Business entities

Types of business entities

Malta’s Company Act of 1995 is principally based on English company law and is in conformity with EU Directives. The law contemplates the following types of business entities, which under Maltese Law acquire a distinct legal personality as soon as they are incorporated and registered under the Companies Act:

Limited Liability Company, which is the most preferred vehicle for doing business in Malta due to its separate legal personality and limited liability. The limited liability company can either be of a public nature (Plc) or of a private nature (Limited or Ltd). The minimum number of shareholders for a Plc and Ltd is two, however an Ltd may also be formed as a single member firm. This is allowed as long as the sole shareholder and sole director are not themselves corporate entities and the objects clause is restricted to one main activity. The Ltd company cannot have more than 50 shareholders. The Limited Liability company is formed by means of capital divided into shares. The liability of the shareholders is limited to the amount of unpaid share capital.

‘Partnership en commandite’, which is a partnership with at least one unlimited (general) partner and other limited partners. This entity has its obligations guaranteed by the unlimited and joint and several liability of its general partners and by the liability limited to the contribution of the limited partners.

‘Partnership en nom collectif’ which is an unlimited partnership where its obligations are guaranteed by the unlimited and joint and several liability of all its partners.

The Companies Act also contemplates a joint venture (association en participation) which is not required to be registered and is not vested with a separate legal personality.

The Companies Act provides for the setting up of investment companies with variable share capital (SICAVs) and companies with share capital denominated in a foreign currency. It allows the possibility of a nominee shareholding in Maltese companies, as long as the nominee functions are exercised by an entity licensed by the Malta Financial Services Authority.

A foreign entity can carry on its business in Malta through a branch that must be registered under the Companies Act. The branch is not considered as a separate entity and is not incorporated as such. The branch must be registered within one month of establishing the place of business in Malta and must submit the following documentation to the Registrar of Companies:

Copy of the charter of the company;
List of officers of the company;
Names and addresses of one or more individuals resident in Malta who are authorized to represent the overseas company locally;
Return with details of the branch including name, address and activities.

Share capital

The minimum authorised and issued share capital in a Limited Liability Company under Maltese law is as follows:

Private companies - 31,165 with at least 20% thereof paid up upon subscription;
Public companies - 346,587 with at least 25% thereof paid up upon subscription.

It is necessary to deposit the amount of the paid-up capital in a bank account entitled ‘Company Name – Company in Formation’ before registering the company with the Registrar of Companies.

The company’s share capital may be denominated in any currency. Malta does not impose any exchange control restrictions and this facilitates the use of Maltese corporate vehicles for international business. Exchange risk is further minimised by the fact that the company’s income tax is paid in the same currency of the share capital. Any tax refunds are also given in the same currency.

Company registration

The registration of a company is done by submitting the necessary documentation to the Registrar of Companies. The documentation includes the Memorandum and Articles of Association (M&A) together with an identification document of the subscribers, and proof that initial share capital has been paid up. The M&A must be signed by the subscribers or their attorneys, but need not be executed in front of a notary public. This enables subscribers to set up a company without actually having to physically come to Malta; however, due diligence documentation with respect to Know Your Client (KYC) procedures is required. The Registrar of Companies usually completes the company incorporation or registration of entities within 24 hours of receipt of all the documentation required.

A registration fee is payable to the Registrar of Companies and depends on the amount of authorised share capital. The fee ranges between a minimum of 3350 and a maximum of 31,747.

Malta has a fully fledged trustee regime and shares in Maltese companies may be held by licensed trustees in a fiduciary capacity for and on behalf of subscribers.

Directors and company secretary

The business of a Limited Liability Company is conducted by its directors, who are appointed by the shareholders. Companies must have at least one director and one company secretary. The director may be a corporate entity but the company secretary must be an individual. As a rule, a sole director cannot occupy the post of company secretary as well unless the company is a single member company. The director and company secretary, both of whom are officers of the company, need not be resident in Malta. In general, a director may not carry on any business in competition with the company and may not receive loans from the company. The Companies Act assigns various duties, responsibilities and obligations on directors who are normally jointly and severally liable for damages arising from any breach of these duties.

Shareholders meetings

The general meetings of the shareholders, which must be held each year and not later than 15 months from the date of the previous annual general meeting, need not be held in Malta but may be done via a telephone or video conference. The business of an annual general meeting would normally include the consideration of the directors’ and auditors’ reports, approval of the financial statements of the company, confirmation of any dividends proposed by the directors, election of the auditors and directors (where latter hold a periodical term) and the fixing of the auditors and directors remuneration.

Financial statements

Every company has to prepare financial statements which are to be audited in accordance with the provisions of the Companies Act. The directors are required to present these audited financial statements, that are to include an income statement, a statement of financial position, a statement of cashflows and any other statement and notes as required in terms of the appropriate reporting framework to the shareholders at the general meeting.

Audited financial statements must be laid before, and approved by, the general meeting of the company and eventually submitted to the Registrar of Companies. A company may opt for a financial year end other than 31 December as long as the first period is not less than six months and not more than eighteen months. The time allowed for the submission of accounts before the general meeting is ten months after the financial year end for private companies and seven months after the financial year end for public companies.

Annual statutory filing

Companies must submit an annual return upon each anniversary of the company’s registration date. The annual return, which must be signed by one of the directors or company secretary, includes the following information: registered office of the company, summary of share capital and debentures, list of shareholders and particulars of directors. An annual fee which depends on the level of authorised share capital and varies from 385 to 32,000 per annum is payable, and this together with the annual return are to be submitted within 42 days from the anniversary of the registration date of the company.

Continuation of companies

Continuation of companies or Redomiciliation is the process whereby a company registered in a foreign jurisdiction may opt to migrate to or be continued in Malta without the need to be wound up. Redomiciliation does not create a new entity or affect the property of the company which shall retain all its rights, assets and liabilities.
In order to qualify for redomiciliation into Malta, the entity must be a “body corporate” which is similar to a company in terms of Maltese law and must be incorporated in an approved jurisdiction as may be established from time to time by the local Registrar of Companies. Furthermore the laws of the jurisdiction must allow for the migration of companies and the company must be authorised to migrate in terms of its statute or constitutive document.

A company wishing to migrate should make a request to the Registrar of Companies presenting the following documents together with the appropriate registration fee:

resolution whereby the decision is taken for the Foreign Company to be continued in Malta;
statute of the Foreign Company, revised and amended to include the requirements for registration in accordance with the provisions of the Companies Act 1995;
a certificate of good standing in respect of the Foreign Company or some other documentary evidence to show that the Foreign Company satisfies the registration requirements of the country in which it was incorporated;
a declaration of solvency signed by at least two directors or two persons vested with the company’s administration or representation;
a list of the directors and company secretary (or alternatively list of persons vested with administration) of the Foreign Company;
a declaration signed by at least two directors or two persons vested with the company’s administration or representation of the Foreign Company confirming certain details about the Foreign Company;
such material as the Registrar may require to ascertain that the request for migration is permitted by the laws of the jurisdiction where the company is incorporated.

Should the Foreign Company be a public company or carry out activities which if conducted in or from Malta require licensing or authorisation such as companies providing Investment Services, Insurance or Credit Institutions, additional documentary and licensing requirements will apply.

Liquidation

A company resolution or order of the Court is necessary to initiate liquidation procedures and dissolve the company. A liquidator is appointed by the shareholders of the company or by application to the court. Liquidation may take the form of a shareholders’ or creditors’ winding up. The former is only possible in the case of a solvent company. A company may also be wound up by the court.

The Companies Act also includes provisions on company reconstructions and recovery procedures.