A limited liability company is the most common form of business entity in Malta, and it has a separate legal personality from that of its shareholders. In such a company, the liability of the shareholders is limited to the amount, if any, of the unpaid shares respectively held by each of them. A limited liability company is validly constituted in Malta in accordance with the Companies Act of 1995 (hereinafter referred to as the Act) once a memorandum of association is entered into and subscribed by at least two persons and a certificate of registration is issued in respect thereof by the Registrar of Companies.
The Malta Financial Services Authority (MFSA) is the autonomous public authority which houses the Registry of Companies where all companies are registered irrespective of what type of activities they carry out. The Registry of Companies is a public registry and therefore, all registered information and documentation is available to the public.
The first step to open a limited liability company in Malta is to draft the Memorandum of Association that specifies the objects for which the company is set up, which must not be simply stated as any lawful purpose or trade in general. It also contains information about shareholding structure, the company directors and the secretary. The memorandum of association may be accompanied by the articles of association, which is a document which prescribes the internal regulations of the company.
A limited liability company may have the status of a public or private company. Both types have the same requirements when it comes to the registration procedure. The difference between the two types of limited liability companies are:
A private company is a company that must restrict the right to transfer its shares, limit the number of members to fifty, and prohibit any invitation to the public to subscribe for any shares or debentures of the company. The minimum authorized share capital must be EUR 1,164.
A public company is a company which does not qualify as a private company. A public company may offer shares or debentures to the public but it may not issue any form of application for its shares or debentures unless the company is registered and the issue is accompanied by a prospectus. The minimum authorized share capital must be EUR 46,587.47.
In the case of a public company, not less than 25%, and in the case of a private company, not less than 20%, of the nominal value of each share taken up shall be paid up on the signing of the memorandum. The paid up share capital must be deposited into a bank account in Malta prior to registration.
The Act also recognizes and regulates corporate investment vehicles such as the SICAVs which is a limited liability company with variable share capital, and the INVCO which is an investment company with fixed share capital. These two structures are useful collective investment vehicles.
A private company may have the status of an exempt company, and qualify for certain advantages if the following conditions are contained in its memorandum or articles of association: (a) the number of persons holding debentures of the company is not more than 50; and (b) no body corporate is the holder of, or has any interest in, any shares or debentures of the company or is a director of the company, and neither the company nor any of the directors is party to an arrangement whereby the policy of the company is capable of being determined by persons other than the directors, members or debenture holders thereof.
The minimum number of shareholders is normally two, however a “single member company” may also be registered under the Act. A single member company is a private limited liability company, which qualifies as an exempt company and which is incorporated with one member or whose membership is reduced to one person after incorporation. In the case of a single member company, the Memorandum of Association should indicate the main trading activity of the company.
It is possible under Maltese law to hold shares through a fiduciary or on a trust. Where shares are so held, the beneficial owner’s identity is not disclosed in the memorandum and articles of association, but disclosure of the beneficial owner must be made with the bank at the time of opening the company’s bank account and with the Registry of Companies when incorporating the company, in accordance with anti-money laundering legislation.
Every company registered in Malta must have a registered office in Malta. This may be at the office of a firm of lawyers, accountants or other providers of corporate services. Any changes to the company’s registered office must be notified to the Registrar of Companies as soon as possible. Furthermore, every company must have at least one director (at least 2 in the case of public companies). Duties of the directors include the duty to act honestly and in good faith in the best interests of the company, and to exercise adequate diligence. Every company must also have a company secretary. The law does not require that the company secretary be resident in Malta.
The Memorandum and Articles of Association constituting the company are forwarded to the Registrar of Companies for registration. These should be accompanied by all relevant documentation, including certified copies of identification documents, references and declarations by trustees where applicable. Evidence of paid up share capital in the form of a bank deposit advice should also be produced. A company comes into existence from the date of registration indicated in its Certificate of Registration. The fees payable to the Registrar for the registration of a company are calculated according to the company’s authorized share capital, and range from a minimum fee of €245 where the authorized share capital does not exceed €1,500, up to a maximum fee of €2,250 where the share capital exceeds €2,500,000.
A company is required to register for income tax purposes upon incorporation and to submit a tax return every year. A company which is registered in Malta is to be deemed domiciled and tax resident in Malta from the date of its incorporation, and is therefore subject to a flat rate of 35% on its worldwide income. However, in view of Malta’s full imputation system of taxation, any income tax paid by the company is credited in full to the shareholder upon a distribution of profits so as to avoid any double taxation of corporate profits. Therefore, though corporate taxation in Malta is relatively high, shareholders are entitled to claim back part or even the whole of the tax paid by the Malta company. This is what makes the Malta taxation system so attractive to companies.