The following is an analysis by auditor Godfrey Leone Ganado of the last available audited accounts of Steward Malta Limited that operates the concession running St Luke’s, Karin Grech and Gozo General Hospital. These accounts refer to the year ending 31 December 2017.

At 31 December 2017, the company was still operating under the name of Vitals Global Healthcare, and this was changed to Steward Malta Limited on 16 February 2018 when Steward purchased 95% of the shareholding. The information below reflects the company’s status at 31 December 2017.

Net liabilities (Deficit) amount to Euro 27.6 million. This means that the company does not have the funds to pay its creditors.

The loss for the year amounted to Euro 18.4 million, which together with the loss of Euro 6 million in 2016, gives an accumulated loss of Euro 24.4 million. This loss includes a bonus of Euro 5 million to one of the directors.

The available cash and bank balances amount to Euro 160,000.

The company has a bank loan of Euro 896,000 which is secured by assets of the Company and the Group, and by guarantees of the shareholders.

The company has trade and other payables, that is creditors, amounting to Euro 43.4 million. Included in these creditors is an amount of Euro 5.9 million due for VAT, and Euro 2.3 million due to the parent company Bluestone Investments Limited. No separate disclosure has been made of the amount, if any, of employee tax and social security which are still due to the Director of Revenue.

At 31 December 2017, one of the Company’s and Group’s contractors had a performance guarantee in place on behalf of the Company and the Group in favour of the government in respect of the services concession agreement amounting to Euro 9 million.

Services Concession Agreement

On 30 November 2015, the Group signed a services concession agreement with the government to make available a minimum of 712 hospital beds per day from the “completion date” to the end of the concession period of 30 years. The effective date of the services concession agreement was 1 June 2016. Construction works on the sites commenced in 2015 and to date works are still underway. The construction and finishing phase is expected to be completed during 2022 and thereafter the operating phase will follow with a duration of twenty four years once the construction and finishing phase is complete.

In line with the agreed terms, the Group has entitlement to cashflows, that is ongoing payments, for the provision of healthcare services. Rates are contractually agreed, and will be paid by the government. The Group’s total cashflows will equate to the contractually agreed rates.

Upon termination of the emphyteutical grant, the Group is required to hand-over responsibility and ownership of all assets relating to the hospital sites to the government. During the term of the agreement, the Group is entitled to cashflows relating to beds even if these are vacant. The only condition that entitles it to cash-flows is making such beds available for use. The Group may not however dispose or change the use of the properties during the period of the concession.

Audit Opinion

The auditor issued a clean audit opinion, however he drew attention to an ‘emphasis of matter’, stating that the Group’s total liabilities exceeded its total assets by more than Euro 27.3 million, and that this indicates the existence of a material uncertainty that may cast doubt about the Group’s ability to continue as a going concern. He also refers to the statement that the shareholders have given their undertaking to support the Group so that it will continue operating in the foreseeable future as a going concern.

Comments and observations

The net liabilities position clearly points to bankruptcy. The company does not have the funds to pay its creditors, and it seems it has neither tried to tap into additional bank borrowings, or if it did, the request was refused.

The company managed to borrow Euro 896,000 from the bank. However, it cannot validate a request for substantial funding, when its registered share capital is only Euro 1,200, a paltry sum for such a major project. Also, the parent company, Bluestone Investments Malta Limited, despite any support it may have promised, none has materialised. In fact, creditors increased from Euro 17.5 million in 2016 to Euro 43.4 million in 2017. This shows clearly that the company is using the funds of its creditors by not paying them or deferring payment, as seems to be the case with outstanding VAT amounting to Euro 5.9 million, and possibly tax and social security deducted from the salaries of the employees. In fact, accrued expenses, where such deductions are normally included, amount to Euro 6.7 million.

The audited accounts for 2018 have not yet been filed and are overdue, while those for 2019 will be due around the third quarter of 2020. It is therefore not possible to assess what the current financial situation of Steward is. It is however pertinent to point out that the issued share capital of Steward has remained at Euro 1,200. The same can be said of the Ultimate Controlling Party/Parent company, Bluestone Investments Malta Limited, which has a share capital of Euro 1,200, and whose last audited financial statements filed with the Companies Registry, were those for 2015.

The performance guarantee for Euro 9 million, that had been issued in favour of the government, had been waived by the government of Prime Minister Joseph Muscat in 2019, and the waiver was withdrawn by the Cabinet of Ministers headed by Prime Minister Robert Abela, with effect from 2 March 2020.

The reason for the waiver of the guarantee is highly suspicious, and shows absolute irresponsibility on the part of Prime Minister Joseph Muscat, Health Minister Konrad Mizzi and Finance Minister Edward Scicluna, whose responsibility was to protect taxpayer funds from potential risks, particularly in view of the fact that in their position, they could not have been unaware that the company was in a bankrupt situation. I wonder whether this could have been an implicit condition made by the new owners before taking over a bankrupt concession from Vitals Global Healthcare.

I must highlight a contract clause, which, though I lack expert knowledge of the health sector, still for me raises questions. The clause states that the government will pay for the use of all the available hospital beds, even for those which may be vacant, that is, without an allocated patient.  This means that the government will pay the company for each of the projected 712 beds, from the date when the hospital starts operating, irrespective as to whether there is a demand for them. In this respect, we don’t know whether the government has the right of first refusal on the use of all the beds.

An important issue on this company, is whether the directors adopted good governance, and whether the government carried out stringent due diligence and ongoing monitoring on the company and its directors/management, to ensure that the assets of the taxpayer are being protected and that an outsourced essential service does not fail.

Article 136 A  of the Companies Act (Chapter 386 of the Laws of Malta) requires binds directors of a company to act honestly and in good faith in the best interest of the company, and that they promote the well-being of the company and its proper administration and management, and the general supervision of its affairs. The directors are obliged to exercise the degree of care, diligence and skill which would be exercised by a reasonably diligent person having both the knowledge, skill and experience that may reasonably be expected. Directors have to ensure that their personal interests do not conflict with the interest of the company, and that they may not use any property, or opportunity of the company for their own or anyone else’s benefit.

The issue of personal interests against company/stakeholders interest, raises the question as to whether the bonus of Euro 5 million paid to a director, was in the interest of the company. Under normal company good governance, such a payment should have been approved in a general meeting. In this case, I would have expected formal approval by the government through the minister of finance, as the amount was paid out of taxpayers money through the contracted cash flows.

In order to determine whether the directors carried out any wrongful and fraudulent trading, I must refer to extracts from the court judgement relating to the case involving the Price Club.

Article 177 of the Companies Act obliges directors to compile a directors’ report for each accounting period which must show a true and fair review of the company’s business. The Court emphasised that during the reporting period, the directors had become aware of the company’s inability to pay its debts, and yet they expressed their confidence that the ‘operational performance of the company will improve in the foreseeable future’. The Court viewed this misleading directors’ report as a clear indication of the directors’ intent to defraud the creditors.

In the case of Steward, the directors, Dr Armin Ernst and Mr Michael Callum, state in their directors’ report, under the heading of ‘Future Developments’ that, “the main objectives of the Board, remains continuing to expand the business model. It is the Board of Directors’ intention to develop the Company and the Group through realignment of the business to provide a more efficient and cost-effective structure. The Board of Directors believes that the measures that are being put in place should provide a platform for the company and the Group to achieve profitability.”

The Board, in their report, also justified the appropriateness of the continued going concern of the company, to the undertaking by the shareholders to support the Group to continue operating in the foreseeable future.

We do however know that the shareholders, through the parent company Bluestone Investments, has not yet taken steps to increase the company’s share capital from the current Euro 1,200, and neither has the parent company obtained adequate bank financing by issuing guarantees towards the banks, nor extended shareholders’ loans to the company.

It is significant that in the Price Club case, the Court found the directors liable for fraudulent trading and not merely for wrongful trading.


The government, in my opinion, cannot continue to support a project which was vitiated right from the very beginning with suspicious intent of potential criminality, and which carries the mark of alleged complicity between the promoters and the government. In fact, this project is continuing to be riddled with questions pointing to continuity in corruptive practices sponsored by the government.