By virtue of L.N.422 of 2021, Subsidiary Legislation 386.25, Companies Act (Use of Digital Tools and Processes) Regulations, 2021 (the "Regulations") came into force with effect from 9 November 2021. The Regulations transpose Directive (EU) 2019/1151 amending Directive (EU) 2017/1132 as regards the use of digital tools and processes in company law.
In accordance with the Regulations, the Registrar of Companies (the "Registrar") must ensure that certain electronic identification means must be recognised for the purposes of utilising the online procedures by applicants who are EU citizens. Such electronic identification means include an electronic identification means issued under an electronic identification scheme in Malta as well as one issued in another EU and EEA state recognised for the purpose of cross-border authentication. All identification means recognised by the Registrar need to be made publicly available.
The purpose of this publication is to provide an outline of the salient features of the Regulations.
Online Formation of Companies
With respect to the online formation of Companies, the Regulations provide that Registrar needs to ensure that this process may be commenced and completed through online means and that electronic copies of documents and information provided by the register during the process of the online formation of companies, are authenticated by means of trust services referred to in Regulation (EU) No 910/2014.
The Regulations set out various matters which the Registrar needs to ensure are complied with in respect of the formation of companies (in some cases reflective of those provisions required in terms of the Companies Act), including procedures to verify the legality of the name of the company, its objects as well as the appointment of directors. Interestingly, the Regulations seem to set out, the possibility for the Registrar to exclude the online formation where the share capital of the company is paid by way of a contribution in kind.
Another interesting rule, provides that the Registrar is required to ensure that where the payment of share capital is required as part of the procedure to form a company, the necessary means are provided for such payment to be made online to a bank account of a bank operating in the Union and shall ensure the existence of means to provide for proof of such payments online. This implies that promoters would need to make use of a bank account of a bank operating in the Union and therefore non-European Union bank account holders would need to plan in order not to fall foul of this requirement.
The Regulations also set out that an online formation of a company formed exclusively by natural persons who use the templates provided by Registrar, is completed within five working days whilst in other cases, an online formation shall be completed within ten working days from the later of the date of the completion of all formalities or date of the payment of the relevant fees.
This is welcomed as it provides persons seeking to form a company with a degree of certainty as to what timeline to expect for the process to be completed and it is submitted that such a provision may also usefully be applied to physical incorporations.
If however, it is not possible to complete the online formation within the foregoing time periods, the Registrar is required to notify the applicant of the reasons for the delay.
Filing and authentication of documents and other information
In addition to the formation of new entities, the Registrar will also need to ensure that various documents and information (including modifications thereof) may be filed online through electronic means. This is also welcomed as certain filings such as amendments to the memorandum and articles of companies can only be filed in the physical format currently.
Registration of an Oversea Company
Another much-welcomed regulation is Regulation 13 which introduces a requirement on the Registrar to have in place the necessary measures to ensure that an overseas company of another Member State may register a branch in Malta fully online. Previously branches and places of business could only be registered in Malta by filing the necessary documents physically.
Similarly to the provisions relating to the formation of new entities, the Registrar needs to ensure that the online registration of a branch is completed with ten working days from the completion of all requirements, including the receipt of documents and information required for registration of a branch by the Registrar. If however, it is not possible to complete the online formation to be completed within the foregoing time periods, the Registrar is only required to notify the applicant of the reasons for the delay
The Registrar also needs to ensure that certain information and documents in relation to branches may be filed online.
Powers of Registrar
Whilst it is important to keep in mind that the scope of these Regulations is to allow for the online formation of companies, registration of branches and registration of information using online means, the Registrar retains the right to, when justified by reason of public interest to prevent identity misuse or alternation or where there is suspected falsification or in to ensure compliance with rules on legal capacity and on the authority of applicants to represent a company, take measures to verify an applicant's identity which could include requiring the physical presence of the applicant.
It should be kept in mind that such measures should be the exception rather than the rule given that the underlying scope of the Regulations is to allow for incorporations and registrations of branches to be completed without the necessity of the applicant appearing in person however it is more than understandable that the Registrar ought to retain this power in certain circumstances.
The regulations set out that the Registrar may charge fees in connection with the above online procedures provided that these are transparent and non-discriminatory and that where payments are required the Registrar shall ensure that payment may be made by means of a widely available online payment service.
Overreaching Benefits of Regulations
Whilst the facility of filing documents for the incorporation of companies was possible prior to the introduction of these rules, it appears that with the introduction of the Regulations, the facility should now be available to a wider group of users and should be extended to cover more online filings post-incorporation.
It is also a step forward in so far as users are now being able to register a branch in Malta using online means (a facility that was not previously available).
Furthermore, an overarching aim of the Regulations is to ensure that concise and user-friendly information which serves to assist in the formation of companies and registration of branches is made available on the online portal and this should further dilute barriers to entry which non-Maltese persons may face when considering utilising this service without the need of an intermediary. The Regulations also present a step forward in terms of their positive impact on the environment seeing as should these Regulations be availed of, the use of physical documents would be reduced considerably.
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.