Malta: Passing The Torch

Last Updated: 13 July 2017
Article by Sarah Rausi

In most family owned businesses there will come a time when the owner, in many instances the parent founder, will have to sit down and plan for the future of the company in his or her absence, with most proprietors wanting to see their business continue to flourish and recognising that passing it on to family members may be the most ideal and responsible option.

Proper planning is crucial for family businesses to avoid facing an uphill battle on the road to longevity and continued prosperity and, following years of hard work to establish a business, there are various reasons why one should consider what should happen to the family company after retirement.

Besides the security and certainty of knowing the prospective of the company, succession planning has several other benefits, including, the treatment of children and heirs in an equitable manner, the maintaining of control by the parent owner until he/she feels comfortable with passing it over to a child, the securing of post-retirement income, the minimising of any arising taxes and the enabling of flexibility, allowing for the owner to consider options and determine what may be best for the company.

Structuring the Transfer

There are a variety of ways in which an owner parent can decide to pass along the family business and the different methods tend to get very complex and have various repercussions relating to taxes and income.

Whilst I shall be providing a brief overview of possible modes of transfers, the purpose of this article is to give a broad and general outline of the ways in which a business can be handed down and, thus, should not be deemed as encapsulating all the nuances of the transactions.

Leaving the interest in the business to the children in a will, for instance, is relatively simple as this allows the owner to maintain complete control of the business during his lifetime. However, there may be downsides to this method in that some business owners may think that their children will benefit from having an ownership stake in the business whilst the former is still alive so as to learn to manage it at such point in time, whilst other proprietors worry that as they get older they might no longer be competent to fully run the company's affairs.

Another option is that of donating all or part of the business to the offspring whilst the owner is still alive, with any future appreciation in the value of the business being excluded from the estate upon succession.

Others may choose to transfer the ownership of a business to the children while they're still alive on condition that they will continue to receive an income from the operations of the business. In fact, in cases where the children might not have enough financial assets of their own to buy the business for its fair market value, an option would be to transfer the business on loan to the successors and hence resulting in an advantage to the owner as he/she will secure a steady stream of income from the principal and interest from the loan.

Buy-sell agreements are ideal for those business owners who have selected the person they would like to transfer the business to but who are not quite ready to hand over the reins. In a buy-sell agreement a business owner can specify that after a triggering event, such as retirement, incapacity or death, the designated successor will be required to purchase his or her interest in the business.

One may also choose to sell or give an interest in the business to a trust for his/her children's benefit. In such instances, it would be imperative for the trust agreement to contain carefully-drafted provisions concerning the operations of the business and how ownership decisions get made if the owner suffers a disability, illness, or passes away, even.

Of course, all of the above scenarios can be combined in various ways, for instance it can be arranged for the transfer of a business interest to be partly a gift and partly a sale, and for owners not comfortable with giving up control, a possibility would be to split the ownership of the business into voting and non-voting interests, with the latter being transferred initially.

Whatever choice is made, a smooth transition can be the crowning legacy of the years of care and effort and it is in an owner's best interest to obtain legal advice and engage a tax expert while in the process of business succession planning so as to understand all consequences of a certain option, particularly how decisions made may have an impact on any tax obligations.


Tax related

The tax implications arising in the above highlighted transactions would have to be considered, of course. However, it is not the scope of this article to delve into same and at this juncture I wish to simply point out and draw the reader's attention to the fact that specific provisions to Stamp Duty relative to transfers of family businesses have been very recently enacted.

Retirement income needs

In cases where the plan is to sell the business, determinations should be made as to how much income the owner will need in order to support his/her lifestyle and retirement goals before starting any negotiations. To resolve this, even after receiving a lump sum from a sale, many former business owners choose to stay involved and earn income by serving on the board of directors, giving consultation or even continuing to help out in day-to-day operations in a reduced but vital role, such as serving clients who have been with the company for years. Where an office building or other physical assets are owned, another option for generating retirement income would be to retain such assets and lease them back to the business.

Further considerations

Finally, there are many factors that should go into a proprietor's decision about what to do with the family business upon retirement, including, how much effort it will take to adequately train the successor, whether the successor has what it takes to run a business, how other employees will take to the decision of transferring the business to a family member in particular, whether the successor will be able to maintain the current customer base and what is to happen if the ownership is passed to one child over others who may be less qualified for an ownership position. Such circumstances, together with others, need to be well tackled and resolved.

Final Thoughts

Business succession planning is all about creating a smooth, successful transition of company ownership; this is by no means a simple process and the areas that need to be considered are plentiful. There are familial, financial, and personal ramifications for any decisions made that should be dealt with carefully and, in this context, it is recommended that a business owner in the process of drafting up a business succession plan consults with lawyers, including tax advisors, to fully understand the options and handle the transfer in a professional way.

Originally published in the Spring 2017 issue of The Accountant.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Sarah Rausi
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.