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In its recent decision HSBC Bank Malta Plc v The Golden Shepherd Group Limited, (decided 4th October, 2018) the Civil Court (Commercial Section) exercised its special powers under Article 220 of the Companies Act to stay proceedings pending against the defendant company (“Golden Shepherd”). Golden Shepherd is currently the defendant in on-going dissolution and winding up proceedings instituted by HSBC Bank Malta Plc (“HSBC”). 

Article 220 allows a company, a creditor or a contributory of that company from applying to the court, at any time after the filing of a winding up application, requesting a stay of judicial proceedings pending against the said company.

In this case, HSBC, as creditor of Golden Shepherd, filed a winding up application and followed this up with another application requesting that another court case pending against Golden Shepherd (L-Awditur Emanuel sive Stephen Fenech et Noe vs The Golden Shepherd Group Limited) which was scheduled to commence later this month, is stayed pending the outcome of the winding up application. The other case concerned a claim for the recission of a deed of emphyteusis.

The court expressed the concern that were it not to accede to the request for a stay of proceedings, the efficacy of the winding up procedure as a collective procedure intended to benefit the interests of the general creditors, as opposed to a specific creditor, would be seriously undermined. In allowing the other proceeding to press ahead, there was the real risk that the sole remaining asset of the defendant company would be applied in satisfaction of a specific creditor’s interests to the detrminent of the general body of creditors. This would operate counter to the fundamental principle upon which proceedings for a company’s winding up are based, which is the collective nature of such proceedings. Consequently, the court decided in favour of HSBC and ordered a stay of proceedings under Article 220.

This document does not purport to give legal, financial or tax advice. Should you require further information or legal assistance, please do not hesitate to contact Mamo TCV Advocates