What are the main types of businesses available under Maltese Company Law?
The law provides for various types of commercial partnerships including general and limited partnerships. The principal form of business organisation is, however, the private limited liability company.
What are the main features of a private limited liability company?
Limited Liability Companies can be of two types: private or public. The distinguishing features between private companies and public companies are that the former restrict the right to transfer of shares, limit the number of their members to 50 and prohibit invitations to the public to subscribe to their shares or debentures.
A company is formed by means of a capital divided into shares held by its members. The members’ liability is limited to the amount, if any, unpaid on the shares respectively held by each of them. Therefore, in the ordinary course of business and in the absence of any fraud, tort or similar wrongdoing on the part of the shareholder, such shareholder can only be held liable to contribute to the company the unpaid part of any shares subscribed and issued to that particular shareholder.
A private company may have the status of an exempt company if: (i) the number of persons holding debentures in the company is not more than 50; and (ii) no body corporate has any interest in any shares or debentures of the company (unless the body corporate shareholder is itself a Maltese private exempt company), or is a director thereof or has a determinable influence on the management of the company.
One of the advantages of private exempt companies is that these companies may have a single member. This may happen both upon registration, or at any subsequent stage, through the acquisition of all the company shares by one person.
How is a limited liability company formed?
A company is constituted by a Memorandum of Association being entered into and subscribed to by at least two persons (unless a private exempt company) and a certificate of registration being issued in respect thereof. The Memorandum should state the name of the company; the name, address and official identification of the subscribers thereto; whether the company is a private company or a public company; the registered office of the company in Malta; the objects of the company; details regarding the authorised, issued and paid-up share capital; the number of directors and the particulars of the first directors and secretary, and the manner in which the representation of the company is to be exercised.
The authorised and issued share capital of a private company shall be of a minimum of EUR 1164.69 of which at least 20% is to be paid-up. In the case of public companies, the minimum authorised and issued share capital shall be of EUR 46,587.47 of which at least 25% must be paid-up. Companies may have their share capital denominated in any hard currency.
Company Registration Expenses are payable to the Registrar of Companies upon incorporation and vary depending on the value of Authorised Share Capital.
The share capital may be divided into ordinary shares and preference shares and classes or hybrids thereof. In the case of private companies, bearer shares are not allowed. Ownership of unlisted company shares or debentures is evidenced by entry in the company’s register of members or of debentures and by the issue of a share or debenture certificate.
The Companies Act contains a standard form of Articles of Association in the First Schedule to the Companies Act, which unless, and to the extent that it is altered, is presumed to regulate the management of a company. The Articles of Association regulate the relationship between the shareholders and the management of the company and would typically contain rules regarding: the issue of share capital and voting rights, the call on shares, the transfer and transmission of shares, the forfeiture of shares, the summoning of general meetings and the proceedings thereat, the nomination of directors and the proceedings of board meetings, the powers and duties of directors, the company secretary, accounting and the distribution of dividends and transfer to reserves, entitlement to and method of giving notice of meetings, and the possibility of indemnity in the case of liabilities being incurred by directors in the execution of their duties.
The setting up of a company in Malta is a relatively expeditious procedure and it should not take more than three to five working days to form a private company. This is in part due to the fact that the incorporation does not require any public or notarial deed. An essential prerequisite of incorporation is the deposit in a bank account in the name of the company in formation of at least 20% of the issued share capital. A company name may be reserved for a maximum period of three months. Upon incorporation a certificate of incorporation is issued.
Is a company obliged to hold meetings during a particular year?
A company is to hold, at least once a year a general meeting as its annual general meeting. Between one annual general meeting and another, not more than 15 months shall elapse. All general meetings other than the annual general meeting are deemed to be extraordinary general meetings. Every member holding at least one-tenth of the paid up share capital, and an equivalent voting right, is entitled to request an extraordinary general meeting. Such a meeting may also be requested by the Courts.
Notice of a general meeting is to be of at least 14 days duration, unless consent to a shorter period is given by all members entitled to attend and vote thereat. Unless otherwise provided in the company’s articles:
- notice of a general meeting is to be given to every member of the company,
- two members personally present shall constitute a quorum,
- any member present at the meeting may be elected chairman, and
- every member shall have one vote in respect of each share held by him.
Any member entitled to attend and vote at a meeting of a company, may appoint, in writing, another person as his proxy to attend and vote in his stead. Such proxy has, within the framework of his appointment, equal rights as the person appointing him.
What type of resolutions may be passed by a company?
Resolutions passed at general meetings may be either extraordinary or ordinary resolutions. In the case of a private company, an extraordinary resolution is a resolution taken at a general meeting of which notice specifying the intention to propose the text of the resolution as an extraordinary resolution and its principal purpose had been duly given, and which must be passed by a number of members having the right to attend and vote at any such meeting holding in the aggregate not less than 51% in nominal value of the shares conferring that right or such other higher percentage as the Memorandum or Articles may prescribe.
Ordinary resolutions are resolutions passed by members, having the right to attend and vote, holding in the aggregate more than 50% of the voting rights attached to the shares represented and entitled to vote at the meeting, or such higher percentage as the Memorandum or Articles may prescribe.
Private companies registered in Malta are permitted to pass written resolutions (both shareholders’ and directors’) without the need of convening a formal meeting, if signed unanimously by all shareholders or directors (as the case may be), since it is provided in the Companies Act that (i) resolutions in writing signed by all the directors, shall be valid and effectual as though they had been passed at a meeting of the directors duly convened and held; and (ii) a resolution in writing signed by all the members entitled to vote at the general meeting shall be valid and effective as if the same had been passed at a general meeting including the annual general meeting of the company duly convened and held. Any type of decision may be passed by means of a resolution in writing except for a resolution seeking to remove a director or an auditor before his expiration of term of office and/or any decision that seeks to deprive the company’s auditors of their right to receive notice of, and to attend and to be heard at, general meetings of the company. It is important to emphasise that written resolutions are available to private companies and not to public companies.
How many directors and company secretaries must be appointed by a Maltese Company?
The minimum number of directors for a private company is one director, whilst the minimum number of directors for a public company is two. A private and a public company (unless the company is a shipping company) must appoint at least one company secretary.
Is a Maltese Company obliged to maintain and file audited accounts?
A company is obliged to keep proper accounting records, in the same currency as that of its share capital, in such manner as enables a person to determine the financial position of the company at any point in time. In particular, directors of a company shall prepare for each accounting period, accounts that shall comprise a Balance Sheet, a Profit and Loss Account and Notes to the Accounts. These accounts are to give a true and fair view of the company’s assets, liabilities, financial position and profit and loss and shall comply with the Companies Act.
A company’s annual accounts are to be approved by the Board of Directors and laid before the company in general meeting. The directors are also to submit a Directors’ Report for each accounting period. Maltese companies are generally required to appoint auditors who shall make a report to company members on all annual accounts of the company.
All the accounts and reports laid before the company in general meeting must be approved by the members and thereafter delivered to the Registrar.
Small companies having (i) a balance sheet total not exceeding € 2,562,310.74, (ii) turnover not exceeding € 5,124,621.48, (iii) an average number of employees during the accounting period of 50 or less (two of these three tests must be satisfied) are required to draw up an abridged balance sheet, abridged profit and loss account, abridged notes, an auditor’s report and a director’s report. If the small company is categorised as a “private exempt” company for Maltese law purposes (see point 4 above), the director’s report is not required.
Private companies having a balance sheet total not exceeding €46,587.47, turnover not exceeding €93,174.94, and an average number of employees during the accounting period of up to 2 persons (two of these three tests must be satisfied) are required to draw up an abridged balance sheet, abridged profit and loss account, abridged notes and a director’s report. Such companies are, by way of exception, not required to appoint an auditor and consequently no audit report is required to be submitted to the Registrar of Companies. If such company is categorised as a “private exempt” company for Maltese law purposes, it is only required to submit to the Registrar an abridged balance sheet, and abridged notes relevant to the balance sheet.
Accounts must be presented at an annual general meeting to be convened every year not later than 10 months from the company’s accounting reference period (financial year-end).
Are there any other statutory documents which need to be filed by a Maltese Company on an annual basis?
Every company is to file an Annual Return with the Registrar of Companies in the prescribed format containing the following information:
- the registered address;
- a summary of its authorised and issued share capital and debentures;
- a list of past and present members, including particulars of shares transferred since the date of the previous Annual Return;
- particulars of the directors and of the company secretary.
The Annual Return for private companies shall be due as of each anniversary of the registration date of the company and shall be made up to the date of such anniversary and must be filed within 42 days from the date as at when the Annual Return is made up to. The Annual Return fee payable to the Malta Registrar of Companies is payable in accordance with the value of a company’s authorised share capital.
What is the procedure for a Maltese company to be liquidated and struck off the register?
A company may decide to wind itself up voluntarily (by an extraordinary resolution), or following a court order.
Winding up by the court may only take place following a winding up application. The court may accept the application and issue a winding up order, whereupon no action may be brought against the company except with the court’s own permission. Following the winding up order, the company goes into receivership and the official receiver will look closely into the company’s affairs and will submit a report to the court detailing an estimated amount of assets and liabilities; the causes of business failure, if any; and whether further enquiry is warranted relating to the promotion, formation or failure of the company.
Upon the presentation of a winding up application, the court may also appoint a provisional administrator, whose duties will be prescribed by the court itself. The provisional administrator may even be the official receiver himself. The latter remains in office until a liquidator is appointed. A liquidator is appointed by the creditors or by the contributories or by the court following an application made by the official receiver. The liquidator could even be assisted by a liquidation committee. When the winding up procedure is completed the liquidator will make an application to the court so that the company’s name will be struck off.
In the case of a voluntary winding-up, an extraordinary resolution is taken to this effect and the company shall by extraordinary resolution appoint one or more liquidators. Following the full winding up of the company’s affairs, the liquidator will make an account of the winding up and call a creditors’ meeting. The liquidation accounts are filed with the Registrar who will afterwards strike the company off the register.
A liquidator under the Companies Act must be either an advocate or a certified public accountant. There are currently no restrictions as to the qualifications of a liquidator under the Merchant Shipping (Shipping Organisations – Private Companies) Regulations.