PRE-INSOLVENCY ACT

CHAPTER 631

PRE-INSOLVENCY ACT

AN ACT to provide for the partial transposition of Directive (EU) 2019/

1023, to strengthen the legislative framework relating to insolvency and to

make provision with respect to matters ancillary thereto or connected

therewith.

23rd December, 2022

ACT XXIV of 2022.

(1)

The short title of this Act is the Pre-Insolvency Act.

(2)

The scope of this Act is to provide for a modern framework,

relating to early warning signs of insolvency, and restructuring

procedures directed at avoiding insolvency, and to partially transpose

Directive (EU) 2019/1023 of the European Parliament and of the

Council of 20 June 2019 on preventive restructuring frameworks, on

discharge of debt and disqualifications, and on measures to increase

the efficiency of procedures concerning restructuring, insolvency and

discharge of debt, and amending Directive (EU) 2017/1132 (Directive

on restructuring and insolvency).

PART I

PRELIMINARY PROVISIONS

PREVENTIVE RESTRUCTURING FILING DECLARATION

Preventive restructuring filing declaration

A preventive restructuring filing declaration to be formulated in

terms of this Act shall contain

(a)

an estimation of the insolvency practitioner’s

costs by way of remuneration in respect to services rendered in

relation to preventive restructuring proceedings entered into in

terms of this Act, including the basis upon which the estimation

has been formulated;

(b)

a statement of the insolvency practitioner, or, in

the case of an insolvency practitioner being a legal person, a

statement by the principal responsible for directing the

fulfilment of the engagement by the legal person, confirming

that the insolvency practitioner is not subject to any conflict of

interest with respect to the debtor or the debtors’ creditors or, in

the event of a potential conflict of interest, the proposed

measures that the insolvency practitioner intends to apply in

order to prevent any risk of the conflict of interest having any

bearing, on either the fulfilment of the insolvency practitioner’s

responsibilities, or on the preventive restructuring;

(c)

a confirmation that the insolvency practitioner is

lawfully authorised to act as such in terms of the Insolvency

Practitioners Act and that the insolvency practitioner possesses

the adequate resources so as to appropriately carry out its

functions in terms of this Act, having regard to the

circumstances of the debtor and its creditors.

In this Act, and in any regulations made thereunder, unless

the context otherwise requires

"affected parties" means creditors, equity holders, or employees

including an employees’ representative, whose claims or interests are,

or may be, directly affected by a restructuring plan;

"best-interest-of-creditors test" means a test that is satisfied if the

Court is reasonably satisfied that no dissenting creditor would be

worse off, under the specific restructuring plan, than such a creditor

would be if the normal ranking of liquidation priorities were applied,

or in the event of the next-best-alternative scenario, if the restructuring

plan were not confirmed;

"close-out netting provision" shall have the meaning assigned to it

in the Set-Off And Netting on Insolvency Act or regulations issued

thereunder;

"competent authority" means the Insolvency and Receivership

Service within the Malta Business Registry established by the Malta

Business Registry (Establishment as an Agency) Order;

"Court" means the Civil Court (Commercial Section);

"debtor" means any natural person carrying out a trade, business,

craft or profession in or from within Malta, or any legal organisation in

terms of the Second Schedule to the Civil Code, including, but not

being limited to, any commercial partnership formed and registered

under the Companies Act, and expressly excludes

(a)

insurance

undertakings

or

reinsurance

undertakings as defined in points (1) and (4) of Article 13 of

Directive 2009/138/EC;

(b)

credit institutions as defined in point (1) of

Article 4(1) of Regulation (EU) No. 575/2013;

(c)

investment firms or collective investment

undertakings as defined in points (2) and (7) of Article 4(1) of

Regulation (EU) No. 575/2013;

(d)

central counter parties as defined in point (1) of

Article 2 of Regulation (EU) No. 648/2012;

(e)

central securities depositories as defined in point

(1) of Article 2(1) of Regulation (EU) No. 909/2014;

(f)

other financial institutions and entities listed in

the first sub-paragraph of Article 1(1) of Directive 2014/59/EU;

(g)

public bodies under national law; and

(h)

natural persons in respect of debts not incurred in

the carrying out of a trade, business, craft or profession;

"equity holder" means a person that has an ownership interest in a

debtor or a debtor’s business, including a shareholder, provided that

equity holders having separate claims against the debtor shall,

notwithstanding, remain entitled to be treated separately as creditors of

the debtor;

"essential executory contract" means a contract between a debtor

and one (1) or more creditors thereof, which, at the time a stay of

individual enforcement actions is granted or applied, the parties are

under an obligation to perform, and the performance of which shall be

necessary for the continuation of the debtor’s day-to-day business,

including contracts for supplies or services that, if suspended, would

lead to the debtor's activities being interrupted, or materially and

detrimentally affected, or otherwise becoming substantially

diminished, but shall exclude contracts of employment as regulated by

the Employment and Industrial Relations Act;

"insolvency practitioner" means a person authorised to act as an

insolvency practitioner in terms of the Insolvency Practitioners Act;

"Minister" means the minister responsible for the registration of

commercial partnerships;

"official of the debtor" means

(a)

in relation to a debtor being a company formed

and registered under Part V of the Companies Act, or a limited

liability company formed in terms of the Commercial

Partnerships Ordinance, or any director, or other person, by

whatever name they may be called, carrying out substantially

the same functions in relation to the direction of the company as

those carried out by a director;

(b)

in relation to a debtor being a commercial

partnership formed and registered under Part III of the

Companies Act or the Commercial Partnerships Ordinance

where applicable, any partner in whom the administration and

representation of the partnership is vested;

(c)

in relation to a debtor being a legal organisation

not mentioned in paragraphs (i) or (ii), shall include any person,

under whatever designation they may operate, who, whether

alone or with others, is designated by the constitutive

documents of the legal organisation or any other instrument,

decision, order or arrangement binding on the legal

organisation, as being vested with the administration and

representation thereof, or through whom it is, or may be,

exercised

Provided that where the debtor is a natural

person, any reference to the officials of the debtor shall be

construed as referring to the debtor himself;

"restructuring" means the implementation of any measures aimed

at preserving or restoring the debtor's economic viability, that may

include changing the composition, conditions or structure of a debtor's

assets and liabilities or any other part of the debtor's financial

structure, sales of assets or parts of the business, the sale of the

business as a going concern, as well as any necessary operational

changes, or any combination of such elements.

PART II

EARLY WARNING TOOLS AND CRISIS PREVENTION

CONTENTS OF RESTRUCTURING PLAN

1. Contents of the restructuring plan

A restructuring plan formulated in terms of this Act shall contain,

at minimum, the following information

(a)

The name, identification number, business

address, and contact information, including at least an

electronic mail address, of the debtor;

(b)

a statement of the debtor's assets and liabilities at

the time of the filing of the restructuring plan, correct up to at

least one (1) month of the submission of the restructuring plan

for adoption, including a value attributed to the listed assets and

liabilities in the reasoned opinion of the officials of the debtor;

(c)

a description of the economic situation of the

debtor including, in particular, whether it has any employees

and the circumstances of such employment, and the full facts,

circumstances and reasons giving rise to the requirement for an

extension and, where applicable, the requirement for an

extended stay of individual enforcement actions, as well as the

reasons for which an extension would be reasonably justified in

the context of the financial and economic situation of the debtor

and the interests of its stakeholders;

(d)

a reasoned statement on how the restructuring

plan has a reasonable prospect of preventing the insolvency of

the debtor and ensuring the economic viability of the business,

including the necessary pre-conditions for the success of the

restructuring plan;

(e)

a list of the affected parties, whether named

individually or by reference to the classes thereof, as well as the

claims or interests covered by the restructuring plan, and

including, where available, the geographical address and

electronic mail address for each affected party;

(f)

the classes into which the affected parties have

been grouped, for the purpose of adopting the restructuring

plan, and the respective values of claims and interests in each

class;

(g)

where applicable, the creditors and claims

thereof, whether named individually or described by categories

of debt, which have been excluded from the restructuring plan,

together with a description of the reasons why such claims have

been excluded, and including, where available, the

geographical address and electronic mail address for every such

creditor;

(h)

the name, identification number, business

address, and contact information, including at least an

electronic mail address, of the insolvency practitioner;

(i)

the manner in which the restructuring plan

proposes to restructure the debtor’s business, including, in

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particular

(i)

the measures aimed at restructuring the

debtor's business that include changing the composition,

conditions or structure of a debtor's assets and liabilities

or any other part of the debtor's capital structure, such as

sales of assets or parts of the business, the sale of the

business as a going concern, as well as any necessary

operational changes, or a combination of those elements;

(ii)

where applicable, the proposed duration of

any proposed restructuring measures;

(iii) the arrangements with regard to informing

and consulting the employees’ representatives in

accordance with applicable law;

(iv) where applicable, the expected overall

consequences of any proposed restructuring measures as

regards employment, such as dismissals, short-time

working arrangements, or similar arrangements;

(v)

a projection of how the confirmation of the

restructuring plan would impact the debtor’s financial

position, including projections covering the debtor’s

expected financial position should the restructuring plan

not be confirmed;

(vi) any new financing anticipated as part of

the restructuring plan, and the reasons why the new

financing is necessary to implement the restructuring

plan;

(vii) the proposed management team of the

debtor during and following the implementation of the

restructuring plan, if confirmed; and

(viii) the information which will be made

available by the debtor to the affected parties following

the approval of the restructuring plan, including the

duration and periodicity for disclosure.

2. Annexes

The following documents shall be annexed to the restructuring

plan

(a)

where the affected parties are to take over shares

or membership rights or holdings in a legal person, the plan

shall be accompanied by a waiver of pre-emption rights or any

other documents as may be necessary for the transfer of shares

to be permitted;

(b)

where a third party has assumed obligations vis-à-

vis the affected parties in the event of approval of the plan, the

plan shall be accompanied by the third party’s statement of

consent; and

(c)

where the restructuring plan provides for the

restructuring of the rights of the affected party with regard to

the priority of secured rights over the assets of the debtor, the

plan shall be accompanied by a statement of consent of any

parties that may be ceding priority.

3. Checklist for restructuring plans

The competent authority shall be responsible to develop and

maintain a comprehensive checklist for restructuring plans, adapted to

the needs of small and medium-sized enterprises, which checklist shall

be publicly available on a website maintained by the competent

authority.

Debtors shall be entitled to access early warning tools

intended to enable debtors to detect circumstances that could give rise

to a likelihood of insolvency and to signal, to the debtor, the need to

act without delay, such as the Minister may, on the advice of the

competent authority, from time to time prescribe by regulations made

under this Act.

The competent authority shall be responsible to develop and

maintain relevant and up-to-date information about the availability of

early warning tools, as well as about the preventive restructuring

procedures available in terms of this Act, which information shall be

publicly available in such manner as the competent authority shall

deem fit and appropriate for the intended purpose.

The officials of the debtor shall, by reference to early

warning tools and any other information reasonably available to them,

continuously monitor developments that may expose the debtor to a

likelihood of insolvency and, where such developments are identified,

take appropriate countermeasures with a view to preventing

insolvency and ensuring business viability

Provided that this article shall not prejudice the provisions

of any other law intended to regulate the conduct of the officials of the

debtor including but not limited to instances where they knew, or

should have known, that there were no reasonable prospects of

avoiding the insolvency of the debtor.

(1)

Where the officials of the debtor become aware that

the debtor has become exposed to a likelihood of insolvency, either as

a result of

(a)

the information and data made available by

virtue of the early warning tools; or

(b)

any financial review made by the auditors of the

debtor; or

(c)

any request by a creditor or creditors, or the

representative of the debtor’s employees, or a debenture or

equity holder to consider its financial position; or

(d)

prevailing circumstances that otherwise expose

the debtor to the likelihood of insolvency,

the officials shall forthwith, and in any event, not later than thirty (30)

days from becoming aware thereof, duly convene a meeting of the

officials, for the purpose of reviewing the debtor’s position and of

determining what steps should be taken to deal with the situation,

having regard to the interests of the creditors, equity holders,

employees, and other stakeholders of the debtor, and including, but not

limited to, consideration as to whether the debtor should consult with

an insolvency practitioner and, or, make a preventive restructuring

application in terms of article 9.

(2)

Without prejudice to sub-article (1), where the debtor is a

sole trader, it shall be sufficient for the trader to document its review

and determination in terms of sub-article (1), and keep record of such

documentation in the manner set out in article 13 of the Commercial

Code.

(3)

The minutes of a meeting in terms of sub-article (1) shall

include a detailed review of the financial matters of the debtor and the

determination made, and shall be kept at the debtor’s office.

(4)

Where the meeting is called following a request by any

person listed in paragraph (c) of sub-article (1), the debtor shall by not

later than fourteen (14) days from the said meeting communicate in

writing to such person, and to the competent authority whether a

meeting in terms of sub-article (1) has been held.

No equity holder of the debtor may, notwithstanding

anything contained within the constitutive instruments of the debtor or

any instruments ancillary thereto, obstruct, directly or indirectly, the

officials of the debtor from taking any action lawfully attributable to

them in terms of this Act.

PART III

ENTRY INTO PREVENTIVE RESTRUCTURING PROCEDURE

Where a debtor has, or the officials of the debtor have,

whether by reference to article 6, or otherwise, reasonably determined

that the debtor is exposed to a likelihood of insolvency, having regard

to the debtor’s business circumstances and its actual, contingent, and

prospective assets and liabilities, a preventive restructuring application

may be made to the Court requesting it to place the debtor under a

preventive restructuring procedure, provided that the debtor

(a)

has reasonable prospects of viability, that is to say

the debtor’s economic viability is likely to be preserved or

restored as a result of being placed under a preventive

restructuring procedure;

(b)

has not become liable for the payment of a debt

that has remained unsatisfied, in whole or in part, after twenty-

four (24) weeks from the enforcement of an executive title

against the debtor by any of the executive acts specified in

article 273 of the Code of Organization and Civil Procedure, or

has been otherwise declared by a court to be unable to pay its

debts; and

(c)

has not previously been admitted to preventive

restructuring procedures in the three (3) years preceding the

date of the application.

(1)

A preventive restructuring application, hereinafter in

this article also referred to as the "application", shall be made by

means of an application to the Court, to be made or endorsed by an

insolvency practitioner.

(2)

The insolvency practitioner making or endorsing, as the

case may be, the application referred to in sub-article (1) shall, by

virtue hereof, subject only to the provisions of article 13, be designated

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as the insolvency practitioner responsible to assist the debtor in the

preventive restructuring procedure, and all the obligations of an

insolvency practitioner as applicable in terms of this Act shall apply to

the said insolvency practitioner for so long as the insolvency

practitioner shall remain so appointed.

(3)

The application referred to in sub-article (1) shall comprise

a request to the Court to place the debtor into a preventive

restructuring procedure under one of the following specific types of

preventive restructuring procedures

(a)

a standard preventive restructuring procedure for

the formulation of a restructuring plan in accordance with the

requirements of the Second Schedule, and to be submitted for

adoption by the affected parties in terms of Part VI;

(b)

a pre-formulated preventive restructuring

procedure, for the submission of a restructuring plan formulated

in accordance with the requirements of the Second Schedule,

for adoption by the affected parties in terms of Part VI; or

(c)

a

pre-approved

preventive

restructuring

procedure, for the confirmation of a restructuring plan

formulated in accordance with the requirements of the Second

Schedule, that has already attained the necessary approval for

adoption by the affected parties in terms of article 41 or 42.

The insolvency practitioner making or endorsing, as the

case may be, the application referred to in article 9(1) shall annex to

the application, the following documents

(a)

a summary of the debtor’s business and the

manner in which it is operated, and a statement of the full facts,

circumstances and the causes which have led the debtor to

becoming exposed to a likelihood of insolvency;

(b)

a statement as to previous restructuring

procedures entered into by the debtor and the outcome of such

procedures;

(c)

a reasoned statement on the debtor’s prospects of

economic viability, having regard also to the debtor’s actual,

contingent, and prospective assets and liabilities, and including

consideration as to how preventive restructuring may

reasonably eliminate or substantially reduce the debtor’s

likelihood of insolvency, and enable the debtor’s economic

viability to be preserved or restored;

(d)

audited financial statements, or management

accounts if audited financial statements are not available, for

the last two (2) full financial years, or, if the debtor has been

trading for a shorter period of time, for such shorter period, and

made up to not less than thirty (30) days before the date of the

application;

(e)

a statement of the debtor’s assets and liabilities,

made up to a date not earlier than two (2) months from the date

of the application, including a value attributed to the listed

assets and liabilities in the reasoned opinion of the officials of

the debtor;

(f)

a list of the creditors of the debtor, containing the

names, addresses, and electronic mail addresses thereof,

together with an indication of the amount due to each of such

creditors and the security, if any, enjoyed by the respective

creditors;

(g)

a preventive restructuring filing declaration made

out in the form set out in the First Schedule;

(h)

if the debtor is applying for admission to standard

preventive restructuring

(i)

a statement as to how the mechanisms

made available to the debtor in terms of standard

preventive restructuring procedures may enable the

financial and economic situation of the debtor to be

improved in the interests of its creditors, equity holders,

employees, other stakeholders and, if applicable, the

debtor himself as a viable going concern; and

(ii)

an identification of any essential executory

contracts of the debtor;

(i)

if the debtor is applying for admission to pre-

formulated preventive restructuring

(i)

a restructuring plan, prepared in

accordance with the requirements of the Second

Schedule, to be submitted for the approval of the

affected parties;

(ii)

if available, written confirmation of the

contingent approval of the restructuring plan submitted

for adoption by the affected parties in terms of sub-

paragraph (i), by the approving affected parties; and

(iii) an identification of any essential executory

contracts of the debtor;

(j)

if the debtor is applying for admission to pre-

approved preventive restructuring

(i)

a restructuring plan, prepared in

accordance with the requirements of the Second

Schedule, that has been adopted by the affected parties,

so that it may be submitted to the Court for confirmation

in terms of article 41;

(ii)

written confirmation of the approval of the

restructuring plan submitted for adoption by the affected

parties in terms of sub-paragraph (i), by the approving

affected parties; and

(iii) appropriate supporting documentation and

statements, where applicable, as may be necessary so as

to evidence that the restructuring plan has satisfied the

criteria for a cross-class cram-down in terms of article

42.

(1)

On the hearing of an application, which shall take

place within not more than thirty (30) days from the filing of the

application, the Court may, after examining all the circumstances and

the options that are available, either dismiss the application or issue a

preventive restructuring order, acceding thereto and placing the debtor

under the requested preventive restructuring procedure.

(2)

The Court shall immediately decide whether to accede to the

application, and accordingly place the debtor under the preventive

restructuring procedure and issue a preventive restructuring order,

only where it is satisfied

(a)

that the application which has been submitted by

the insolvency practitioner is complete and contains all the

necessary annexes in terms of article 10;

(b)

that the type of preventive restructuring being

requested is suitable to the circumstances of the debtor and its

creditors; and

(c)

that the issuing of the preventive restructuring

order would, in the event of an application for a standard or pre-

formulated preventive restructuring procedure, be likely to

facilitate the confirmation of a restructuring plan that satisfies

the requirements of article 43(2) and shall enable the debtor to

restructure, with a view to preventing insolvency and ensuring

its economic viability, having regard to the interests of the

creditors, equity holders, employees, and other stakeholders of

the debtor.

(1)

The insolvency practitioner shall notify any creditors

listed in the application by virtue of sub-article 10(f), the competent

authority, and the Registrar of Courts of the issue of a preventive

restructuring order in terms of this Part, without undue delay, at the

expense of the debtor.

(2)

The insolvency practitioner shall publish notice of the issue

of the order on a website maintained by the competent authority for

this purpose, not later than fourteen days (14) from the issue of the

order.

(1)

Any creditor of the debtor may, at any time, make an

application to the Court for the appointment of an alternative

insolvency practitioner, where the creditor

(a)

has reasonable grounds to believe that the

insolvency practitioner is subject to a conflict of interest or is

otherwise unable to perform the functions thereof impartially;

or

(b)

is of the opinion that the insolvency practitioner

does not have the specific competence, experience, or resources

required to adequately participate in the preventive

restructuring procedures.

(2)

Where an application is made in terms of sub-article (1), the

following documents shall be annexed thereto

(a)

the written confirmation of the proposed

alternative insolvency practitioner, that he is available and

prepared to participate in the preventive restructuring

procedures in terms of the preventive restructuring order;

(b)

a preventive restructuring filing declaration made

out in the form set out in the First Schedule; and

(c)

the written confirmation of not less than fifty per

cent (50%) of the debtor’s creditors as listed in article 10(f), by

reference to both the number of individual creditors and the

economic value of their claims, that such creditors approve of

the appointment of the alternative insolvency practitioner.

(3) Where the Court, after hearing the insolvency practitioner,

is satisfied that the requirements of sub-article (1) subsist, the Court

shall accede to the application submitted in terms of this article and

shall issue an order immediately terminating the appointment of the

insolvency practitioner and confirming the appointment of the

alternative insolvency practitioner

Provided that the Court shall cause a copy of the order to be

delivered to the Registrar of Courts and the competent authority, and

the latter shall be required to determine what action, if any, may be

warranted in the circumstances with respect to the insolvency

practitioner.

(4)

The filing of an application in terms of this article shall not

have any suspensive or negatory effect on the debtor’s status as being

under preventive restructuring procedures, or on the protections

granted to the debtor by virtue of being admitted to preventive

restructuring procedures, or on any action taken by the insolvency

practitioner prior to the date of issue of the order referred to in sub-

article (3).

(5)

Where, within the context of a preventive restructuring

procedure, the insolvency practitioner is no longer able to execute the

responsibilities imposed in terms of this Act, whether as a result of

resignation, interdiction, incapacitation, death, or otherwise, the debtor

shall, within forty-eight (48) hours of becoming aware of such fact, by

application to the court, request the appointment of an alternative

insolvency practitioner

Provided that this application shall, mutatis mutandis,

comply with the requirements of sub-articles (2)(a) and (2)(b)

Provided further that the debtor shall be prohibited, without

the express prior approval of the Court, from taking any action, the

performance of which shall require the involvement of the insolvency

practitioner in terms of this Act or as the Court may otherwise stipulate

in the preventive restructuring order issued in terms of article 11, until

a new insolvency practitioner has been confirmed by the Court.

(1) For the period commencing upon the filing of an

application and until the earlier of the dismissal of the application, or

the termination of the preventive restructuring order

(a)

any obligation incumbent on the debtor to make

an application for the opening of proceedings that may result in

a judgement declaring the bankruptcy of the debtor, or the

dissolution or winding up of the debtor in terms of law, shall be

suspended;

(b)

any act or proceedings that may result in a

judgement declaring the bankruptcy of the debtor, or the

dissolution or winding up of the debtor in terms of law, shall be

stayed; and

(c)

no new act or proceedings that may result in a

judgement declaring the bankruptcy of the debtor, or the

dissolution or winding up of the debtor in terms of law, shall be

taken or commenced against the debtor.

(2)

The Court shall suspend, stay or disallow any such act or

proceeding ex officio upon becoming aware that a preventive

restructuring order is in force.

PART IV

GENERAL PROVISIONS ON PREVENTIVE RESTRUCTURING

PROCEDURE

(1)

During the course of a preventive restructuring

procedure, the debtor shall not, without the prior approval of the

insolvency practitioner

(a)

terminate the employment of any employees of

the debtor on the basis of redundancy;

(b)

sell or in any way dispose of, or encumber by

providing as security, any assets or property of the debtor; or

(c)

enter into any long-term commitment

Provided that for the purposes hereof, a long-term

commitment shall mean any contractual commitment for a duration of

longer than six (6) months

Provided further that a contractual commitment that is

entered into within the six (6) month period after the termination of a

previous contractual commitment, shall be considered as a

continuation of the previous contractual commitment if the obligations

being contracted are substantially the same.

(2)

At any time during the course of a preventive restructuring

procedure, a creditor or creditors of the debtor, or an employee

representative of the debtor ’s employees, may request that the

insolvency practitioner provide them with information regarding the

activities being carried on by the debtor in the course of the preventive

restructuring procedure, and the extent to which progress has been

made on the negotiation of a restructuring plan.

(3)

The insolvency practitioner, upon receipt of a request made

in terms of sub-article (2), shall provide the requested information

without undue delay to the person or persons having made the request,

only if, and to the extent that, the provision of such information is, at

the discretion of the insolvency practitioner, reasonable in view of the

person’s interest in the preventive restructuring procedure, and only if

the provision thereof would not be prejudicial to the preventive

restructuring procedure.

(4)

At any time during the course of a preventive restructuring

procedure, the debtor, or the insolvency practitioner with the consent

of the debtor, or both, may consult with any interested party, including

any creditor or creditors or employee representative of the debtor’s

employees, with respect to any proposed actions to be taken with the

intention of restoring the debtor’s economic viability or negotiating a

restructuring plan.

(1)

A restructuring plan formulated in terms of a

preventive restructuring procedure may propose to restructure claims,

whether secured or unsecured, that

(a)

are lawfully enforceable against the debtor at the

time of the submission of the restructuring plan; and

(b)

arise from

(i)

contractual arrangements, including debts

that are contingent upon the occurrence of future

circumstances or that have otherwise not yet become

due;

(ii)

shares, equity or other ownership rights in

the debtor, including sums due by way of dividends,

profits or otherwise;

(iii) taxes due by the debtor in Malta, excluding

taxes levied on consumption such as value added taxes,

and excluding taxes due which have been withheld or

otherwise collected by the debtor on behalf of any

authority or government agency; or

(iv) any other claims that the Court may, upon

the application of the interested creditor, order to be

included within the restructuring plan

Provided that the restructuring plan may not, under any

circumstances, purport to include, or affect the ranking of, claims

arising in connection with

(a)

wages due by the debtor and constituting a

privileged claim over the assets of the debtor in terms of article

20 of the Employment and Industrial Relations Act;

(b)

civil debts due by the debtor exclusively by way

of damages in tort; and

(c)

any fine (ammenda or multa) due by the debtor in

terms of Maltese law.

(2)

Where the restructuring plan includes measures leading to

changes in work organisation, employment conditions, or contractual

relations with workers, the application of such measures shall be

without prejudice to any requirement of the relevant party to discuss,

or notify the measures with, or to, the respective workers, or

representatives thereof, as the case may be, as may arise in terms of

law or in terms of any collective agreement.

(3)

Any agreement extraneous to the restructuring plan,

howsoever formulated, that purports to exclude or include a claim

within the scope of a restructuring plan in a manner contrary to the

provisions of this article, shall be null and void.

(4)

Any contractual provision within an executory contract

concluded by the debtor, that purports to allow a party to the contract

to exercise, to the detriment of the debtor, any right of termination, or

any right to accelerate, modify, withhold or suspend the performance

of its obligations in favour of the debtor, or any right to repossess any

property leased, sold or granted to the debtor, solely by virtue of the

debtor’s commencement of the preventive restructuring procedure or

any procedure in the course thereof, shall be null and void.

(1)

The debtor may choose to exclude claims from the

restructuring plan where it is evident that

(a)

the claims excluded from the restructuring plan

would be reasonably expected to be settled in full, should the

restructuring plan not be confirmed; or

(b)

the exclusion is justified in the context of the

economic realities of the debtor, particularly where the included

debt is secured against assets of the debtor.

(2)

The criteria used to justify the exclusion of any claims in

terms of this article must be explained in sufficient detail within the

restructuring plan and the Court must be satisfied that the proposed

exclusion is compatible with the object and purpose of this article and

would not result in unfair prejudice to any excluded creditor.

(3)

All creditors in respect of claims that have not been

excluded from the restructuring plan in terms of this article shall be

deemed to be affected parties for the purposes of the restructuring plan

and otherwise for the purposes of this Act.

(1)

All affected parties shall be organised into classes, as

the insolvency practitioner may deem necessary to distinguish between

the varying economic interests thereof, and which classes shall, at

minimum, distinguish between

(a)

holders of secured claims;

(b)

holders of unsecured claims;

(c)

holders of claims for the payment of wages not

constituting a privileged claim over the assets of the debtor in

terms of article 20 of the Employment and Industrial Relations

Act;

(d)

holders of subordinated claims, meaning claims

that, in the event of the liquidation of the debtor’s assets, would

remain unpaid until the full settlement of all non-subordinated

debts of the debtor; and

(e)

holders of shares, equity or other ownership

rights in the debtor.

(2)

The insolvency practitioner shall, when formulating classes

of affected parties, have particular regard to the protection of

vulnerable creditors, such as workers and small suppliers, and shall

also organise a vulnerable creditors’ class, or classes, if the insolvency

practitioner considers this to be necessary for the protection of the

vulnerable creditors.

(3)

The affected parties shall be further divided into additional

classes, as may be necessary in order to distinguish between affected

parties within the same class but having claims of different legal

priority in the event of the liquidation of the debtor’s assets.

(4)

In all cases, all classes of affected parties should be clearly

distinguished from one another, and the criteria used to distinguish

between affected parties must be clearly specified within the

restructuring plan.

(1)

All affected parties comprising part of a specific

class shall be treated equally for the purposes of the restructuring of

their claims within the scope of the restructuring plan, except insofar

as any detrimental treatment is expressly agreed to by the affected

parties to whom such differentiation shall apply.

(2)

Where an affected party agrees to be treated differently from

other affected parties within the same class in terms of the preceding

sub-article, the restructuring plan shall be accompanied by an express

statement, in writing, by each of the affected parties to the detriment of

whom the differentiation in treatment shall apply.

(3)

Any agreement extraneous to the restructuring plan,

howsoever formulated, that grants, or purports to grant, an unfair

advantage to an affected party, whether pursuant to the terms of a

restructuring plan or otherwise in connection with the preventive

restructuring procedures, shall be null and void.

(1)

Any interim financing acquired by the debtor in

terms of article 31, or any new financing forming part of a

restructuring plan that is duly confirmed in terms of this Act, shall, in

the case of any subsequent insolvency proceedings in respect of the

debtor

(a)

not be declared void, voidable, or unenforceable;

(b)

not constitute a basis for any claim or allegation

of wrongful trading or fraudulent preference, in terms of the

Companies Act, that may be brought against the debtor; and

(c)

the grantors of such new or interim financing

shall not, notwithstanding anything to the contrary contained in

any other law, incur liability on the grounds that such financing

is detrimental to the creditors of the debtor

Provided that the provisions of this sub-article

shall not, in any way, limit the entitlement of a creditor to bring

an action on the basis of article 1144 of the Civil Code.

(2)

Any agreement, howsoever formulated, that purports to

exclude or limit the provisions of this article, shall be null and void.

(1)

Any transactions reasonably entered into by the

debtor, as the debtor may prove to be directly necessary for the

negotiation of a restructuring plan in the course of preventive

restructuring procedures, or for the implementation of a restructuring

plan that has been confirmed in terms of this Act, including, without

limitation, fees and costs incurred for

(a)

the negotiation, adoption, or confirmation of a

restructuring plan;

(b)

the provision of professional advice closely

connected with the restructuring;

(c)

the payment of workers’ wages for work already

carried out; and

(d)

any other payments or disbursements made in the

ordinary course of the debtor’s business,

shall, in the case of any subsequent insolvency proceedings in respect

of the debtor, not be declared void, voidable, or unenforceable, or

constitute a basis for any claim or allegation of wrongful trading, or

fraudulent preference in terms of the Companies Act, that may be

brought against the debtor

Provided that the provisions of this sub-article shall not, in

any way, limit the entitlement of a creditor to bring an action on the

basis of article 1144 of the Civil Code.

(2)

Without prejudice to the protections stipulated in sub-article

(1)(a), the remuneration of an insolvency practitioner, as well as any

expenses incurred or disbursements made by the insolvency

practitioner in the exercise of its functions, shall represent a privileged

claim over the assets of the debtor, which, notwithstanding anything

contained in any other law, shall be paid with priority to all other

secured or unsecured debts of the debtor.

(3)

The Minister may, in consultation with the competent

authority mentioned in the Insolvency Practitioners Act, make

regulations for the payment of expenses and remuneration of the

insolvency practitioner.

(4)

The Court shall have the power to order that the payment of

the expenses and remuneration of the insolvency practitioner are paid

in terms of regulations made in terms of sub-article (3).

(5)

Any agreement, howsoever formulated, that purports to

exclude or limit the provisions of this article, shall be null and void.

(1)

Notwithstanding anything contained within the

constitutive instruments of the debtor or any instruments ancillary

thereto, any meeting convened or held in terms of this Act may be

validly held remotely in accordance with this article

Provided that where a meeting is not held remotely, any

person entitled to be present at the meeting may still attend such

meeting remotely, and all of the requirements applicable to the holding

of a remote meeting in terms of this article shall apply in the interest of

those persons attending remotely.

(2)

It shall be the responsibility of the insolvency practitioner to

ensure that sufficient technological means are available, at the place of

the meeting, to enable any persons attending the meeting remotely to

effectively follow and participate in the discussion.

(3)

Any person entitled to be present at a meeting shall,

notwithstanding any provision or agreement to the contrary, be entitled

to appoint another person as their proxy to attend the meeting and, if

necessary, take any decision relevant to their interests, and vote for and

on their behalf.

(4)

The appointment of a proxy shall be in writing and may be

recorded electronically, and proof of such appointment shall be

provided to the insolvency practitioner prior to the meeting.

(5)

Every notice calling a meeting in terms of this Act shall be

in writing and may be transmitted by means of electronic mail, by not

later than seven (7) days from the meeting and shall include, with

reasonable prominence

(a)

a statement that persons may attend the meeting

remotely;

(b)

a statement that persons shall be entitled to

appoint a proxy that, for the avoidance of doubt, may also

attend the meeting remotely;

(c)

details regarding the means to be used to attend

the meeting remotely; and

(d)

the procedure regulating how any person entitled

to attend may participate in the discussion.

(1)

At any point during the course of a preventive

restructuring procedure, the insolvency practitioner may, with the

sanction of the debtor and a majority in value of all the affected

parties, seek the appointment of a mediator in terms of the Mediation

Act, to facilitate negotiations between the debtor and the affected

parties towards the formulation of a restructuring plan.

(2) Notwithstanding anything contained in the Mediation Act,

the appointment of a mediator in terms of this article shall not affect

the application of the other provisions of this Act and in the event of

any inconsistency between this Act and the Mediation Act, the

provisions of this Act shall prevail.

If two or more applications for preventive restructuring are

brought before the Court, that are connected in respect of the subject-

matter thereof, or if the decision on one might affect the decision on

the other, the Court may order that the several proceedings be heard

and deliberated upon simultaneously.

PART V

PREVENTIVE RESTRUCTURING PROCEDURE

TITLE I: STANDARD PREVENTIVE RESTRUCTURING

PROCEDURE

(1)

Upon the filing of an application requesting that the

Court place the debtor under standard preventive restructuring

procedure and unless it is dismissed, and, in the event that the Court

accedes to the request and issues an order to place the debtor under

standard preventive restructuring procedure, for a period of four (4)

months following the date of the application

(a)

the execution of claims of a monetary nature

against the debtor, with the exclusion only of workers’ claims,

and any interest that may otherwise accrue thereon, shall be

stayed;

(b)

in respect of essential executory contracts entered

into prior to the order to place the debtor under preventive

restructuring procedure, no party may exercise, to the detriment

of the debtor, any right of termination, or any right to

accelerate, modify, withhold or suspend the performance of its

obligations in favour of the debtor, or any right to repossess any

property leased, sold or granted to the debtor, solely by virtue of

the fact that they were not paid by the debtor, or by virtue of the

debtor’s entry into preventive restructuring procedure;

PRE-INSOLVENCY

(c)

no precautionary or executive act or warrant

mentioned in the Code of Organization and Civil Procedure

shall be made or continued against the debtor or any property of

the debtor, including any warrant in terms of article 312 of the

Code of Organization and Civil Procedure;

(d)

no arbitration proceeding shall be made or

continued against the debtor or any property of the debtor; and

(e)

notwithstanding anything contained in this sub-

article, no judicial proceedings shall be commenced or

continued against the debtor or its property, and any relevant

court shall refuse any new judicial action against the debtor or

shall ex officio order that ongoing judicial proceedings against

the debtor are stayed.

(2)

The Court shall suspend, stay or disallow any act or

proceeding in terms of paragraph (d) or (e) of sub-article (1), or the

execution of claims in terms of paragraph (a) of sub-article (1), as the

case may be, ex officio upon becoming aware that a preventive

restructuring application has been made and has not been dismissed, or

a preventive restructuring order is in force.

(3)

The Court may, pursuant to an application received in terms

of sub-article (4), at any time issue an order to lift all or any of the

protections granted to the debtor in terms of sub-article (1), in whole

or in part, and subject to such terms as the Court deems fit to impose.

(4)

An application in terms of sub-article (2) may be made to

the Court by

(a)

the debtor, following, where applicable, a

decision of the officials of the debtor;

(b)

the insolvency practitioner; or

(c)

any creditor or creditors, provided that it is

proven to the satisfaction of the Court

(i)

that the protections granted no longer fulfil

the objective of supporting negotiations on a

restructuring plan;

(ii)

that the protections granted shall cause

substantial harm or financial distress to the creditor;

(iii) that the protections granted shall cause the

creditor or class of creditors to be unfairly prejudiced in

respect to any other creditor or class of creditors; or

(iv) that, where the creditor is asking the Court

to lift the protection granted in terms of sub-article

(1)(b), that a contract entered into between the debtor

and the creditor is not an essential executory contract.

(5)

The provisions of sub-article (1), without prejudice to the

generality thereof, shall not apply insofar as these may be inconsistent

with, or insofar as these may be construed as limiting or restricting

(a)

any action in rem against a ship or sea vessel;

(b)

any action in rem against an aircraft or aircraft

engine;

(c)

any proceedings that may be instituted by the

holder of a registered mortgage or a privileged creditor over a

ship or sea vessel, or any other actions or proceedings to which

a ship or sea vessel may be subject in terms of the Merchant

Shipping Act;

(d)

any proceedings that may be instituted by the

holder of a registered mortgage or a privileged creditor over an

aircraft or aircraft engine, or any other actions or proceedings to

which an aircraft or aircraft engine may be subject in terms of

the Aircraft Registration Act;

(e)

any warrant of arrest, whether in personam or in

rem, of a sea-going vessel;

(f)

any warrant of arrest, whether in personam or in

rem, of an aircraft or aircraft engine;

(g)

any warrant of seizure of a commercial going

concern in terms of article 848A of the Code of Organization

and Civil Procedure;

(h)

any action to be brought in respect of a right

stated in any of the foregoing warrants, in terms of article 843

of the Code of Organization and Civil Procedure; and

(i)

any rights of a securitisation creditor as defined in

the Securitisation Act.

(1)

The insolvency practitioner shall, as soon as possible

following appointment, examine the assets, liabilities, and affairs of

the debtor and rank all claims against the debtor, present or future,

certain or contingent, ascertained or which may be due in damages, by

reference to the priority and ranking of their debts in accordance with

the law being in force at the time.

(2)

Upon preparing a ranking of the claims against the debtor in

terms of sub-article (1), the insolvency practitioner shall convene a

meeting of the officials of the debtor, for the purpose of

(a)

laying before them for their information, review

and confirmation, a comprehensive ranking of the claims

against the debtor;

(b)

discussing which claims are to be selected for

inclusion within the scope of a restructuring plan, having regard

to the provisions of article 17; and

(c)

organising the said creditors, into classes formed,

having regard to the provisions of article 18.

(1)

Within thirty (30) daysfrom his appointment, the

insolvency practitioner shall convene a meeting of the creditors of the

debtor, for the purpose of

(a)

laying before them for their information and

review, a comprehensive ranking of the claims against the

debtor;

(b)

laying before them for their information and

review, a list of the affected parties and the classes into which

the affected parties have been organised; and

(c)

allowing the creditors to request further

information as to the financial situation of the debtor and the

expectations of the debtor with respect to the outcome of

preventive restructuring.

(2)

No less than seven (7) days’ notice shall be given of the

holding of the meeting of the creditors of the debtor, and the

insolvency practitioner may also send a copy of the notice convening

the meeting to any officials of the debtor or other persons as may be

relevant to the content of the meeting.

(3)

The insolvency practitioner shall publish notice of the

meeting of the creditors in two (2) daily newspapers circulating wholly

or mainly in Malta, one published in Maltese and the other in English,

at the expense of the debtor, not later than seven (7) days before the

holding of the meeting

Provided that the notice to be published in a newspaper may,

subject to the alignment of the applicable time-periods, be comprised

within the notice to be published in terms of article 12(2).

(4)

The insolvency practitioner shall undertake to ensure that

any notice convening the meeting of creditors in terms of this article

shall also be given to known creditors residing or based abroad.

(1)

Any affected party may object to the proposed

ranking of claims and the formation of classes, in writing, to the

insolvency practitioner within twenty (20) days of the meeting held in

terms of article 27

Provided that a failure to object to the proposed ranking of

claims shall not constitute the acceptance, by the affected party, of the

ranking of claims for purposes external to the preventive restructuring

proceedings, including but not limited to subsequent insolvency

proceedings.

(2)

The insolvency practitioner shall investigate any objections

received to the proposed ranking of claims and the formation of

classes, and shall revise the ranking of claims and the formation of

classes as it may deem necessary in discussion with the officials of the

debtor, and shall notify any revisions to the affected parties.

(3)

The insolvency practitioner’s ranking of claims and the

formation of classes in terms of sub-article (2) may only be challenged

before the Court during the procedure for the confirmation of a

restructuring plan by the Court, as contemplated in article 43(1).

The insolvency practitioner may, if he deems appropriate,

having regard to any objections received and to the economic impact

of any required revisions on the affected parties, convene another

meeting of the creditors of the debtor in terms of, and in accordance

with the requirements of article 27.

(1)

The officials of the debtor shall, in consultation with

the insolvency practitioner, review any executory contracts that have

been entered into by and between the debtor and any counterparty, and

the performance of which has not been concluded, and shall evaluate

the termination or re-negotiation of any such executory contracts as

shall be conducive to the economic viability of the debtor

Provided that, where the debtor is a natural person, only

executory contracts entered into for the furtherance of the debtor’s

trade, business, craft or profession may be considered for the purposes

of this article

Provided further that the re-negotiation and termination of

contracts of employment shall, notwithstanding anything contained in

this Act, continue to be regulated by the rules set out within the

Employment and Industrial Relations Act or other pertinent

legislation.

(2)

Where it is identified that the re-negotiation or termination

of an executory contract would benefit the debtor’s prospects of

economic viability, the insolvency practitioner may invite the

counterparty or counterparties to engage in bona fide negotiations with

the debtor, for the purpose of reaching a mutual agreement as to the re-

negotiation or termination of the executory contract.

(3)

If the parties are unable to come to a mutual agreement as to

the re-negotiation or termination of the respective executory contract,

the debtor may propose to unilaterally terminate the executory contract

as part of the restructuring plan submitted for confirmation in terms of

Part VI.

(4)

The unilateral termination of an executory contract shall

render the debtor liable only to compensate the counterparty for losses

incurred, if any, as a result of the unilateral termination, or as may

otherwise be determined in accordance with regulations to be made by

the Minister, and a claim for such losses may be immediately included

within the restructuring plan

Provided that the insolvency practitioner shall notify any

consequential revisions to the ranking of claims or the formation of

classes to the officials of the debtor and to the affected parties, in

writing and without undue delay.

(5)

Upon the confirmation of the restructuring plan, any

unilateral termination of any executory contract as contemplated

therein, shall, except where a longer period is stipulated within the

restructuring plan, take effect automatically upon the earlier of

(a)

the lapse of three (3) months from the date of the

confirmation of the restructuring plan, notwithstanding any

appeal that may be filed against the confirmation of the

restructuring plan; or

(b)

where the executory contract provides for a notice

period shorter than three (3) months, the said shorter period.

(6)

The provisions of this article shall not allow a debtor to

propose the unilateral termination of an executory contract where the

termination would result in the non-enforcement of any close-out

netting provision or any other provision in any contract providing for

or relating to the set-off or netting of sums due from each party to the

other in respect of mutual credits, mutual debts or other mutual

dealings.

(1)

The officials of the debtor shall, in consultation with

the insolvency practitioner, review whether the procurement of interim

financing shall be necessary in order to preserve the economic

viability of the debtor until the confirmation of a restructuring plan.

(2)

If interim financing is deemed to be necessary, the officials

of the debtor may solicit proposals from third parties willing to

provide the debtor with interim financing, and shall forward any

proposals they are desirous of accepting to the insolvency practitioner,

including any terms pursuant to which the interim financing is

proposed.

(3)

Where the insolvency practitioner is satisfied that the

procurement of interim financing is necessary in order to preserve the

economic viability of the debtor until the confirmation of a

restructuring plan and that the acceptance of the proposed terms would

not infringe any provisions of this Act, the insolvency practitioner

shall

(a)

if the proposed interim financing is unsecured,

approve the acquisition of the interim financing; or

(b)

if the proposed interim financing is secured,

convene a meeting of the affected parties, or classes thereof,

that would be adversely impacted by the acquisition of the

proposed secured interim financing, for the purpose of laying

before them, and holding a vote on, the proposed terms for the

acquisition of secured interim financing.

(4)

Where a meeting is convened in terms of sub-article (3)(b),

no less than seven (7) days’ notice shall be given for the holding of the

meeting, and the insolvency practitioner shall also send a copy of the

notice convening the meeting to any officials of the debtor.

(5)

The acquisition of secured interim financing shall be

approved subject to the agreement of not less than fifty per cent (50%)

of the affected parties in each class, by reference to the value of the

claims represented thereby.

(6)

Any interim financing approved in terms of this article shall

be acquired by the debtor and the claim for repayment thereof may be

immediately included within the restructuring plan, provided that the

repayment of interim financing shall, in all cases, not be subject to any

reduction within the scope of a restructuring plan.

(7)

The insolvency practitioner shall notify any revisions that

arise consequent to this article, to the ranking of claims or the

formation of classes to the officials of the debtor and to the affected

parties, in writing and without undue delay.

(1)

The officials of the debtor shall, in consultation with

the insolvency practitioner, formulate a restructuring plan prepared in

accordance with the requirements of the Second Schedule, to be

submitted for adoption by the affected parties

Provided that any creditor of the debtor may also prepare a

restructuring plan, or proposals for inclusion within a restructuring

plan, and submit these to the insolvency practitioner for the

consideration of the debtor.

(2)

As may be conducive to the formulation of a restructuring

plan, the insolvency practitioner may, at the request of the debtor,

invite an affected party, or class of affected parties, to engage in bona

fide discussions with the debtor in connection with any restructuring

proposals that the insolvency practitioner, upon consultation with the

debtor, may consider to be appropriate for inclusion within the

restructuring plan, for the purpose of hearing the views of the affected

parties.

(3)

A restructuring plan prepared in terms of this article may,

subject to the agreement of the debtor, be submitted by the insolvency

practitioner for adoption by the affected parties in terms of Part VI of

this Act, provided that it is reasonably apparent that

(a)

affected parties with a sufficient commonality of

interest in the same class are treated equally, and in a manner

proportionate to their claim; and

(b)

any new financing proposed in the restructuring

plan is necessary to implement the restructuring plan and does

not unfairly prejudice the interests of the affected parties.

(1)

The preventive restructuring order placing the debtor

under standard preventive restructuring shall automatically terminate

upon the lapse of four (4) months from the date of the application filed

in terms of article 9, provided that the duration of standard preventive

restructuring may be extended in terms of this article until a maximum

of twelve (12) months from the date of the application.

(2)

The insolvency practitioner may by no later than fourteen

(14) days before the termination of the previous order, file an

application to the Court to extend the order for a further period of four

(4) months following the termination thereof, subject to the agreement

of the debtor

Provided that the application may also request that the stay

of individual enforcement actions in terms of article 25 be extended, in

whole or in part, for a further period of four (4) months following the

termination of the order, or until the termination of the preventive

restructuring order in terms of article 34, whichever is earlier.

(3)

The application shall, as far as possible, give the full facts,

circumstances and reasons giving rise to the requirement for an

extension and, where applicable, the requirement for an extended stay

of individual enforcement actions, as well as the reasons for which an

extension would be reasonably justified in the context of the financial

and economic situation of the debtor and the interests of his

stakeholders.

(4)

The Court shall, prior to the date of the automatic

termination of the order, issue a decision on whether to extend the

preventive restructuring procedure and, where applicable, whether to

also extend the stay of individual enforcement actions

Provided that the Court shall only renew the stay of

individual enforcement actions if it is satisfied that the renewal would

be reasonable, having regard to the debtor’s prospects of economic

viability, the interests of the affected parties, and the likelihood that a

renewal would facilitate the successful negotiation and confirmation

of a restructuring plan, and would generally not be unduly prejudicial

to the interests of the affected creditors.

(5)

The insolvency practitioner shall notify the extension of

preventive restructuring procedure to the affected parties, the

competent authority and the Registrar of Courts, at the expense of the

debtor, without undue delay.

(1)

If, at any time during which a standard preventive

restructuring order is in force, it results to the insolvency practitioner

(a)

that, after consulting with the officials of the

debtor, the affairs of the debtor have improved to the extent that

the debtor is no longer exposed to a likelihood of insolvency;

(b)

that, after consulting with the officials of the

debtor, the affairs of the debtor have deteriorated to the extent

that the debtor does not have reasonable prospects of economic

viability; or

(c)

that, after consulting with the officials of the

debtor and any creditors of the debtor as the insolvency

practitioner may deem reasonably appropriate, the insolvency

practitioner has established that a significant proportion of the

debtor’s creditors do not support the continuation of

negotiations and shall prevent the debtor from obtaining the

approvals necessary for the confirmation of a restructuring

plan,

the insolvency practitioner shall forthwith make a request by

application to the Court for the termination of the preventive

restructuring procedure, containing detailed and comprehensive

reasons therefor.

(2)

At any time during which a standard preventive

restructuring order is in force, the officials of the debtor, if they are

satisfied that the affairs of the debtor have improved to the extent that

the debtor is no longer exposed to a likelihood of insolvency or

convinced that the affairs of the debtor have deteriorated to the extent

that the debtor does not have reasonable prospects of economic

viability, may submit a request by application to the Court confirming

that they are so satisfied or convinced, and requesting that the Court

issue an order for the termination of the preventive restructuring

procedures, provided that the Court shall not without just cause

proceed to make an order acceding to or declining the application

without having first heard the insolvency practitioner, insofar as

reasonably possible.

(3)

At

any

time

during

which

a

standard

preventive

restructuring order is in force, any creditor or creditors of the debtor, if

they believe that there would be no purpose to the continuation of

standard preventive restructuring procedures on the basis

(a)

that the debtor is no longer exposed to a

likelihood of insolvency or no longer has reasonable prospects

of economic viability; or

(b)

that a significant proportion of the debtor’s

creditors do not support the continuation of negotiations and

shall not provide the approvals necessary for the confirmation

of a restructuring plan,

may, after informing the insolvency practitioner, submit an application

to the Court requesting it to issue an order for the termination of the

preventive restructuring procedures, provided that the Court shall not

proceed to make an order acceding to or declining the application

without having first heard the insolvency practitioner, insofar as

reasonably possible.

(4)

In the event that the Court accedes to an application for the

pre-emptive termination of a standard preventive restructuring order in

terms of this article, it shall make such provisions and conditions, as it

may consider necessary in the circumstances of the case.

TITLE II: PRE-FORMULATED PREVENTIVE RESTRUCTURING

PROCEDURE

The provisions of articles 25, 30 and article 34, as

applicable to a standard preventive restructuring procedure shall,

mutatis mutandis, apply to a pre-formulated preventive restructuring

procedure.

(1)

As may be conducive to the approval of the terms of

a pre-formulated restructuring plan, the insolvency practitioner may, at

the request of the debtor, invite an affected party, or class of affected

parties, to engage in bona fide discussions with the debtor in

connection with the pre-formulated restructuring proposal, for the

purpose of hearing the views of the affected parties.

(2)

A pre-formulated restructuring plan may, subject to the

agreement of the debtor, be submitted by the insolvency practitioner

for adoption by the affected parties in terms of Part VI of this Act,

provided that it is reasonably apparent that

(a)

affected parties with a sufficient commonality of

interest in the same class are treated equally, and in a manner

proportionate to their claim; and

(b)

any new financing proposed in the restructuring

plan is necessary to implement the restructuring plan and does

not unfairly prejudice the interests of the affected parties.

The preventive restructuring order placing the debtor under

pre-formulated preventive restructuring shall automatically terminate

upon the lapse of four (4) months from the date of the application filed

in terms of article 9.

(1)

The insolvency practitioner may, at any time during

which a pre-formulated preventive restructuring order is in force, file

an application to the Court to convert the pre-formulated preventive

restructuring procedure into standard preventive restructuring, if it

results to the insolvency practitioner that

(a)

after consulting with the officials of the debtor,

the economic viability of the debtor is more likely to be

preserved or restored if it is placed under standard preventive

restructuring procedure; or

(b)

after consulting with the creditors of the debtor, a

significant proportion are not in favour of the pre-formulated

restructuring plan, such as is likely to prevent the debtor from

obtaining the approvals necessary for the confirmation thereof,

and the insolvency practitioner is of the view that standard

preventive restructuring is more likely to result in the

successful negotiation and confirmation of a restructuring plan.

(2)

The insolvency practitioner shall annex to an application

made in terms of sub-article (1)

(a)

any information or documentation previously

submitted, in terms of articles 10(a) to 10(g), and article

10(i)(iii), that, following the initial submission thereof, requires

update or revision; and

(b)

a statement in terms of article 10(h)(i), which

should also include details as to how the conversion of the pre-

formulated preventive restructuring procedure into standard

preventive restructuring procedure shall improve the debtor’s

likelihood of preserving or restoring its economic viability.

(3)

In the event that the Court accedes to the request and issues

an order to convert the pre-formulated preventive restructuring

procedure into a standard preventive restructuring procedure, for the

purpose of determining the maximum duration of any stay of

individual enforcement actions in terms of article 25(1), and the

duration of the order placing the debtor under standard preventive

restructuring in terms of article 33(1), the period shall be deemed to

have started to run on the day on which the aforementioned stay and

order commenced during the pre-formulated preventive restructuring

procedure.

PART VI

CONFIRMATION OF RESTRUCTURING PLAN

(1)

A restructuring plan formulated in terms of this Act,

other than a pre-approved restructuring plan that has already attained

the written approval of the affected parties as necessary for the

purposes of confirmation in terms of article 41 or 42, shall be

submitted for adoption at a meeting of the affected parties to be

convened by the insolvency practitioner.

(2)

Not less than seven (7) days notice shall be given to the

affected parties of the holding of the meeting, and the insolvency

practitioner shall also send a copy of the notice to any officials of the

debtor

Provided that, in the event of a pre-approved restructuring

proceeding, it shall be sufficient for the insolvency practitioner to

provide notice to the affected parties that a pre-approved plan has

attained the written approval of the affected parties as necessary for the

purposes of approval in terms of articles 41 or 42, which notice shall be

given not less than seven (7) days prior to the filing of an application to

the Court for the confirmation of the restructuring plan in terms of

article 41(2) or 42(2), as the case may be, such that any dissenting

creditor may, if desirous, communicate the grounds pursuant to which

they are in opposition to the adoption of the restructuring plan.

(3)

The notice shall include a copy of the restructuring plan to

be submitted for adoption at the meeting, for the consideration of the

affected parties, or, in the event of pre-approved restructuring

proceedings, a copy of the pre-approved restructuring plan.

(1) At the meeting for the adoption of the restructuring

plan, the affected parties shall have the opportunity to discuss the

restructuring plan and request clarification on the contents thereof

from the insolvency practitioner.

(2)

The affected parties shall then vote on the adoption of the

restructuring plan, by show of hands, and the insolvency practitioner

shall record the result of the votes taken.

(3)

Any affected party may delay the submission of their vote, for

a maximum period of seven (7) days to be reckoned from the day

following the meeting, in which case their vote shall be submitted, in

writing, to the insolvency practitioner before the expiration of the said

seven (7) day period.

(4)

The written communication of a vote transmitted by the

affected party to the insolvency practitioner in terms of sub-article (3),

must, on pain of nullity, expressly and unequivocally state whether the

affected party wishes to adopt or reject the restructuring plan, and such

vote may be validly submitted to the insolvency practitioner

electronically.

(5)

Notwithstanding any agreement to the contrary, any affected

party that does not vote in the manner aforesaid shall not be considered

for the purpose of assessing whether the restructuring plan has

received the approval necessary for adoption by the affected parties in

terms of article 41 or for the restructuring plan to be crammed down in

terms of article 42.

(1)

The restructuring plan shall be adopted by the

affected parties if it is approved by not less than two-thirds (2/3) of the

affected parties in each class, by reference to the value of the claims

represented thereby.

(2)

Where a restructuring plan is adopted in terms of this article,

the insolvency practitioner shall, without delay, file an application to

the Court for the confirmation of the restructuring plan so that it may

be made effective and binding on all affected parties for all purposes

of law, to which the insolvency practitioner shall annex a copy of the

adopted restructuring plan and proof of the adoption thereof by the

affected parties, as well as the grounds, where these are expressly

stated, pursuant to which any dissenting creditors have voted against

the adoption of the restructuring plan.

(1)

If the restructuring plan is not adopted by the affected

parties in terms of the thresholds prescribed in article 41, the

restructuring plan shall notwithstanding be deemed to be adopted if, in

the view of the insolvency practitioner, the restructuring plan satisfies

at least the following conditions

(a)

the restructuring plan satisfies the best-interest-

of-creditors test;

(b)

the restructuring plan will not result in any class

of affected parties receiving economic value in excess of the

full amount of its claims;

(c)

the restructuring plan ensures that any dissenting

class of affected parties is treated at least as favourably as any

other class of affected parties whose claims would, if the

normal ranking of liquidation priorities were to be applied, rank

pari passu with the claims of the dissenting class, and more

favourably than any other class of affected parties whose claims

would, if the normal ranking of liquidation priorities were to be

applied, rank below the claims of the dissenting class; and

(d)

the restructuring plan has been approved for

adoption by at least one (1) class of affected parties who would,

if the normal ranking of liquidation priorities were to be

applied, receive payment of their claims in whole or in part.

(2)

Where a restructuring plan is adopted in terms of this article,

the insolvency practitioner shall, subject to the agreement of the debtor

and without undue delay, make an application to the Court for the

confirmation of the restructuring plan so that it may be made effective

and binding on all affected parties for all purposes of law, to which the

insolvency practitioner shall annex a copy of the adopted restructuring

plan and appropriate supporting documentation and statements as may

be necessary so as to evidence that the restructuring plan has satisfied

the criteria for adoption in terms of sub-article (1), as well as an

identification of the dissenting creditors and the grounds, where these

are expressly stated, pursuant to which any such dissenting creditors

have voted against the adoption of the restructuring plan.

(1)

The Court shall, within thirty (30) days from the date

of receipt thereof, decide on whether to approve or reject the

restructuring plan

Provided that, insofar as possible, the Court shall, before so

doing, hear from the officials of the debtor and of any affected parties,

as it may deem appropriate, by serving them with a notice of the

proceedings.

(2)

The Court shall only approve and confirm a restructuring

plan if it is satisfied that

(a)

the restructuring plan has reasonable prospects of

ensuring that the debtor’s economic viability is preserved or

restored;

(b)

the restructuring plan has been approved for

adoption by the affected parties in accordance with the terms of

this Act;

(c)

the formation of voting classes, and the

attribution of voting rights thereto, has been performed in

accordance with the terms of this Act;

(d)

the restructuring plan ensures that affected parties

with a sufficient commonality of interest in the same class are

treated equally, and in a manner proportionate to their claim;

(e)

any new financing proposed in the restructuring

plan is necessary to implement the restructuring plan and does

not unfairly prejudice the interests of the affected parties; and

(f)

notification of the restructuring plan has been

given to all affected parties in terms of article 39.

(3)

Following receipt of an application for the confirmation of a

restructuring plan, the Court may request any explanations or

clarifications as it may consider appropriate for the formulation of its

decision, which shall be provided to it, either verbally or in writing, as

the Court may direct.

(4)

If a dissenting creditor has opposed the approval of the

restructuring plan, on the grounds of, either

(a)

the failure of the restructuring plan to satisfy the

best-interest-of-creditors test; or

(b)

a breach of the conditions for a cross-class cram-

down in terms of article 42(1),

the Court shall appoint an expert, who shall be an insolvency

practitioner, to, within thirty (30) days from the date of his

appointment, carry out, or cause the carrying out, of such valuations

and other procedures as may be necessary or required so as to enable

the expert to submit to the Court his report in writing regarding the

subsistence, or otherwise, of the relevant grounds for opposition, and

motivating the basis on which his conclusions are founded

Provided that the insolvency practitioner who is so appointed

may, with the approval of the Court, appoint any such experts as may be

deemed necessary to assist in carrying out valuations and other

procedures, and any costs incurred for this process, shall, if the

opposition is unfounded, be borne by the dissenting creditor, or, if the

grounds for opposition are found to subsist, by the debtor.

(5)

Without prejudice to sub-article (1), where a restructuring

plan is opposed on the grounds referred to in sub-article (4)(a) or (4)(b),

the Court shall, within thirty (30) days from the date of receipt of a final

report from the expert appointed in terms of sub-article (4), make a

determination regarding the subsistence or otherwise of the said

grounds, and the Court shall reject the restructuring plan if either of the

said grounds are determined to subsist.

(6)

Upon the Court’s approval of the restructuring plan, it shall

become effective and binding on all affected parties for all purposes of

law.

(1)

Where the Court rejects a restructuring plan, it may

propose amendments to the restructuring plan to the officials of the

debtor and the affected parties, indicating the Court’s readiness to

confirm the plan should those amendments be approved by a separate

vote of the affected parties held in accordance with articles 41 or 42.

(2) Upon rejection of a restructuring plan, the officials of the

debtor may, in consultation with the insolvency practitioner and

otherwise in terms of this Act, formulate a new, or revised,

restructuring plan prepared in accordance with the requirements of the

Second Schedule, to be submitted for adoption by the affected parties.

(3)

Any preventive restructuring order issued by the Court shall

continue to apply until the automatic or pre-emptive termination

thereof in terms of this Act, and any right to request an extension of

the preventive restructuring order may be duly exercised by the

competent party.

PART VII

APPEALS

(1)

Any decision of the Court within the context of a

preventive restructuring procedure, including to approve or reject a

restructuring plan, shall be subject to appeal to the Court of Appeal,

constituted in terms of article 41(6) of the Code of Organisation and

Civil Procedure, hereinafter referred to in this article as the "Court of

Appeal"

Provided that the Court of Appeal may, notwithstanding that

it has accepted an appeal made against the confirmation of a

restructuring plan, uphold the decision of the Court to confirm a

restructuring plan, and provide such remedy as necessary to ensure

that the appellant is protected from the effects of the restructuring

plan, or duly compensated, such that the appellant

(a)

shall be entitled to receive an amount at least

equivalent to that which the appellant would have been entitled

to if the normal ranking of liquidation priorities were applied,

or in the event of the next-best-alternative scenario, if the

restructuring plan had not been confirmed; and

(b)

shall be treated at least as favourably as any other

creditor within any class of affected parties whose claims

would, if the normal ranking of liquidation priorities were to be

applied, rank pari passu with the claims of the appellant, and

more favourably than any other creditor within any class of

affected parties whose claims would, if the normal ranking of

liquidation priorities were to be applied, rank below the claims

of the appellant.

(2)

An appeal made in terms of sub-article (1), may be made by

the debtor by means of an application submitted to the Court of Appeal

within twenty (20) days of the Court’s decision.

(3)

An appeal made in terms of sub-article (1), may also be

made by any interested party, by means of an application submitted to

the Court of Appeal within twenty (20) days of the Court’s decision

Provided that the Court of Appeal shall, before hearing such

an appeal, ascertain the interest of the appellant in the decision against

which the appeal has been filed.

(4)

Any appeal made in terms of this article shall have no

suspensive effects on the execution of that decision, or on the

execution of any restructuring plan approved within the preventive

restructuring procedure in which that decision was made.

(1)

Upon the confirmation of a restructuring plan by the

Court, and if the restructuring plan identifies the need to obtain the

consent of a creditor prior to the transfer of any asset or assets, and, or,

where the creditor is required to appear on any pertinent public deed so

as to give consent to the cancellation of, or a reduction in, any cause of

preference and the registration of the same, enjoyed by the creditor

over the said asset or assets, the debtor may, if he is, or if the officials

of the debtor are, of the opinion that the consent of the said creditor is,

or may be withheld, make an application to the Court for the

appointment of a curator.

(2)

A curator appointed in terms of this article may under the

authority of the Court, give his consent to the transfer of assets and, or,

appear on any pertinent public deed to consent, for and on behalf of

the creditor referred to in sub-article (1), to the cancellation of, or

reduction in, any cause of preference, and the registration of the same,

enjoyed by the said creditor, on condition that the curator receives that

portion of the proceeds of the sale of assets which, in terms of law and

subject to the restructuring plan, pertains to the said creditor, and

which shall be applied in his favour in terms of sub-article (3).

(3)

The curator shall receive, for and on behalf of the creditor

referred to in sub-article (1), that portion of the proceeds of the sale of

assets referred to in sub-article (2) which, in terms of law and subject

to the restructuring plan, pertains to the said creditor, and shall ensure

that such funds are either distributed to the said creditor or, if this is

not reasonably practicable, deposited in Court for the benefit of the

said creditor.

PART VIII

MISCELLANEOUS

If at any time it appears that any actions of the debtor during

a preventive restructuring order or otherwise in connection with the

process of preventive restructuring, has been carried on with intent to

defraud any creditor of the debtor, the Court, on the application of the

insolvency practitioner or of any creditor of the debtor, may, if it

thinks proper so to do, declare that any persons who were knowingly

parties to the carrying on of the business in the manner aforesaid be

personally responsible, without any limitation of liability, for all or any

of the debts or other liabilities of the debtor as the Court may direct.

(1)

Upon the filing of a preventive restructuring

application, the issue of a preventive restructuring order, the

appointment and termination of the appointment of an insolvency

practitioner and the appointment of a replacement thereof, the filing of

an application for the termination of a preventive restructuring order,

or the order of the Court terminating the preventive restructuring

procedure for any reason, the Registrar of Courts shall forthwith

PRE-INSOLVENCY

submit a copy of any such application, Court order or other relevant

document to the competent authority.

(2)

Notwithstanding the provisions of sub-article (1), a copy of

the restructuring plan, as may be attached to an application or order,

shall not be delivered to the Registrar together with such application or

order.

(1)

The provisions of this Act shall not apply insofar as

these may be inconsistent with, or insofar as these may be construed as

limiting or restricting, the application of the following laws or

instruments, or any transposing legislation, as may be amended from

time to time

(a)

the Convention on International Interests in

Mobile Equipment and its Protocols on Matters Specific to

Aircraft Equipment that was opened for signature at Cape Town

on 16 November 2001, as transposed or as enforceable in terms

of Maltese law;

(b)

Directive 98/26/EC of the European Parliament

and of the Council of 19 May 1998 on settlement finality in

payment and securities settlement systems, as transposed in

Maltese law;

(c)

Directive 2002/47/EC of the European Parliament

and of the Council of 6 June 2002 on financial collateral

arrangements, as transposed in Maltese law;

(d)

Regulation (EU) No. 648/2012 of the European

Parliament and of the Council of 4 July 2012 on OTC

derivatives, central counterparties and trade repositories;

(e)

the safeguarding requirements of funds for

(i)

payment institutions laid down under

Directive (EU) 2015/2366 of the European Parliament

and of the Council of 25 November 2015 on payment

services in the internal market, amending Directives

2002/65/EC, 2009/110/EC and 2013/36/EU and

Regulation (EU) No 1093/2010, and repealing Directive

2007/64/EC, as transposed in terms of Maltese law; and

(ii)

electronic money institutions laid down

under Directive 2009/110/EC of the European

Parliament and of the Council of 16 September 2009 on

the taking up, pursuit and prudential supervision of the

business of electronic money institutions amending

Directives 2005/60/EC and 2006/48/EC and repealing

Directive 2000/46/EC, as transposed in terms of Maltese

law;

(f)

the

Financial

Collateral

Arrangements

Regulations and any financial collateral arrangement in terms

thereof;

(g)

the Set-Off and Netting on Insolvency Act;

(h)

the Merchant Shipping Act; and

(i)

the Aircraft Registration Act.

(2)

The provisions of this Act shall

(a)

not apply where any applicable law creates a

separate patrimony in the hands of a person or where a person is

vested with ownership, has registered in his name, holds,

exercises control or powers of disposition over property subject

to fiduciary obligations;

(b)

have no impact on any accrued occupational

pension entitlements.

(1)

In addition to the matters on which the Minister is

empowered to prescribe regulations under the provisions of this Act,

the Minister shall additionally have the power to make such

regulations for the better carrying out of any of the provisions of this

Act as the Minister may also, on consultation with the competent

authority, deem necessary, required or appropriate to give effect to the

object and purpose of the Act.

(2)

Without prejudice to the generality of sub-article (1), the

Minister shall make regulations for the use of electronic means of

communication in the course of the procedures established in

accordance with this Act, including regarding

(a)

the presentation of requests and applications;

(b)

the submission of a proposed restructuring plan,

in accordance with this Act or the submission of the proposed

terms of a debt agreement or bankruptcy order in accordance

with the Commercial Code;

(c)

notifications to the creditors;

(d)

holding of hearings and meetings;

(e)

voting at all hearings or meetings; and

(f)

the submission of contestations, objections and

appeals.

(1)

In case of conflict between the Maltese text and

English text of this Act, the English text shall prevail.

PRE-INSOLVENCY

(2)

Any rules or regulations made pursuant to any provision of

this Act shall be made in the Maltese language and in the English

language; however where in exceptional cases the use of the Maltese

language would be difficult due to technical terminology, such rules or

regulations may be made in the English language only.