Exclusive Q&A on Company Formations with Dr Mifsud Parker
Posted: 4th January 2017 09:29What is the procedure for foreign investors setting up a company in your jurisdiction?
The Malta Registry of Companies which forms part of the MFSA is responsible for registering companies and partnerships as per the Companies Act, 1995. Maltese company law provides for a very straightforward process to register a Malta company. The formation process can be finalised within 24-48 hours from receipt of the documentation which satisfies the requirements established by Maltese law.
A Malta company is set up through the drafting and registration of its Memorandum of Association. All shareholder/s must subscribe thereto and a certificate is issued in respect thereof. The Memorandum of Association should include the following details:
- Company name
- Address and official identification of the subscribers thereto
- The nature of the company – whether it is a public (Plc) or private (Ltd) company
- The registered office of the company in Malta
- The object and purpose of the company to be incorporated
- Details of the authorised issued and paid up share capital
- Judicial and legal representation of the company
- Details and number of directors and secretary
The procedure for the setting up of a Company by foreign investors is the same as that for local investors. A power of attorney might be required if the foreign investors are not able to sign the incorporation documents themselves and some additional documentation might be required for non-EU nationals.
The following is the procedure for the setting up of a company in Malta:
- Due Diligence Procedures
- The reservation of the Company’s name
- Drafting of Memorandum and Articles of Association
- Preparation & signature of the necessary documents
- Company Registration
- Bank Accountopening process
- Income Tax Registration
- VAT Registration
Have there been any recent regulatory changes or interesting developments?
Malta company formation is regulated by the Companies Act. This Act was promulgated in 1996 and subsequently amended throughout the years. In 2013 there were some important amendments to the Companies Act in relation to the regulations concerning single member companies. As a general rule, a company is required to have a minimum of two members for incorporation. However, it is possible for a single member to form a company where the objects of such a company specify which activity of the company shall be its main activity and the business of the company shall consist principally of that activity.
Moreover, a number of changes were also made in 2015 through Act XXXI of 2015, whereby new requirements were introduced regarding the format of accounts and reporting by Maltese Companies. These include the following:
- The removal of the Financial Holding Company Exemption whereby a parent company cannot utilise other exemptions for the consolidation of accounts and the parent company must prepare and file Consolidated Accounts for the whole group.
- Removal of Form U Mechanism allowing for an extension of the time period for filing accounts.
- Directors’ Reports in Annual Accounts require a greater level of detail.
- Facilitation of preparation of Audit reports and other reports by small companies – the threshold for small companies was increased and the concept of “abridged accounts” was removed.
- Overseas companies must file accounts within 12 months from the end of every accounting period.
Can you detail the various funding options for early stage companies?
Malta early stage companies have a variety of options for funding that include the traditional options of injection of share capital, loans from the shareholders, loans from third parties and some other options which are particular to Malta.
There are funding options for start-up companies which have a viable and innovative business concept through a grant of up to €25,000 given by Malta Enterprise. The grant is not given as one lump sum but asa series of instalments, with the first instalment of up to €10,000 beingpaid upon the project’s approval. Subsequent instalments are made quarterly following a review of the progress in line with the business plan of the company. Moreover, certain local banks also offer finance packages for start-ups and for SMEs.
Can you outline the strategic benefit from choosing a specific location for company formation?
Malta has a thriving economy and provides various benefits for the setting up of a company:
- It is part of the European Union and the Eurozone
- It forms part of the Schengen area
- It enjoys political stability
- Banks in Maltaare resilient and were rated as follows:
- S&P : BBB+ stable
- Fitch : A stable
- It has a pro-business government and being a small country is agile and remains competitive
- Variety of business and estate planning entities available; limited liability companies – public and private, partnerships, trustsand foundations
Malta has a full-imputation system of corporate taxation and therefore any income tax that is paid by a Maltese company is fully imputed or credited to the shareholder who receives dividends of the company, enabling the same to benefit from the full relief of economic double taxation of corporate profits
Although the standard rate of taxation in Malta currently stands at 35% of the chargeable income of the company, a shareholder of such company would be entitled to a refund of any tax paid by the company of 5/7ths, 6/7ths or 7/7ths depending on the source of income of the company
- Over seventy double taxation treaties signed
- No withholding tax on the payment of dividends, interest or royalties;
- No controlled foreign company legislation or transfer of pricing rules
- No thin capitalization rules
- No exit taxes, wealth taxes, payroll based tax or trade tax
- Low initial share capital requirement
- Malta companiesare set up within 24 hours
- All company formation documents are in English without the requirement of signing in front of a notary or a court
- Main industries in Malta: Financial Services, Shipping, Super Yachts, Manufacturing, Pharma, ICT, iGaming, Tourism, Filming.
- Emerging Industries in Malta: Digital Gaming, Bio-Sciences, Aviation, e-Education, Medical Tourism.
- World’s first Family Business Law: holistic approach to Malta's role as centre of excellence for FB Governance& for management of Family Offices.
Are there governmental restrictions on who can be an owner of the company?
There exist no governmental restrictions in Malta as to who can own shares in a Malta company, whether directly or indirectly. Shares in a Malta company can be owned by an individual or by a body corporate.
Are there any other regulatory or compliance issues investors need to consider?
Malta is pro-foreign direct investments and therefore the jurisdiction and its regulations are modelled to promote investment. Suffice it to say that the Government has created a number of separate sections within authorities in order to focus and specialise only in foreign direct investment including an international tax unit.
There are then certain industries that are regulated in which case a specific authorisation/licence would be required. Some of the regulated industries are the following:
- Trustees and fiduciary services;
- Administrators of foundations;
- Financial services companies including credit institutions, financial institutions(payment service providers, electronic money institutions) fund managers, forex companies, crowdfunding., securitisation vehicles,collective investment schemes, insurance, Islamic finance, custody & depositary, capital markets, etc.
- Gaming companies;
- Companies operating retail outlets/offices accessible to the public.
What role do shelf companies play in your jurisdiction?
Malta companies are set up within 24 hours of receipt of documentation and therefore even though shelf companies are not available this has no significant impact on the industry.
What are the main opportunities and challenges investors need to consider before entering?
Malta offers a stable business environment where investors can feel safe investing their money in a variety of industries whilst at the same time controlling costs. As an EU jurisdiction it offers the benefits afforded by the harmonisation of EU legislation and provides good opportunities such as the following:
- Possibility of obtaining Malta citizenship(EU) and Malta residence(EU) for investors
- A thriving property market
- A thriving hospitality marketwhich is in need of 5-star plus hotels
- Untapped potential in terms of renewable energy projects
- Bio-sciences parkwhich has been and will continue being a huge success etc.
- Holding companyjurisdiction especially for royalty companies
Recent additions to these opportunities are the following:
- Prospects Listing; The Malta Stock Exchange has opened up its doors to a particular category of listing particularly aimed at small to medium enterprises.
- Filming industry; Film fund available for companies shooting films and documentaries in Malta.
- Rental market; reduced rate of tax of 15% on the residential rental market which has increased considerably the buy-to-let market.
How can a new company ensure it has all of the necessary mechanisms in place to report and pay taxes accurately and on time?
It is essential for a new company to appoint a professional Malta corporate services and Malta accounting firm in order to duly guide it with its statutory obligations.
What are the different methods of restoring a company?
A Malta company can be restored through an application filed by any interested person with the Civil Court. If the Court is of the opinion that the winding up and striking off were vitiated by fraud or illegality of a material nature and that the restoration of the company is the only available remedy, then it would order that the name of a company that was struck off the Register, be restored and that the winding up be reopened for the purposes and the time period specified by the Court. The company will only be restored if the Court is satisfied. The application for the restoration of a company may only be done within 5 years from when the company was struck off the Register.
What are the most common reasons for restoring a company?
A common reason why a company is restored is where the liquidator deliberately or inadvertently fails to discharge all the liabilities of the company. Another reason why a company may be restored is due to the bona vacantia of assets. Any assets which were not distributed during the winding up of the company would be deemed as bona vacantia and would devolve onto the State. Moreover, the Court may also restore the Company if the Company’s name was struck off the Register as it was deemed to be defunct (ceased to carry out business) when the Company is in fact still operational.
Priscilla is one of the partners of Chetcuti Cauchi, a leading Malta law firm based in Valletta, Nicosia, Zurich and London.
Dr Mifsud Parker heads the Corporate & Trust Services arm of the firm which handles the set up and administration of the corporate structures designed by the law firm for our clients. Her practice here revolves around assisting clients in business start-up stage or with acquisitions, corporate restructurings, shareholder matters and providing day-to-day company law and tax advice to companies under the firm's administration.
Priscilla also heads the firm's Families & Wealth practice group. In this capacity, she specialises in trusts and estate planning, wealth and business structuring for high net worth and successful business families. In the structuring field her main specialty is tailor-made solutions for the optimisation and protection of high value assets. Priscilla's background and experience in corporate, trusts and tax law enables her to assist clients in overcoming their challenges when structuring their wealth.
Dr Mifsud Parker can be contacted on +44 20 7583 9433 or by email at firstname.lastname@example.org