MBR: Challenges in Fines Collection and Allegations of Favoritism

The Malta Business Registry (MBR) plays a crucial role in regulating and enforcing compliance with the Companies Act. In recent years, the MBR has intensified its efforts to impose fines on businesses found in contravention of the law, aiming to bolster compliance statistics following Malta’s grey-listing by the Financial Action Task Force. However, despite the substantial increase in fines imposed, the MBR is facing significant challenges in collecting the fines and arrears owed. Moreover, allegations of favoritism have arisen due to the head of the MBR’s enforcement unit being none other than Deandra Schembri, the wife of Economy Minister Silvio Schembri.

The increase in fines imposed by the MBR is evident from the data presented in Parliament by Minister Silvio Schembri. In 2019 alone, fines totaling €9.4 million were imposed, and this figure had risen to €16.2 million by the following year. On the surface, this indicates a firm stance on enforcing compliance with the Companies Act. However, the reality is that the government is struggling to collect the fines, leading to a substantial accumulation of unpaid dues.

According to parliamentary questions raised by Opposition MP Jerome Caruana Cilia, the MBR managed to collect only 44% of the fines imposed in 2021, with the percentage dropping to 41% in the previous year. These figures reveal a significant shortfall in the collection efforts of the MBR, despite the increased fines being imposed. The inability to collect the fines raises questions about the effectiveness of the enforcement unit and the methods employed.

Insiders close to the MBR have shed light on the situation. While businesses are being subjected to higher fines, the actual collection of these fines remains lacking. It appears that the focus is more on boosting compliance statistics rather than ensuring the financial penalties are paid. This indicates a concerning discrepancy between the intention to enforce the law and the ability to follow through with effective collection efforts.

One underlying factor that has raised eyebrows is the involvement of Deandra Schembri as the head of the MBR’s enforcement unit. Being the wife of Economy Minister Silvio Schembri, she holds a position that potentially presents a conflict of interest. Concerns have been raised about the influence that well-connected businessmen may exert on the enforcement process when they complain to the minister. The close relationship between Minister Silvio Schembri and Deandra Schembri naturally raises questions about the objectivity and fairness of the MBR’s enforcement practices.

Deandra Schembri’s professional background adds further weight to these concerns. Graduating as a lawyer in 2012, she joined the MBR’s payroll just months after her husband assumed the position of Parliamentary Secretary. Following Silvio Schembri’s promotion to minister in 2019, Deandra Schembri also received a promotion at the MBR, resulting in a €14,000 increase in her annual salary, reaching €50,000. Additionally, she was appointed as a member of the Police Complaints Board, further raising questions about potential conflicts of interest.

In conclusion, the MBR’s enforcement unit faces significant challenges in effectively collecting fines and arrears owed by businesses. The increase in fines imposed does not align with the actual amount collected, highlighting a discrepancy between enforcement efforts and outcomes. Allegations of favoritism arise due to the involvement of Deandra Schembri, wife of Economy Minister Silvio Schembri, as the head of the enforcement unit. These concerns necessitate greater transparency and accountability within the MBR to ensure the fair and impartial enforcement of the Companies Act.

FAQs

How are fines imposed by the Malta Business Registry calculated?

Fines imposed by the Malta Business Registry are typically calculated based on the severity and nature of the contravention of the Companies Act. The specific calculations may vary depending on the circumstances of each case.

Can businesses appeal against the fines imposed by the Malta Business Registry?

Yes, businesses have the right to appeal against fines imposed by the Malta Business Registry. They can follow the designated appeal process to present their case and challenge the imposed fines.

What happens if businesses fail to pay the fines imposed by the MBR?

If businesses fail to pay the fines imposed by the Malta Business Registry, the MBR may take legal action to recover the outstanding amount. This can involve court proceedings and further penalties for non-payment.

How can businesses ensure compliance with the Companies Act and avoid fines?

Businesses can ensure compliance with the Companies Act by maintaining accurate records, timely filing of required documents, and adhering to the regulations outlined in the legislation. Regular monitoring and seeking professional advice can help avoid potential fines.

Are there any initiatives in place to support businesses in understanding and complying with the Companies Act?

Yes, various initiatives, including workshops, seminars, and informational resources, are available to support businesses in understanding and complying with the Companies Act. These initiatives aim to provide guidance and assistance to business owners and stakeholders.

What measures are being taken to address the challenges in fines collection?

Efforts are being made to address the challenges in fines collection by reviewing and improving the collection processes within the Malta Business Registry. This includes exploring more effective methods of enforcement and streamlining the overall fines collection system.

Are there any plans to reform the enforcement unit of the Malta Business Registry?

The need for reform within the enforcement unit of the Malta Business Registry is being considered. Discussions are underway to assess the unit’s functioning, address any shortcomings, and implement necessary changes to enhance its effectiveness.

How does the MBR enforce compliance with the Companies Act besides imposing fines?

Besides imposing fines, the Malta Business Registry can also initiate court proceedings against companies that fail to comply with the Companies Act. Legal action can result in additional penalties and consequences for non-compliance.

Is the issue of unpaid fines unique to the Malta Business Registry?

The issue of unpaid fines is not unique to the Malta Business Registry. Many regulatory bodies around the world face challenges in collecting fines, and it requires continuous improvement in collection processes and enforcement efforts.

What steps can businesses take if they believe they have been unjustly fined?

If businesses believe they have been unjustly fined, they can seek legal advice and consider appealing the imposed fines. It is important to present a strong case supported by evidence to challenge the fines through the designated appeal process.

How often does the Malta Business Registry review its enforcement practices?

The Malta Business Registry periodically reviews its enforcement practices to ensure their effectiveness and alignment with evolving regulatory requirements. The aim is to continually improve the enforcement process and address any identified issues.

Is there a mechanism in place to ensure accountability within the MBR’s enforcement unit?

Yes, there are mechanisms in place to ensure accountability within the MBR’s enforcement unit. Regular internal audits, oversight by relevant authorities, and adherence to established procedures help maintain accountability and transparency.

Are there any ongoing investigations into the MBR’s enforcement practices?

At present, it is unclear whether there are ongoing investigations into the Malta Business Registry’s enforcement practices. However, concerns raised regarding the enforcement unit’s operations may prompt further scrutiny and investigation.

How can the MBR improve its fines collection rate?

The Malta Business Registry can improve its fines collection rate by implementing more efficient and robust collection procedures, engaging with businesses to address payment issues, and leveraging technology for streamlined processes.

What consequences can businesses face for non-compliance with the Companies Act besides fines?

Besides fines, businesses that fail to comply with the Companies Act can face various consequences. These can include reputational damage, restrictions on business activities, legal action, and potentially even dissolution of the company in severe cases.

Does the head of the MBR’s enforcement unit have sole authority over fine imposition?

The head of the MBR’s enforcement unit does not have sole authority over fine imposition. The process involves multiple stages, including investigation, decision-making, and potentially legal proceedings, with oversight and involvement from relevant authorities.

What actions can businesses take if they are struggling to pay the imposed fines?

If businesses are struggling to pay the imposed fines, they can consider negotiating payment plans or seeking professional advice to manage their financial obligations. Open communication with the Malta Business Registry may also help explore viable solutions.

Are there any plans to introduce reforms in the Companies Act to address these issues?

The possibility of introducing reforms in the Companies Act to address the issues surrounding fines collection and enforcement practices is under consideration. The aim is to enhance the effectiveness and fairness of the regulatory framework.