The Merchant Shipping (Shipping organisations - Private Companies) Regulations (Subsidiary Legislation 234.42 of the Laws of Malta, "the Regulations") have recently been amended by Legal Notice 31 of 2020 published in the Government Gazette on the 21st of February 2020.
Originally promulgated in 2004, the Regulations address the establishment and corporate workings of what is typically referred to as the Maltese shipping company.
Well known by players in the international shipping industry, shipping companies incorporated under the Regulations are used for the ownership, operation, and management of merchant vessels (both Malta-flagged or flagged elsewhere) as well as other maritime-related activities.
Legal Notice 31 of 2020 has now further improved the legislative and regulatory position in the area.
Continuation of foreign companies in Malta and vice-versa
Continuation (sometimes referred to as re-domiciliation) entails the transfer of a corporate entity's 'seat of incorporation' or registration from one jurisdiction to another, thus ensuring the continuing corporate existence of the migrating entity.
Continuation seeks to ensure the continued existence of the same legal person. Accordingly, the company retains all the assets, rights, liabilities and obligations previously held or due by it.
Re-domiciliation into Malta is a useful and advantageous route for those existing shipping companies or shipping groups wishing to move their corporate seat to Malta. Existing shipping companies incorporated elsewhere may retain their corporate existence, instead of incurring winding up costs or leaving them idle whilst incurring costs to keep them in good standing, combined with the cost of incorporating a new company in Malta.
The continuation of a foreign shipping company into Malta may also be considered in connection with the simultaneous flagging of new tonnage or the re-flagging of existing tonnage under the Malta flag. Indeed, the whole re-domiciliation exercise, combined with the registration of the underlying owned or operated vessels in Malta, may well serve as a point of entry into the Maltese tonnage tax system.
Whilst re-domiciliation laws for non-shipping companies have been enacted in Malta a number of years ago, Legal Notice 31 of 2020 has brought about a novel faculty for Maltese shipping companies. Prior to 21st February 2020, a foreign shipping company wishing to re-domicile to Malta would first need to do so as a non-shipping company and subsequently convert to a shipping company post re-domiciliation.
This time consuming and burdensome procedure has now been removed through the introduction of Legal Notice 31 of 2020.
The Regulations now govern both the continuation in Malta of a foreign corporate entity as well as the continuation of a Maltese company in a country or jurisdiction outside Malta.
Re-domiciliation is only possible if the laws of the concerned jurisdiction (other than Malta) allow so.
Additionally, re-domiciliation may only take place when the foreign jurisdiction is considered as an "approved country or jurisdiction". In this regard, the Registry relies on the Financial Action Task Force (FATF) country evaluations and treats as an approved jurisdiction a country that is not on the FATF blacklist.
Reporting & filing obligations for shipping companies
Starting from financial year 2020, shipping companies are requested to keep accounting records in accordance with the Regulations and will be subject to the exemptions and disclosure requirements as detailed in the said Regulations. Shipping companies will, therefore, need to prepare financial statements in accordance with the Regulations and the relevant applicable financial reporting standards such as GAPSME or IFRS.
Shipping companies will now submit audited financial statements to the Registrar of Companies. Submission must be made within 42 days from the end of the period for the laying before and approval by the company in general meeting of the annual accounts, that is 10 months after the end of the applicable and relevant accounting reference period.
Simply put, the large majority of shipping companies having their respective year-end in December must make their first filing of their audited accounts for financial year 2020 towards early December 2021.
A "small" shipping company is exempt from the general requirement to prepare a directors' report. A "small" shipping company is one which, in terms of Regulation 64 of the amended Regulations, does not exceed two of the below thresholds:
- A balance sheet total of ? 6,000,000
- Turnover of ? 12,000,000
- Not more than fifty employees
At a parent company level, exemptions from the preparation of consolidated accounts are also present. A parent shipping company incorporated under the Regulations can qualify as a "small company" in terms of the foregoing only if the group of which it is parent qualifies as a small group, meaning that, on a consolidation basis, it does not exceed the limits of two of the following criteria:
- An aggregate balance sheet total of ? 6,000,000 net or ? 7,200,000 gross
- An aggregate turnover of ? 12,000,000 net or ? 14,400,000 gross
- An aggregate number of fifty employees
The above-described size exemption applicable to the preparation of consolidated accounts does not seem to apply in the event that the parent shipping company, or any of its undertakings to be consolidated, have their securities listed on a regulated market and in the event that none of the group companies are public interest entities.
An additional Schedule – the Tenth Schedule – has been added to the Regulations. This Schedule lists a number of administrative penalties which may be imposed by the Registrar of Companies in the event of a number of defaults concerning failure by a shipping company and its officers to abide by their notification and filing obligations with respect to annual accounts as well as other matters concerning corporate governance.
Originally published 11 May 2020
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.