1. What is the general situation for foreign companies in your jurisdiction? (For example, common presence, difficulty to setup, restrictive system, open and welcoming jurisdiction?
Malta is open to investment by foreign companies and we facilitate foreign companies’ transition and business activities in Malta. Malta is known to have a Regulator, such as the Malta Financial Services Authority, which has an excellent international reputation. MFSA is also known to be open to assist in difficulties that may arise from time to time. Malta’s size helps in this regard as the Regulator usually has a structure that makes it accessible and efficient in dealing with issues that crop up from time to time. Therefore, Malta could be described as a welcoming jurisdiction to serious business and commerce.
2. What are the key laws and regulations that govern company law in your jurisdiction?
Malta has a host of legislation that regulates company law. The most significant pieces of legislation are the following:
(1) The Companies Act (Cap 386 of the Law of Malta) which regulates the set up and administration of partnerships, limited liability companies;
(2) The Merchant Shipping Act (Cap 234) which regulates the setting up and operation of shipping companies;
(3) The Financial Institutions Act (Cap 376); and
(4) The Investment Services Act (Cap 370), both of which regulate the setting up, licensing and administration of financial institution such as banks, collective investment schemes (funds) and other such vehicles.
3. What are the most common types of companies in your jurisdiction?
The most common type of company in Malta is the limited liability company. It is flexible in its use and most of all it offers limited liability to its shareholders and officers.
Another type of commercial structure is partnership. There are 2 types which are the En Nom Collectif partnership and the En Commandite partnership.
Malta offers also the possibility of the setting up on Trusts, Foundations and in the fund industry SICAVs. SICAVS allow the collective investment scheme to have an open-ended investment fund structure.
4. How long does it take to set up a company in your jurisdiction? (For example, it could be as fast as X amount of time, average setup time and then as slow as Y amount of time based on your experience – are there any mechanisms to fast track a setup?)
A Limited Liability Company may be set up within a day. The service provider will receive the necessary documents and draft the Memorandum and Articles of Association. The share capital will be deposited in a bank and a bank receipt will be issued. Both will be sent to the Malta Business Registry, either by hand or electronically and then the company will be registered. The Registrar of Companies has a right to ask for correction or make queries after vetting the documentation. The same goes for Partnerships. Foundations and Trusts may take slightly longer in order to register with the appropriate authorities.
A fund will require a license from the Malta Financial Services Authority, and this make take from 3 or 4 months, on average.
5. What are the main registration requirements for companies in your jurisdiction?
If one were to take a limited liability company, the Memorandum and Articles of Association has to list the shareholders and the officers of the company, being directors and company secretary. A Maltese company may be a single member company and have one shareholder and one director. There is no limitation on the nationality of the shareholders and officers of the companies and therefore if required none of the directors may be Maltese and may be easily all non-Maltese residents. A Maltese company must have a share capital. The minimum is €1200 of which 20% must be paid up. Therefore, with €240 one can incorporate a company. The Company must have a registered office in Malta, and it must list the areas of business the company with be involved in. Therefore, the Memorandum and Articles of Association must list the objects or purpose of the company. More often than not the first few are specific, while generic objects are also included.
6. What are the main post-registration reporting requirements for companies in your jurisdiction? (For example, annual reporting requirements: what to file, to whom is a company secretary required?)
Again taking a limited liability company as an example, it would have to submit annually the annual return, where the directors or the company secretary will list the shareholders and the officers of the company and submit this list to the Malta Business Registry. A limited liability company would have to also submit annually audited accounts of the company. The failure to present these will result in penalties.
Licensed corporate vehicles may have other annual or periodic reporting to the relevant authorities.
All companies will have to submit an income tax return to the tax authorities in Malta and those who have a VAT number will have to submit VAT returns quarterly or annually.
7. Are there any controlling factors or restrictions on foreign companies in your jurisdiction?
There are no controlling factors or restrictions of foreign companies having commercial activities in Malta. However, Malta does apply international sanctions and has an international Sanctions Monitoring Board to enforce these sanctions against individuals and companies listed in the sanctions.
Foreign companies may apply for licenses in many of the industries in Malta; however, some may require a minimal amount of presence as in the banking, gaming and financial services industries.
In the maritime field, although a non-Maltese entity owning a vessel may flag the vessel in Malta, without changing the owning entity, it must appoint a Resident Agent to represent the shipowner in Malta.
8. What is the typical structure of directors (or family management structure) and liability issues for companies in your jurisdiction?
Maltese limited liability companies are flexible in the structures used at board of directors’ level. The Companies Act, art 37(1) states that there should be a minimum of two (2) directors for every company, however, in the case of private company, there may be a minimum of one (1). In many companies where there are two or more directors, the Memorandum and Articles of Association regulate that the legal representation of the company may lie in any two (2) of the directors.
9. What is the minimum number of directors and shareholders required to set up a company in your jurisdiction? Are there any requirements that a director must be a natural person?
According to the Companies Act, art 209, a private company has a maximum of fifty (50) members, however, the minimum is one shareholder. In Malta there is the possibility of having a single member company. The law gives a definition of director, which:
“includes any person occupying the position of director of a company by whatever name he may be called carrying out substantially the same functions in relation to the direction of the company as those carried out by a director;
When one states that any person may be a director, the person can per a natural person or a legal person, meaning that a company may act as a director of a company.
This service is regulated by the Company Service Providers Act, 2013, where the Malta Financial Services Authority authorizes the registration of these service providers, in terms of the Act.
10. What are the requirements on how shares are offered in your jurisdiction?
The Memorandum and Articles of Association of a limited liability company will establish the share capital of the company when it is incorporated and how is it divided amongst the shareholders. In a private company, the shareholders decide on whom the shares are distributed to and the rights that each category of shares enjoys within the company.
In public companies, the allotment of shares is regulated by the Companies Act, art 97 seq. Article 99 states that shares or debentures of public companies must be issued following a prospectus and applications may be received following six (6) days of the publication of the prospectus. This may be done at the Malta Stock Exchange or else at any international market, as long as it is regulated.
There are specific rules with regard to group reconstruction and in the event of a take overs.
11. What are the key laws and regulations on employment in your jurisdiction that companies should be aware of? Are there any aspects of employment law that are heavily regulated?
Maltese employment law is regulated under the Employment and Industrial Relations Act (Cap 452) of the Laws of Malta and its subsidiary Legislations. This Act regulates the main conditions of employment, including the type of employment contract to be adopted, be it a definite or an indefinite contract, probationary period, notice period, unfair dismissal and redundancy, amongst others.
A number of subsidiary legislations under this Act then regulate the employment of a person in more detail. One should particularly take note of the Organisation Of Working Time Regulations (SL 452.87), the scope of which is to ensure that employees enjoy minimum hours of rest during their employment and the Overtime Regulations (sub leg 452.110), which stipulates that unless there is the written consent of the employee, then when an employee is carrying out overtime, the average weekly working time shall not exceed an average of forty-eight (48) hours per week.
The Minimum Special Leave Entitlement Regulations (SL452.101) provides employees with the minimum legal entitlements in relation to different types of leave, including sick leave, injury leave, marriage leave, birth leave, bereavement leave, jury service leave and quarantine leave. This particular regulation is applicable to those employees who do not fall under the remit of a specific Wage Regulation Order, applicable to particular different industries such as the Food Manufacture Industries (SL 452.76 of the Laws of Malta), Hospitals and Clinics (SL 452.54) and Seamen (SL 452.51 of the Laws of Malta).
Companies must also be aware of the specific obligations they have in relation to women employees, both during their pregnancy and upon the birth of their child(ren) and this in terms of the Protection of Maternity (Employment) Regulations, SL 452.91. This includes the provision of maternity leave and the provision of a safe environment for such employees. Furthermore, Companies must also ensure that employees enjoy equal treatment at the place of work, whereby no discriminatory treatment is tolerated either by the employers of the employees. Apart from the Employment and Industrial Relations Act, such equal treatment on the basis of gender is more specifically regulated by Equality for Men And Women Act (Cap 456).
Finally, it is also of importance that Companies take into account the Occupational Health and Safety Authority Act (Cap 424 of the Laws of Malta and its Subsidiary Legislations), which regulates in detail the health and safety of employees at the place of work.
12. What is the nature of the corporate governance regime in effect in your jurisdiction? What agencies or government bodies regulate corporate governance?
The main piece of legislation for corporate governance is the Companies Act (Cap 386); notwithstanding many other pieces of legislation governing the activities of these companies. The Malta Financial Services Act (Cap 330) apart from regulating the granting of licenses to entities in the financial services industry, such banks, corporate service providers and other similar activities, is tasked with the monitoring the working and enforcement of the laws of the financial services in Malta through the Malta Financial Services Authority.
The Investment Services Act (Cap 370) those companies licensed as collective investment schemes, in order words funds.
The Prevention of Money Laundering Act (Cap 373) and its regulations legislate the corporate government of subject persons and the manner in which individuals or companies must act in order to prevent money laundering and funding of terrorism in their activities and the handling of assets.
These are just a few pieces of legislation on corporate governance.
13. Does establishing a company in your jurisdiction grant any kind of residency rights? Are there any conditions that in order to receive these residency rights (if applicable) one must partner or establish a joint venture with a local (e.g. a citizen of your jurisdiction)?
Establishing a company in Malta does not give an automatic right to residency in Malta for any shareholder or office of the company There is no need for an investor to have a Maltese national or resident as a partner. There is no limitation on residency or nationality for shareholders and officers of the company. These may be all non-Maltese nationals or residents.
If a shareholder or officer of a Maltese registered company would like to apply for a residency permit or work permit on the ground of his or her investment in Malta, this may be done, through a separate application process in which the regulator, Identity Malta, will verify whether the investment in genuine and feasible.
There are a number of programmes and schemes which would allow investors to apply for residency in Malta and some of which have fiscal benefits attached to them, as the Global Residency Scheme or the High Net Worth Individuals Rules:
14. When is a company subject to tax in your jurisdiction? What are the main taxes that may apply to companies in your jurisdiction?
According to our income tax legislation, Maltese companies are subject to corporate tax at the rate of 35% on their worldwide income and capital gains. Foreign companies incorporated outside Malta carrying out business activities in Malta are liable to tax on income arising in Malta.
When companies are taxed at the standard rate of 35%, following the distribution of dividends, shareholders are entitled to a refund of part or of all the tax paid by the company. The purpose of this imputation system is to eliminate any double taxation that might arise on the distribution of such dividends. Thus, company profits will only be subject to tax at corporate level.
15. How does the competition law in your jurisdiction regulate companies?
Malta has three main pieces of legislation on competition. These are the Commercial Code and the Competition Act, (Cap 379) and the Malta Competition and Consumer Affairs Authority Act (Cap 510). The latter sets up the Malta Competition and Consumer Affairs Authority. The Authority has the function to promote and enhance competition, promote standards and standardization to mention a few. The Authority may investigate and prohibit the fixing of purchase and selling princes, control on production and prohibition of cartels.
Again, Malta being an EU member state, adheres to all the Directives and Regulations of the EU.
16. What are the main intellectual property rights companies should be aware of in your jurisdiction?
Intellectual property rights in Malta are quite diverse and may take different forms; however the main ones that companies should be aware of are copyrights, trademarks, design rights, trade secrets and patents. Some of these rights, namely copyright rights are automatic and do not require registration. Others such as trademarks, patents, designs and trade secrets require registration in order for validity. At the national level, IP rights are registered with the Industrial Property Registrations Directorate within the Commerce Department.
Locally IP rights are mainly regulated by the following legislations: Copyright Act (Cap 415 of the Laws of Malta);Trademarks Act (Cap 416 of the Laws of Malta); Patents and Designs Act (Cap 417 of the Laws of Malta); Intellectual Property Rights (Cross-Border Measures) Act (Cap 414 of the Laws of Malta); Enforcement of Intellectual Property Rights (Regulation) Act (Cap 488 of the Laws of Malta); Trade Secrets Act (Cap 589 of the Laws of Malta); and the Commercial Code (Cap 13 of the Laws of Malta).
However Malta is also party to a number of international agreements and regulations including the World Trade Organisation’s Agreement of Trade-Related Aspects of Intellectual Property Rights, Berne Convention, Patent Cooperation Treaty, European Patent Convention and Unified Patent Court and Regulations.
17. Does your jurisdiction have laws or regulations that govern data privacy?
Malta regulates data privacy in terms of the Data Protection Act (Cap 586 of the Laws of Malta) and the European Union’s General Data Protection Regulation or ‘GDPR’ (EU Regulation 2016/679/EU). The Office of the Information and Data Protection Commissioner is the national supervisory authority responsible for monitoring and enforcing the provisions of the GDPR and the Data Protection Act.
18. Are there any incentives to attract foreign companies to your jurisdiction?
The main attraction of the Maltese jurisdiction is the fiscal corporate regime. As mentioned above, Malta applies as full imputation system, allowing refunds to shareholders upon the distribution of dividends. There could be potentially a tax leakage of 5%, subject to a number of conditions. There are also social security advantages to crew members of Maltese flagged vessels:
There are also industry sensitive incentives, as in the film industry, where the Malta Film Commission, may give cash rebates and/or tax credits. For more information, one can visit: https://maltafilmcommission.com/financial-incentives/. The Malta Enterprise offers several incentives to investment in Malta, for example tax credits for Research and Development Projects, investment aid for tax creditors, start-up finance: http://www.maltaenterprise.com/support.
19. What is the law on corporate insolvency in your jurisdiction?
The Commercial Code regulates bankruptcy of a trader, which could be an individual or a corporate vehicle. The Companies Act, the regulates insolvency and makes a distinction between voluntary and judicial winding up on the company. It established the role and functions of the liquidator and the provision for creditors.
20. Have there been any recent proposals for reforms or regulatory changes that will impact company law in your jurisdiction?
I do not think there will be any major reforms in the near future. Saying this, Malta is enhancing its anti-money laundry structure and anti-terrorism financing mechanisms, and therefore, specific providers, such as a lawyers, accountant, and banks will be strict on applying these mechanisms. This is to ensure that all transactions are above board and legitimate. Therefore, entities which will use Malta, will expect to fulfil AML obligations even more rigorously.
21. Are there any features regarding company law in your jurisdiction or in Asia that you wish to highlight?
Corporate and company law in Malta has developed through the ages and has a rich history and development. Today company law is complex and sophisticated, which offer variety of solutions of people who want to travel in Malta or from Malta.
The main features today of a limited liability company there is no limitation on nationality of the shareholders and officers of the company. There is no need to seek a Maltese participant and all shareholders and offices may be non-Maltese. Another feature is that the entry level to incorporate a company is low, merely €240, allowing a large spectrum of people to participate in commerce. A Maltese limited liability company is flexible and may be adapted throughout its lifetime to cater for different situations. It may be incorporate in a day or two, the share capital may be increased without too much difficulties, shares may be traded again without too much difficulty.
The Malta judicial system dedicates court entirely focused on company and corporate law. Allowing disputes to be decided upon professionally.
22. What changes in company law have been implemented in light of current events? Are there any “new normal” practical tips in your jurisdiction parties should be aware of when dealing with company law?
The COVID 19 situation is ever changing. As I write, the situation here is that there is no lock down and the airport is open. There are however, limitations such as wearing a mask, except at the place of residence or in the car, if by oneself. Many medical, unions and commercial organizations have encouraged that teleworking be adopted, if possible. The Government has issued a number of monetary packages to assist companies that are facing difficulties to meet the payroll commitments and other commitments.
This article has been issued on the publication of LexisNexis Company and Foreign Investment Guide 2021.
For more information you can contact one of our Team Members at Mifsud & Mifsud Advocates.