An ‘occasional insider’ in search of the good

The Law of Companies (including Co-operatives)

Author: David Fabri Publisher: Midsea Books / 2024 Pages: 216

After his book on Financial Services Law, and before the final volume in his trilogy (on Consumer Protection Law), David Fabri regales us with this wonderful book reviewing the Law of Companies (and including Cooperatives).

The company ranks amongst the most important organisations in the world, along with the family, the tribe, the church and the political party. But as a generator of economic prosperity, the company has no rival. No wonder that, as Fabri reminds us, the first intent of company law was to facilitate business, encourage enterprise and create wealth and jobs. This facultative and enabling side has been complemented, with the passage of time and experience, with a more controlling and regulatory arm. Indeed, the contemporary period – rocked by the Council of Europe’s Moneyval investigations and Malta’s grey listing by the Financial Action Task Force (202122) – seems to have lost sight of the noble, value added purpose of companies, mistaking them instead as potential cabals of money laundering. Fabri advises us to resist this temptation: regulation, yes; overregulation: no.

That this book has been written at all warrants an explanation. The definitive work on Malta Company Law is the 3-volume compendium by Professor Andrew Muscat, which appeared in 2007 and went into its second edition in 2019. (Muscat pens a delightful Foreword to Fabri’s book; as does former Minister and European Commissioner Joe Borg.) What distinguishes The Law of Companies from Muscat’s work – and this is the hallmark of the Fabri trilogy – is the intimate conversational style of the author. The reader is drawn in by a frank and forthright writing style that, at one time, provides useful tips about what makes a ‘good’ director and a ‘good’ company secretary; then, advises on board meeting procedure; and offers us anecdotes into corporate governance drawn from Dr Fabri’s long experience in the field, plus his insightful research on relevant cases of corporate failure from around the world: from the VW fraud scandal and the Parmalat collapse to the grounding of Boeing’s 737 Max and our own Price Club debacle. Everybody loves a good story, especially when well narrated. One can easily understand why and how Dr Fabri holds his university students in his thrall. Frankly, I would have appreciated more anecdotes, like that involving the saga of the soldier guarding the premises of the Toko (Malta) Ltd factory under liquidation.

An experience spanning over four decades in multiple aspects of legal practice, including managing liquidations, crafting legislation and studying European Union directives, endows Dr Fabri with a deep understanding of local issues as much as of the regional and international contexts which frame and nudge legislative intent. On the latter, Fabri takes pains to explain, for example, the complex genealogy of Malta’s transition away from offshore banking with the 1995 Companies Act (with a nod to contracted KPMG legal drafters from the UK who naturally proposed a draft based on UK law), as well as the Malta Government’s long-term goal of securing accession to the European Union and so comply with EU Directives. On the former, he refers to alleged cases of ‘friendly capture’ whereby sound legislative intent is sidetracked by personal interests. Here is indeed, a clear case of an ‘occasional insider’, as Fabri calls himself in the opening chapter, enjoying the vantage point of being actually on the ground, making history, while affording himself enough distance to be able to scrutinise specific moments in this same history, possibly aided by the passage of time.

Fabri does not lose opportunities to recommend legislative amendments. Having had more than one finger in the 1995 Companies Act, and the 2001 Cooperative Societies Act, this demeanour stands to reason. He refers to the provisions of Article 136A in the Companies Act, obliging every director to act honestly and in good faith and in the best interests of the company: Fabri argues that such obligations ought to be extended to cover the directors of voluntary organisations and (especially) public sector entities. He refers to Article 80 of the Cooperative Societies Act: Dr Fabri argues that this provision is tantamount to blessing the Secretary of a cooperative meddling in day-to-day management duties. And, in the wake of a 2020 Court of Appeal decision regarding auditor liability, he also advises auditors to be more vigilant and not go about their tasks perfunctorily and mechanically.

This text is much more than ‘a review of company law, with some issues omitted and others perhaps oversimplified’, as Fabri suggests. Here is a snippet at the life’s work of a principled lawyer, in search of the good. I know, because I was lucky to be complicit in Dr Fabri’s crafting of the Cooperative Societies Act 2001, still in force; details in the book. Kudos to the author and his publisher, Midsea Books, for a very readable book that has been impeccably proof-read.