The role of a court-appointed provisional administrator

In Joseph Montebello (KI nru ……..) Vs 1. Carmel Montebello (KI nru ……..), 2. Montebello Holdings Limited (C 29433), 3. Montebello Property Holdings Limited (C 29934), 4. Montebello Enterprises Limited (C 121199) u A. Montebello Tyres Limited (C 8086), a decree was given in camera by Mr Justice Ian Spiteri Bailey (Civil Court – Commercial Section) on 6 August 2025, whereby the Court acceded to the request of the applicant and appointed a provisional administrator for the respondent companies.

Facts of the Case

On 30 June 2025, the applicant requested the court to hear his application with urgency and appoint a provisional administrator so that together with him, such provisional administrator could administer the affairs of the four respondent companies under the terms of reference the Court deems opportune. The applicant also requested the Court to suspend the respondent Carmel Montebello from all functions, executive or otherwise, of the respondent companies, whose functions would be taken care of by the provisional administrator. The applicant also requested the Court to appoint an information forensic expert so as to extract all the data contained on the electronic means of the companies from wherever they operate. These requests were made in terms of Article 228 of the Companies Act, Chapter 386 of The Laws of Malta, which provides:

“(1) The court may by order appoint a provisional administrator at any time after the presentation of a winding up application and before the making of a winding up order, and either the official receiver or any other competent person may be so appointed.

(2) The provisional administrator shall carry out such functions and powers in relation to the administration of the estate or business of the company as the court may specify in the order appointing him.

(3) The provisional administrator holds office until such time as the winding up order is made or the winding up application is dismissed unless before such time he resigns or he is removed by the court upon good cause being shown.”

The applicant stated that he had already proceeded with a request for the winding up of the four companies. He explained in detail how he and his brother Carmel Montebello, are involved in these four companies, and how they are all related.

Apart from making various allegations, the applicant concluded that the aim behind his application was first and foremost the preservation of the company’s assets and books, so that from this early stage of the proceedings, there would be the proper administration of the companies.

On the other hand, the respondents opposed the applicant’s demands and claimed that there was no urgency, and that the applicant had failed to present sufficient proof to substantiate such request. Inter alia, they also claimed that there were no reasons serious enough to warrant Carmel Montebello to be suspended, and that the parties had been two years preparing for the division of the business, including also having agreed on the professionals to be engaged, at the expense of the companies. The respondents also denied there being any risk to the assets and books of the companies if no provisional administrator is appointed. The respondents also held that in the eventuality that the Court had to accede to the applicant’s requests, the Court must take note of the factual context in that Carmel Montebello had always occupied roles of administration in the companies, whilst Joseph Montebello had always occupied roles that had nothing to do with the administration of the companies. Therefore, the respondents claimed, the provisional administrator who is appointed should be guided by Carmel Montebello or a person of his trust, and that even the applicant’s functions as a director would be suspended. Finally, they opposed the request for the appointment of an information forensic expert, adding that this request was not based on any provision of the law, so much so that it does not come out from Article 228 of the Companies Act.

Judgement

The Court, after examining Article 228 of the Companies Act, quoted extensively from a previous judgement

to harp on the point when a provisional administrator is to be appointed and his particular role. In that judgement, the court had held that to appoint a provisional administrator, the court is not required to consider the merits of the applicant’s requests, but the court’s decision should be dictated by the facts and circumstances of the case. Such an appointment is permissible between the stage when an application is filed in court requesting the dissolution and consequent winding up of a company, and the stage when the court accepts or rejects the request for the dissolution and consequent winding up of the company. In the meantime, the Court must have the peace of mind that the administration and financial affairs of the company are properly conducted in a transparent manner:

“Bil-hatra ta` amministratur provizorju jigi ppreservat l-istat attwali tal-kumpannija ntimata sabiex jekk jigu ppruvati r-ragunijiet tal-kumpannija rikorrenti ghax-xoljiment, u l-Qorti taghmel ordni ta` stralc, il-kredituri kollha jitilqu lkoll mill-istess punt tat-tluq u kulhadd jiehu tieghu skont ix-xorta ta` l-kreditu ppruvat li jkollu. Ir-rwol u l-kompitu ta` amministratur provizorju mhuwiex dak ta` stralcjarju u ghalhekk huwa prekluz milli jiddisponi mill-assi… Il-htiega ta` kondotta tajba, effettiva u trasparenti mid-diretturi ssir imperattiva meta l-kumpannija jkollha biss asset wiehed li jkun irid jaghmel tajjeb ghall-claims tal-kredituri fl-eventwalita` li l-qorti tordna x-xoljiment u tahtar stralcjarju biex jikkonduci l-istralc.”

The Court further made the following observations:

1. That there was sufficient proof that decent communication between the two directors had been lost;
2. That Carmelo Montebello admitted that he was occupying the role of a director that takes care of the companies’ administration;
3. That recently there had been discussions on the proposed division of the business, so much so that an architect and auditor had already been appointed, at the expense of the companies, for such purpose.

Therefore, on this basis, the Court found that the requisites at law for the appointment of a provisional administrator, had been met, and that both the parties and the Court itself, would be in a better position if an independent provisional administrator is appointed, and that in view of the facts and circumstances of the case, the Court felt the need to give a favourable decree in line with Article 228.

The Court, while rejecting the first request of the applicant, accepted the second and with immediate effect appointed an advocate as the provisional administrator of the four companies, so as to administer their affairs in terms of law.

With regard to the third request, the Court went into great detail and:

1. declared that the directors of the four companies must retain all their powers and therefore remain exclusively statutorily responsible, according to law, vis-à-vis any authority or entity, fiscal or administrative;
2. declared that even at this stage the actual directors are to retain their powers as directors, with effect from the date of the decree, in every act of ordinary and/or extraordinary administration the directors shall do in the name of and in representation of the four respondent companies. However, this must always be done together with and with the express consent of the newly appointed provisional administrator. The Court specified that even on public acts such as promises of sale and public contracts that any company may enter into, the presence of the provisional administrator is required, together with that of the directors;
3. declared that if any of the directors fail to abide with this obligation, every act may be declared null and without effect;
4. ordered the current directors to provide any information whatsoever related to every aspect of the administration of the four companies, be it financial, regulatory, that related to the rights and duties of the companies, and anything else that may be requested from them by the provisional administrator;
5. authorised, from the date of the same decree, the provisional administrator to have full access to the books and documents of the four companies, of whatever nature, and authorised the same provisional administrator to communicate with the accountants, auditors of the companies, notaries, prospective buyers of the companies’ property, banks and financial/fiscal institutions, and/or professionals and institutions as he deems necessary, in order to have the full actual picture of the companies and to take all the necessary decisions in the interest of such companies;
6. authorised the provisional administrator to report to the Court, when he deems it opportune, whether it is necessary for the Court to consider the request for the appointment of an information forensic expert;
7. authorised the provisional administrator, in the interest of the best administration of the companies, to give all necessary instructions to the directors, without prejudice to any other provisions if it is reported to the Court that the directors did not abide themselves with the stipulated conditions;
8. authorised the provisional administrator so that if he deems it opportune, he is given unlimited access to the registered office of the companies, by being given a copy of the keys to the same office;
9. solicited the provisional administrator to explore every agreement that may have been reached between the parties in connection with the intended division of the business, and to see whether he can mediate or assist by any other means, to continue the possibility, if existing, of such division;
10. ordered the provisional administrator to do all that is necessary to ensure the good governance of the companies, in the case it results to him that it is lacking; and finally,
11. ordered the provisional administrator to assume the representation of the companies in these proceedings.

Fourthly, the Court ordered the notification of this decree to the lawyer in question who was being appointed as a provisional administrator, as well as to the Malta Business Registry, at the expense of the Court Registrar.

Fifthly, the Court assigned all expenses and the fees of the provisional administrator to all the parties, jointly and in solidum.

Lastly the Court abstained from considering whether an information forensic expert should be appointed in terms of that already provided earlier, i.e. as requested from the provisional administrator in paragraph (6) above.

1 Civil Court – Commercial Section, 6 May 2020.

Disclaimer: Ganado Advocates is responsible for contributing to this law report but was not in any way involved as legal advisor for the parties in the judgement being covered in this law report. This article was first published in ‘The Malta Independent’ on 17/12/2025.