1. LEGAL SYSTEM
1.1 Legal System
The Maltese legal system is mixed. For many centuries it was based on Roman law as codified by Emperor Justinian, with the civilian influence being further strengthened during the rule of the Order of St John, which resulted in a predominantly civil law system. Years of British rule introduced several significant legal institutions derived from the English legal system, such as trial by jury, the rules of evidence and the structure of the courts. In time and over the centuries, Malta's legal system therefore continued to evolve into a predominantly civil law system, incorporating some elements from the common law traditions.
The judicial order is organised into:
- a Constitutional Court, which has limited competence;
- a Court of Appeal that is competent for all jurisdictions; and
- first-instance civil and criminal inferior and superior courts.
There are also several administrative tribunals, from which an appeal can be made to the Court of Appeal in its inferior jurisdiction.
2. RESTRICTIONS TO FOREIGN INVESTMENTS
2.1 Approval of Foreign Investments
Following new legislation enacted during 2020, foreign direct investments are subject to the National Foreign Direct Investment Screening Office Act 2020. This act implements the provisions of Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019, establishing a framework for the screening of foreign direct investments into the EU. A foreign investment is one made directly by a foreign investor (being a non-EU national or undertaking), or indirectly by any undertaking, organisation, foundation or other entity where at least 10% of its control is held by a foreign investor. Where a foreign investment (i) concerns any of the critical activities set out in the legislation, including any access to sensitive information including personal data; or (ii) the foreign investor either has ties with a third-country government, armed forces or a state body, or otherwise affects public order or there exists a risk that the investor engages in illegal or criminal activities, then the transaction must be notified to the National Foreign Direct Investment Screening Office (the "Office").
2.2 Procedure and Sanctions in the Event of Non-compliance
If a notification is triggered, certain information on the transaction and the parties involved must be provided to the Office. The notification is submitted online, and within five working days from receipt of the notification, the Office must determine whether the transaction is subject to screening. Should screening be required, a decision must be taken within 60 calendar days from the date of determination that screening is required. Any investment in default of notification where this is triggered is automatically considered in violation of the Act, and the Office is empowered at law to take all necessary measures to unwind the investment, and to impose administrative penalties ranging between EUR500 and EUR100,000, depending on the gravity and nature of the offence.
Furthermore, where a person is required to implement certain conditions or commitments, failure to implement such conditions within the time established by the Office may be liable to an administrative penalty of EUR500 per day.
2.3 Commitments Required From Foreign Investors
If the Office determines that the investment might affect the security or public order of Malta, it may require commitments or conditions to completion of the transaction.
2.4 Right to Appeal
A person aggrieved by a decision taken by the Office is entitled to lodge an appeal to the Administrative Review Tribunal. Appeals lie on points of law, and the right to appeal is exercisable within 20 days from the date of the decision taken by the Office or on a decision to impose an administrative penalty. Decisions on an appeal to the Administrative Review Tribunal are subject to appeal on points of law only to the Court of Appeal in its inferior jurisdiction.
3. CORPORATE VEHICLES
3.1 Most Common Forms of Legal Entities
The most common type of corporate vehicle in Malta is the limited liability company, which may be private or public. Other forms of corporate vehicles available under the Maltese legal system include a general partnership (partnership en nom collectif); a limited partnership (partnership en commandite), which may have its capital divided into shares; a civil partnership; a foundation; and an association. Joint ventures are recognised but are not usually required to be registered and do not have distinct legal personality. Whereas limited companies are frequently used in business and trading, foundations and associations are frequently encountered in connection with charitable or social set-ups. Partnerships are more common among smaller or more traditional businesses.
The liability of shareholders in both forms of limited liability company is limited up to their share holding. A private limited company can have a single member and single director, provided the company is an exempt company. There is a 50-shareholder limit for private companies, and transfers of shares in such companies must be restricted. If the number of members in a company exceeds 50, it must convert to a public company. The minimum share capital for a private company is EUR1,165.69, paid up at least 20% on incorporation; whereas for a public company it is EUR46,597.47, at least 25% paid up.
3.2 Incorporation Process
The steps involved in incorporation vary depending mainly on the type of entity being incorporated. A company is formed upon subscription by shareholders to a memorandum and articles of association, and their delivery to the Malta Business Registry together with key ancillary documents, which include evidence of paid-up minimum share capital and compliance documentation. Once delivered to the Malta Business Registry, the incorporation can be complete in around one working day.
Other forms of corporation, such as a foundation, are set up either by means of a public deed or through a last will, in each case published in Malta and executed before a notary public.
3.3 Ongoing Reporting and Disclosure Obligations
Private companies are subject to at least annual reporting obligations to the Malta Business Registry, consisting of annual returns and annual financial statements, which, unless a company is registered as a private exempt company, must be audited. Other corporate changes, such as changes to directors and officers, changes to shareholding and to ultimate beneficial ownership, amendments to the company's memorandum and articles of association, and other significant corporate events are also subject to disclosure to the Malta Business Registry within applicable timeframes. Where a company is subject to licensing and regulation, it is subject to additional reporting and disclosure obligations to the relevant licensing body or authorit
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Originally Published by Chambers
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