Former director who poses as one is disqualified

The Civil Court (Commercial Section) made a disqualification order for the maximum term of 15 years on 28 August 2026 against I.C., a former director who had appeared for a company after he resigned. Mr Justice Ian Spiteri Bailey held that this conduct made him unfit to be concerned in the management of a company under article 320(2)(b) of the Companies Act (Chapter 386 of the Laws of Malta).

The court did not consider an order against a second director, because the Official Receiver had not asked for one.

The facts

The application was filed in G.R. vs Star Investments Limited, the proceedings in which the court had dissolved Star Investments Limited with effect from 7 August 2019. The Official Receiver, as liquidator, applied on 25 November 2024 for a disqualification order against I.C. In separate proceedings, the First Hall of the Civil Court had found that I.C. appeared for the company on two public sale contracts in 2016 and 2017, although he had resigned as director in 2009.

On those contracts he cancelled a special privilege that secured a debt he owed the company, without its consent. The First Hall ordered him to pay the company €70,000, with costs and interest. I.C. was served after many attempts and did not reply.

The other director, P.B., argued that he should not face the same procedure. G.R. and the other applicants supported the application and asked for the same order against P.B.

What the court held

Article 320(2)(b) allows the court, on an application by the Attorney General, the Official Receiver or the Registrar, to disqualify a person who is or was a director of a company that became insolvent, if that person's conduct as director makes the person unfit to be concerned in the management of a company. Under article 320(3) the order runs for at least one year and at most 15 years.

The court first dealt with P.B. The applicants had argued consistently that he should face an order too, but the Official Receiver limited the application to I.C. The court held that it is bound to decide only what is asked of it, and it limited its decision to I.C. It made no finding on the conduct of P.B.

On I.C., the court found that all the elements of article 320 were present. It relied on the passages of the First Hall judgment finding that he knew he was no longer a director when he appeared on the contracts.

The court held that "mhux aċċettabbli illi persuna illi kien direttur, jippreżenta ruħu in rappreżentanza ta' kumpanija meta jaf illi ma għadux direttur" (it is not acceptable that a person who was a director presents himself as representing a company when he knows he is no longer a director).

Doing so for personal advantage, to the company's detriment, only made matters worse. The court called the conduct illegal and irresponsible.

The court also relied on a witness's evidence that I.C. now holds office in another company which, despite notices from the Registrar, had not filed annual returns, accounts or beneficial ownership forms for a long time, so that the defunct procedure had begun. The court held that a person who does not understand the responsibility that company office carries is not fit to hold it.

The court disqualified I.C. from the date of the decree, for 15 years, from being a director or company secretary, a special manager of a company's property or business, or concerned in the promotion, formation or management of a company. It ordered the Registrar of Courts to deliver the order to the Registrar of Companies for entry in a public register.

Why it matters

A person who has resigned as director and still signs for the company risks personal liability and, if the company becomes insolvent, disqualification for the full 15 years. A disqualified person cannot hold office as director under article 142(1)(d), and acting in breach of the order is an offence under article 320(6).

Creditors who want an order against a director need the Attorney General, the Official Receiver or the Registrar to ask for it, because the court will not go beyond the application.

Where it sits

Article 320 gives two routes to disqualification. Under article 320(1), the court may disqualify a person convicted of an offence under the Act, other than a contravention punishable only by a penalty, or a person whose breach of the Act makes that person liable to contribute to the company's assets or personally liable for its debts.

Under article 320(2), the court may disqualify a director who breaches the Act for the third time within two years, or a director of an insolvent company whose conduct shows unfitness. The order is registered and open to public inspection under article 320(5).

The decree also applies the rule that a court decides only what is asked of it. The court named no earlier case. It decided on article 320 and on the findings of the First Hall in the separate proceedings.

Source

Civil Court (Commercial Section), G.R. vs Star Investments Limited, 28 August 2026: 767/2019