Limited Liability Company
Private vs Public
Maltese law distinguishes between two main types of companies:
– Private Limited Liability Company
– Public Limited Liability Company
Main features of the Private Company:
- the memorandum and articles of association limits the number of its members to 50;
- public companies may offer their shares to the investing public, while private companies are prohibited from doing so;
- transfer of shares in private companies is restricted in that shareholders must first offer their shares to the other existing shareholders before offering them to third parties.
A private company may opt for Private Exempt status in which case it may have a single shareholder. In order to be able to form such private exempt company two conditions must be satisfied:
- there must be the inclusion of a primary objects clause in the Memorandum of Association
Salient features of a Public Company:
- its articles and memorandum do not contain provisions restricting the number of its members;
- nor do they exclude the offer of its shares or debentures to the public.
The name of a private company must end with the words ‘Ltd.’ whereas a public company must have the abbreviation ‘P.l.c.’ at the end. A company name cannot be the same or even similar to the name of another company already in existence.
Company names may be reserved with the Registry of Companies for a period of 3 months.
The function of the objects clause is to declare and define the object or objects for which the proposed company is being established.
The objects of a company may not simply stated any lawful purpose or trade in general. Indeed, the main trading activities must be described in detail. Usually, however, the objects are drafted in such a way as to make their interpretation as wide as possible.
The objects clause of a private exempt company must specify its main trading activity. This is one of the conditions for the establishment of the private exempt company.
Classes of Shares
A company may issue its shares with the same or different rights. When a company issues its shares with different rights, the share capital is said to be divided into different classes of shares with different rights attached to them. Thus it is generally possible to have more than one class of shares in a Maltese company (Ordinary shares, Preference shares, Redeemable shares etc).
There can also exist sub-classes within a class of shares (e.g. ‘A’ Ordinary Shares, ‘B’ Ordinary Shares). Such classes will carry different rights as to dividends, attendance at meetings, voting rights, rights to appoint Directors, as well as capital rights.
A private exempt company requires an individual to act as a director
Nominee directors can be used in private non-exempt companies
Public companies, on the other hand, must have a minimum of two directors
Every company must have a registered office situated in Malta.
This is a private limited liability company under Maltese law, which has its objects limited to the ownership, management and administration of equity holdings in other companies. An ’equity holding’ is as a holding of the nominal share capital in a company which grants the holder certain rights (right to attend and vote at General Meetings, to dividends and to the assets of the company on liquidation).
If the shareholders are non-Maltese residents, authorisation from the Malta Financial Services Authority(MFSA) is required. Requirements include appropriate bankers’ references and testimonials of the shareholders and directors of the proposed company, to satisfy that they are reputable and financially sound.
These are companies that have branches in Malta but are neither incorporated, nor constituted in Malta, therefore these have to be registered with the company registry, one month after the setting up of the branch.
Partnerships: En Nom Collectif and En Commandite(or Limited Partnership)
A commercial partnership other than a company may be formed for the exercise of one or more acts of trade. The main difference between a company and the two different partnerships is the issue of liability. It is important to note that limited liability companies are more commonly formed than partnerships of this kind.
While in a Company, the shareholders are protected, in a partnership en nom collectif all members are jointly and severally liable for the debts and liabilities of the partnership even though a separate legal personality is created. With regards to a partnership en commandite, out of the members required by law (at least two), one must be a limited partner, whilst the other a general partner with unlimited liability. Therefore only general and not limited partners are liable for the debts of the partnership. This means in essence that once the assets of the partnership have been exhausted, creditors may look upon the partners to satisfy the debts of the partnership.
The rules applicable for all partners in a partnership en nom collectif are generally the same as the ones for the general partners of a partnership en commandite or limited partnership.
In both partnerships, at least one the (general) partners shall be either an individual or a body corporate which has its obligations guaranteed by the unlimited and joint and several liability of one or more of its members.
Many of the rules regarding registered office, registration of names and objects that apply to companies, also apply with regards the partnerships en nom collectif and en commandite.
The most common form of a Maltese fund is the company with variable share capital, an opened ended fund known as SICAV. SICAV may be formed or constituted as an incorporated cell company and may establish incorporated cells in accordance with the law(see Fact Sheet on Cell Companies).
A SICAV falls under the Continuation of Company Regulations in Malta which allows entities covered by it to re-domicile to Malta via a relatively straight-forward procedure: the fund must be incorporated in an approved jurisdiction, the re-domiciliation process must be possible under the laws of the exporting jurisdiction as well as permissible in terms of the Collective Investment Scheme’s(CIS) constitutive documents and the re-domiciliation must be approved by way of an extraordinary resolution of the CIS.
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