Maltese regulatory framework provides for different types of entities including public companies, partnership en commandite (“the limited partnership”) or partnership en nom collectif (“the general partnership”), association en participation, Societas Europaea (the “European Company”), the European Economic Interest Group (“EEIG”) and the most popular, the private limited liability company.
Registration of public and private companies in Malta is a relatively quick process- it is normal for the registration of the company to be completed by issue of a “Certificate of Incorporation” by the Registrar within a week of delivery in good order of all requisite documentation to the Registrar.
Documentation required for incorporation
The only essential documentation required for the incorporation of a Maltese company is a Memorandum of Association, which includes key information - such as company name, objects, capital, subscribers, company directors, and company secretary, though, in practice, a tailored Articles of Association, which regulates the internal management of a company, for example, relationship between the company members and the directors, the rights of the shareholders, is submitted together with a Memorandum of Association to the Registrar.
The contents of a Memorandum and Articles of Association required may vary depending on the type of company, for example, the Memorandum and Articles of Association of a private limited liability company must restrict the transfer of it shares, limited the number of members to 50 and prohibit any invitation to the public to subscribe for any shares or debentures of the company.
It is worth noting that a Maltese company may be set up with only one shareholder, and such single member company, in its Memorandum or Articles of Association, must:
- determine which activity is to be its principal activity;
- limit the number of persons holding debentures of the company to not more than 50;
- prohibit any body corporate from being a director of a company and;
- prohibit the company and each of the directors from being a 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.
Few additional requirements exist for public companies and special vehicles such as SICAV.
The Registrar must also be provided with the evidence that the subscribed share capital has been paid up, such as a bank deposit slip, and documentation relating to subscribers and directors of a company.
Public Authority approval
There is no clearance required by public authority in Malta for incorporation of a company on the basis that the Maltese company carries no activity, business or service which requires a licence or is otherwise regulated under the Gaming Act, the Banking Act, the Financial Institutions Act, the Investments Services Act, the Financial Markets Act, the Insurance Business Act, the Insurance Intermediaries Act, nor the Retirement Pensions Act or the Trusts and Trustees Act, nor the Special Funds Regulation Act, and the Company Services Providers Act.
It is worth noting that an authorisation to commence business, however, is required for a public company in Malta before it can lawfully commence business. Every such company requires authorisation from the Registrar to actually commence business. This usually follows as an effect of the issue of the certificate of registration and is immediate.
Upon deciding on a company name a reservation that is valid for three months shall be obtained. In general, every name requires the approval of the Registrar, who has the power to refuse registration in certain cases, e.g. if the name is offensive. The name of a private company must end with the words ‘private limited company’, ‘limited’ or the abbreviation ‘ltd’ while that of a public company must end with the words ‘public limited company’ or the abbreviation ‘plc’.
The minimum authorized capital for a private company in Malta is € 1,164.69 and that of a public company- € 46,587.47. In case of a public company, at least 25% of the issued share capital, and in case of a private company, at least 20% of the issued share capital must be paid-up on the signing of the Memorandum of Association of a company.
The number of shareholders in a Maltese company differs on the type of company. A single member private limited company has a minimum of one shareholder whilst a minimum of two shareholders is set for private companies and public companies. A maximum number of fifty shareholders is set for a private limited liability company.
It is worth noting that there are no legal requirements with respect to nationality or residency of a shareholder of a company under Maltese law and both, nominee shareholding and holding of shares under trust are permitted.
Company director and secretary (Management)
The Memorandum of Association must appoint the first director (being either a
natural or a legal person) of the company, being a minimum of one with respect
to private limited liability companies and two in the case of public companies.
In case of a public company is that the director of such company consent in writing to such appointment. Such consent must be delivered to the Registry of Companies together with the formation documentation.
A Maltese company is managed by the directors who have the authority to execute all powers of the company, having extremely broad discretionary powers. In addition, the Memorandum of Association must also indicate the first company secretary, who must be an individual. The role of the company secretary is that of an administrative officer, carrying with it functions and responsibilities at law.
Following incorporation, a Maltese company will have certain minimum obligations including the keeping of registers of members and directors, and filing an annual return to the Registrar. Should changes be made to the company name, the involved parties or details to the shareholders the Registrar must be notified to give effect to such changes and reflect these on its website. In the case of default of notification within the time limits set out at law the company may incur penalties.
The registration fee payable to the Registrar in Malta depends on the authorised share capital of the company. The fee starts at € 245 with the maximum set at € 2,250 if the authorised share capital exceed the total of € 2,500,000. There is also a yearly fee payable to the Registry of Companies in Malta, counted on the share capital of the company, with the minimum being € 100 and maximum set at € 1,400.
Taxation of limited liability companies in Malta
Companies incorporated in Malta are both domiciled and resident in Malta, irrespective of whether the management and control of the company is exercised in Malta or outside. Companies in Malta are subject to standard tax rate of 35% on their worldwide income, and may claim relief by way of a tax credit of foreign taxes paid on such income against the applicable Maltese taxes.
Upon a distribution of the taxed profits by a Maltese company to its shareholder/s, the latter may be entitled to claim a shareholder’s partial tax refund, reducing the effective tax rate to between nil and 6.25%. The amount of refund available depends on the nature of income earned by the Maltese company and on whether the Maltese company has claimed any relief for foreign taxes paid, although typically the refund available is that of 6/7ths of the Maltese tax charge, before the deduction of any credit for foreign taxes, limited to the amount of Malta tax paid.
A full 100% tax refund can be claimed by a Maltese holding company which derives its profits/gains from a participating holding, provided that it satisfies certain conditions set out in the law.
Associate Director, Taxation Department
KPMG in Malta