Doing Business In

The Maltese legal system is classified as a hybrid system, as it is the product of various legal traditions that have shaped it over the centuries, particularly during its long period of colonisation. Malta’s main codes – the Civil Code (Chapter 16 of the Laws of Malta), the Code of Organisation and Civil Procedure (Chapter 12 of the Laws of Malta), the Commercial Code (Chapter 13 of the Laws of Malta) and the Criminal Code (Chapter 9 of the Laws of Malta) – are influenced by continental law.

Following the long period of British rule in Malta, the Maltese legal system was inevitably influenced by common law. This is particularly evident in Maltese tax law and Maltese company law: the latter is principally modelled on English company law, with some provisions indicating inspiration from Italian and French law (eg, provisions on partnerships en commandite and en nom collectif). English company law has formed the backbone of Maltese company law for over 50 years and it is expected that the Maltese legislature will look to English company law for inspiration for years to come.

While the Maltese legal system integrates elements of both civil law and common law traditions, its foundations and ongoing development are deeply rooted in European legal thought. The regime embodies the country’s rich legal heritage while adapting to contemporary legal challenges within the EU context.

The primary legislative and regulatory provisions governing the establishment and operation of enterprises in Malta are set out in the Companies Act (Chapter 386 of the Laws of Malta) and the subsidiary legislation issued thereunder. The Companies Act provides a comprehensive legal framework for the incorporation and regulation of various forms of commercial partnerships.

The Companies Act also establishes rules of corporate governance, covering:

• the appointment, powers and duties of directors;
• the rights of shareholders and partners;
• the conduct of general meetings; and
• capital maintenance and reporting obligations.

In addition, the Companies Act:

• contains provisions on modes of corporate restructuring, such as:
• • mergers;
  • divisions; and
  • reconstructions; and
• governs the dissolution and winding up of companies and partnerships.

In addition to the Companies Act, a number of sector-specific laws govern the establishment and operation of particular types of entities in Malta. Regulated entities such as the following are subject to their own dedicated legal frameworks:

• insurance undertakings;
• credit institutions;
• investment firms;
• financial institutions; and
• gaming companies.

These include specific laws, regulations, rules and directives, which commonly:

• prescribe minimum capital requirements; and
• define management structures which must be:
• • established at incorporation stage; and
  • maintained throughout the entity’s existence.

Therefore, while the Companies Act forms the core legal framework governing commercial partnerships in Malta, it must be interpreted and applied in conjunction with any other relevant provisions within the wide range of sector-specific legislation applicable to the entity in question.

Under the Companies Act, the Minister responsible for the registration of commercial partnerships is empowered to issue regulations aimed at enhancing the effective implementation of specific provisions within the act. In practice, the responsibility for drafting these regulations may be delegated to the Registrar of Companies, who operates under the Malta Business Registry. The Malta Business Registry:

• oversees the registration of commercial partnerships in Malta;
• maintains the official companies register; and
• processes documentation submitted by such entities.

As the authority tasked with enforcing the Companies Act, the Registrar is vested with several powers. These include:

• the authority to impose administrative penalties for non-compliance with the Companies Act;
• investigative powers with regard to company affairs and beneficial ownership of companies;
• the power to refuse the registration of individuals as company directors if they are disqualified; and
• the power to strike off companies classified as ‘defunct’ where there is reasonable cause to believe that they are no longer operational or conducting business.

Apart from the Malta Business Registry, regulated entities such as financial institutions and gaming operators are also overseen by their respective regulatory authorities. These include the Malta Financial Services Authority and the Malta Gaming Authority, each of which is vested with powers under the specific legislative frameworks applicable to their sectors.

In Malta, the main forms of business structures are inclusive of the following:

• limited liability companies;
• partnerships en nom collectif and en commandite;
• branches; and
• sole traders.

Limited liability companies may be either private or public. These companies are formed through capital divided into shares held by members whose liability is limited to any unpaid amount on their shares. Another fundamental feature is the company’s separate legal personality, which legally distinguishes the company from its shareholders. This provides a safeguard by isolating personal assets from business liabilities.

The partnership en nom collectif requires at least two partners and involves joint and several unlimited liability. The partnership en commandite (limited partnership) distinguishes between general partners, who have unlimited liability, and limited partners, whose liability is restricted to their unpaid contribution.

A branch in Malta does not constitute a separate legal entity from its parent company abroad and entails setting up a place of business in Malta. A branch must still be registered with the Malta Business Registry. The sole requirement for setting up a branch is the existence of an operational business presence within Malta.

Sole traders are individuals who habitually engage in acts of trade for profit in their own name. This structure does not require registration with the Malta Business Registry. Unlike companies and partnerships, sole traders are personally liable for all business obligations, as there is no legal separation between the individual and the business.

The capital requirements which apply to the different types of business structures described above are as follows:

• A public limited liability company must have a minimum share capital of €46,587.47, which must be subscribed to by at least two persons. For a private limited liability company, the required minimum share capital is €1,164.69, also to be subscribed to by two persons. Contributions may be made in cash or in kind.
• There are no minimum or maximum capital contribution requirements for partnerships. Contributions can take the form of cash, items in kind and/or services, except when the partner contributing the services is a limited partner in a partnership en commandite.
• There are no capital requirements for establishing a branch in Malta.
• There are no capital requirements for individuals operating as sole traders in Malta.

The processes for establishing the different types of business structures are as follows:

• A limited liability company is established by the submission of the memorandum and articles of association together with other required documentation to the Registrar of companies who, upon being satisfied that the requirements of the Companies Act have been complied with and the applicable fees paid, will register the company and issue a certificate of registration. The timeline for incorporating a company typically takes a few business days from the date of submission of the documents to the Registrar.
• Partnerships are constituted through a deed of partnership, which must be delivered for registration along with other required documentation. The Registrar, once satisfied that the requirements of the Companies Act have been met and the necessary fees paid, shall register the partnership and issue a certificate of registration. The timeline for constituting a partnership typically takes a couple of business days from the date of submission of the documents to the Registrar.
• To establish a branch or place of business in Malta:
• • an authorised representative must be appointed; and
  • the statutory Form M, together with other required documentation, must be submitted to the Registrar.
• The timeline for establishing a branch typically takes a few business days from the date of submission of the documents to the Registrar.
• Sole traders must apply to be registered as self-employed by completing the appropriate forms depending on whether the individual applying to be registered as self-employed is:
• • a Maltese citizen;
  • an EU national; or
  • a non-EU national.

There are no additional restrictions or requirements that apply to foreign jurisdictions from a strict company law perspective. That said, the Malta Business Registry imposes more stringent due diligence requirement for any non-EU natural or legal person seeking to establish a business in Malta. Non-EU natural or legal person may be required to:

• have their due diligence documents apostilled for the purposes of the Malta Business Registry; or
• submit additional documents when compared to a local or EU person – such documents should:
• • include a professional or bank reference letter issued by a warranted individual; and
  • not be older than three months from the filing date.

There are no local director requirements in terms of Maltese company law. However, having Maltese directors may be required for tax purposes and for reasons of substance, to support the position that the company is being effectively managed and controlled from Malta.

Businesses looking to operate in Malta through third-party collaborations may explore opportunities such as appointing agents or partnering with local distributors. These models offer a flexible and cost-efficient route into the Maltese market but require careful attention to legal and regulatory obligations.

One common route is through the use of an agent. This approach enables market access without establishing a permanent base. It is essential that agency relationships are governed by a written agreement, detailing:

• duties;
• commission terms;
• geographic coverage; and
• termination provisions.

Alternatively, businesses may engage with local resellers or distributors to market and sell their goods or services. This method provides access to pre-existing customer networks and can accelerate market penetration. Distribution agreements should clearly define the rights and responsibilities of each party, including:

• pricing controls;
• territorial rights; and
• branding obligations.

A franchise arrangement also allows a franchisee to run a business using the franchisor’s brand and systems. Maltese businesses can operate as franchisees or expand as franchisors. These agreements are legally complex, requiring transparency, regulatory compliance and adherence to set standards by both parties to ensure consistency and brand integrity.

Before engaging in any activity, companies should assess whether they need to register with Maltese authorities, such as the Malta Business Registry – particularly if establishing a branch or fixed place of business. Certain business sectors may also require specific licences or regulatory approvals, depending on the nature of the goods or services offered.

The structure of management depends on the type of entity in question. With respect to partnerships en nom collectif, insofar as the deed of partnership does not otherwise provide, the administration and representation of the partnership will vest in each of the partners severally. On the other hand:

• the administration and representation of the partnership en commandite or limited partnership will vest in the general partners; and
• unless the deed of partnership provides otherwise, such administration and representation will vest in each of the general partners severally.

The management structure of a company is primarily composed of its board of directors, which serves as the central decision-making body, responsible for:

• overseeing the company’s strategic direction; and
• ensuring compliance with legal and fiduciary obligations.

The board is typically entrusted with the overall governance and high-level administration of the company.

Beyond the statutory framework, it is common practice for companies with complex or large-scale operations to appoint officials who are delegated specific operational responsibilities, such as a chief executive officer. The delegation of authority by directors to such individuals allows for more efficient management, while the board retains ultimate oversight and accountability.

Public interest entities – that is, regulated entities and companies whose debt or equity securities are admitted for listing on a regulated market – must establish and maintain an audit committee. The establishment and operation of such committee depend on the type of entity in question. In terms of the Malta Financial Services Authority’s (MFSA) Capital Markets Rules, the primary purpose of an audit committee is to:

• assist in the company’s decision-making capability; and
• ensure:
• • the accuracy of its reporting; and
  • that financial results are maintained at a high level at all times.

While unregulated private companies are not legally required to establish specialist committees, the MFSA regulatory framework imposes specific obligations in this respect on entities within its scope to ensure robust governance and oversight.

The MFSA Corporate Governance Code, which applies to all persons authorised by the MFSA, encourages the board of directors of regulated entities to establish committees to assist them in adequately carrying out their duties, particularly with respect to specialised areas within the company’s business. Where committees are set up:

• their composition should be set up in accordance with the criteria outlined for the board’s composition; and
• the board should establish and approve clear terms of reference for the committee.

Committees which are commonly set up in regulated entities include:

• the compliance, anti-money laundering and risk committee;
• the investment committee; and
• with respect to insurance undertakings, the product oversight and governance committee.

As a general principle under Maltese company law, the appointment of corporate directors is permitted with respect to private limited liability companies. However, a notable exception exists in relation to companies with a private ‘exempt’ status pursuant to Article 211 of the Companies Act. This restriction also extends to single member companies which must adopt ‘exempt’ status. The rationale behind this prohibition may lie in the fact that private exempt companies benefit from reduced obligations under the Companies Act and thus the law requires that only natural persons serve as directors in order to preserve transparency in their control structure.

Recent amendments to the Companies Act (which are yet to come into force) remove the classification of private companies which satisfy the criteria listed in Article 211 of the Companies Act as “exempt” companies. However, the substantive benefits and exemptions afforded to qualifying private companies remain unchanged.

Beyond the statutory limitations imposed by the Companies Act, regulated entities such as public limited liability companies whose securities are listed on the Malta Stock Exchange, insurance undertakings, credit institutions and investment firms are also precluded from appointing corporate directors. This restriction arises from the ‘fit and proper’ requirements embedded in sector-specific regulatory frameworks, which necessitate that individuals occupying key governance roles possess the requisite:

• integrity;
• competence; and
• accountability.

The appointment of corporate directors in such contexts would be incompatible with these standards, as it would hinder the ability of regulators to assess and monitor the suitability of such an appointment.

The minimum number of directors in a private company is one, while the minimum number of directors for public companies is two. However, the memorandum of association sets out the minimum and maximum number of directors. All directors must ensure that their personal interests do not conflict with the interests of the company. Directors are not, in terms of the Companies Act, required to be free from any relationship of any nature with the company. However, the MFSA Code of Corporate Governance does recommend that authorised entities have a board of directors which consists of at least one independent director – that is, a non-executive director who is free from any present and past business, family or other relationship of any nature with the entity, its controlling shareholder/s or the management of either that could:

• influence the director’s objective and balanced judgement; or
• reduce the director’s ability to take decisions independently.

In terms of the Companies Act, there are no diversity or residence requirements for the appointment of directors of limited liability companies. However, having Maltese resident directors is generally required for tax purposes to demonstrate management and control of the company from Malta.

Where applicable, the Company Service Providers Act (Chapter 529 of the Laws of Malta) requires persons proposed to be appointed as directors either to:

• be licensed by the MFSA to act as a company service provider; or
• be registered with the MFSA as a limited company service provider.

Under the Companies Act, directors are generally appointed by an ordinary resolution passed at a general meeting, unless otherwise provided in the company’s memorandum or articles. Where a class of shareholders has the right to appoint directors, the appointment requires over 50% in nominal value of voting shares at that class meeting. A person cannot be appointed as a director unless they have either:

• personally signed the memorandum to indicate their consent; or
• submitted a written consent to the Registrar of Companies.

Additionally, directors must declare whether they are aware of any disqualifying circumstances under Maltese law or the laws of another member state.

The Companies Act permits the removal of a director before the end of their term, regardless of any contrary provision in the company’s memorandum, articles or agreements. This can be done by a resolution at a general meeting, passed by members holding more than 50% of the voting rights attached to shares represented at the meeting. Upon receiving notice of such a resolution, the company must send a copy to the director, who has the right to be heard at the meeting, whether or not they are a shareholder.

The act also outlines specific grounds for disqualification from appointment or from holding office as a director. These include:

• individuals who are bankrupt, interdicted or incapacitated;
• individuals who have been convicted of money laundering;
• minors who are not emancipated to trade;
• individuals who have been subject to a disqualification order; and
• individuals who have breached the local company service provider regime.

The primary role of the directors is to:

• manage the business of a company; and
• exercise all powers of the company that are not required to be exercised by the company in general meeting by:
• • the Companies Act; or
  • the memorandum or articles of the company.

The directors of a company must promote the wellbeing of the company and are responsible for the general governance of the company. The functions of directors are primarily exercised through board meetings. These meetings serve as the formal mechanism through which directors discharge their collective decision-making duties.

Directors are typically appointed as the legal and judicial representatives of the company, empowered to:

• act on its behalf in dealings with third parties; and
• execute documents that legally bind the company.

This authority includes representing the company before public authorities or in legal proceedings.

Nonetheless, it is common practice for directors to delegate certain administrative and operational functions to individuals outside of the board of directors, particularly individuals occupying managerial or senior roles within the company. Such delegation is often necessary for the efficient day-to-day running of the business and may include tasks such as:

• the execution of employment contracts;
• the execution of supplier agreements; and
• routine communications with external stakeholders.

While directors may delegate authority, they retain ultimate responsibility for ensuring that delegated tasks are performed in accordance with the company’s policies and applicable laws.

All directors within a company have the same roles, responsibilities and obligations at law. The Companies Act does not distinguish between different types of directors and treats them all equally, regardless of any description of a director in the company’s memorandum or articles of association. In particular, the Companies Act does not differentiate between ‘executive’ and ‘non-executive’ directors, notwithstanding that such terms are widely used in local practice. A ‘non-executive director’ is generally understood to be a director who is not involved in the day-to-day management and administration of the company. In the absence of a legal distinction between these two types of directors under Maltese law, all directors are subject to the same duties and liabilities. In a litigious context, the courts will not adopt a more lenient approach towards a director simply because their role is non-executive in nature.

On the other hand, the powers of directors may be restricted by the provisions of the company’s memorandum and articles of association. For example, they may require that a resolution on a specific matter be approved by at least a particular director or class of directors. Additionally, the memorandum or articles may reserve certain matters which would otherwise be within the directors’ remit for decision by the shareholders, which is common in practice.

Maltese law holds all directors equally accountable, regardless of title or function. While a company’s constitutive documents may regulate how powers are exercised, the legal duties and liabilities remain uniform across the board.

The legal duties of directors under Maltese law can be broadly categorised into three main areas:

• the duty of loyalty;
• administrative duties; and
• duties in relation to insolvency.

Article 136A(3) of the Companies Act outlines the fiduciary obligations of directors. Directors must exercise the degree of care, diligence and skill that would reasonably be expected of someone performing the functions of a director. They must not:

• derive secret or personal profits from their position; or
• exploit confidential company information for personal gain.

Directors:

• are also expected to ensure that there are no conflicts between their personal interests and those of the company;
• must not use company property, information or opportunities for their own benefit or that of others;
• must exercise their powers solely for the purposes for which they were conferred; and
• must not misuse such powers.

Directors’ administrative duties include:

• maintaining statutory registers and minute books or filing returns with the Registrar of Companies;
• preparing a directors’ report for each accounting period;
• preparing individual accounts; and
• laying the audited financial statements before the shareholders.

While directors’ duties are ordinarily owed to the company for the benefit of its shareholders, this changes in the event of insolvency. At that point in time, directors must act in the best interests of the company’s creditors. Failure to do so may expose the directors to legal action resulting in personal or criminal liability.

The nature of directors’ duties classifies them as both fiduciaries and mandataries of a company. Consequently, any breach of these duties may give rise to liability under the Civil Code (Chapter 16 of the Laws of Malta) for breaches of fiduciary obligations and obligations relating to mandate.

Directors may incur civil liability for negligence when they fail to exercise the level of care, diligence and skill reasonably expected of someone in their position. This is seen in the event of wrongful trading under the Companies Act, where a director may be held personally liable to contribute to the company’s assets.

Under the Companies Act, directors are criminally liable for fraudulent acts committed in the context of insolvency. Fraudulent trading is punishable by:

• up to five years’ imprisonment;
• a fine of up to €232,937; or
• both.

Additionally, the granting of ‘preferences’ within six months prior to dissolution is deemed fraudulent. Certain acts – such as the concealment of company property or debts – committed in the 12 months prior to dissolution may also give rise to criminal liability.

More generally, Article 13 of the Interpretation Act (Chapter 249 of the Laws of Malta) provides that where an offence is committed by a body of persons, any person who was a director at the time will be deemed guilty unless it is proven that:

• the offence occurred without their knowledge; and
• they exercised all due diligence to prevent it.

This principle is further reinforced in specific employment legislation and occupational health and safety legislation.

In Malta, there are no requirements or restrictions which apply to shareholders of an unregulated private limited liability company. The Companies Act is notably flexible in this regard, imposing no requirements or restrictions concerning the age, nationality or residency of shareholders of a company in Malta. While Maltese law does restrict individuals who are bankrupt or insolvent from acting as partners, directors or company secretaries, these restrictions do not extend to shareholders.

Shareholders enjoy several rights in relation to the company in which they have invested. Primarily, they have the right to:

• receive dividends from the company’s profits; and
• participate in the distribution of assets upon dissolution.

Additionally, they have the right to decide on certain corporate matters, including the following:

• the appointment and removal of directors and statutory auditors;
• approval of the company’s audited annual financial statements, with a right to inspect the financial statements at least 14 days prior to the date of the general meeting at which the accounts are being laid;
• amendments to the memorandum and articles of association;
• increases of the company’s authorised and issued share capital (unless the latter is delegated to the board of directors);
• the dissolution and winding up of the company;
• the amalgamation of the company with another; and
• the continuation of a company outside Malta.

The memorandum or articles of association may also provide that certain key matters concerning the company will be decided by the shareholders; such matters are typically referred to as ‘reserved matters’.

Shareholders also have the right to pursue legal action when affairs of the company have been, are being or are likely to be conducted in a manner that is, or t any act or omission of the company has been, is being or is likely to be, oppressive, unfairly discriminatory against or unfairly prejudicial to a member or members or in a manner that is contrary to the interests of the members as a whole.

Shareholders exercise their rights primarily by participating and voting in general meetings – both annual general meetings and extraordinary general meetings. Companies are mandated to hold annual general meetings every year. In terms of the Companies Act, any general meeting which is not an annual general meeting is referred to as an ‘extraordinary general meeting’. Voting can be conducted in person or through a proxy, in proportion to the number of shares held in the company.

The directors are responsible for convening general meetings. Nonetheless, the directors are legally required to convene a general meeting upon the requisition of one or members of the company holding not less than one-tenth of the paid-up share capital (which carries voting rights) of the company on the date of the deposit of the requisition. In such instances:

• the directors must convene the meeting within 21 days of the date of the deposit of the requisition; and
• the meeting must be held not later than two months from the date of the deposit.

If the directors do not duly proceed to hold a meeting as per the aforesaid requirements, the requisitionists may convene a meeting in the same manner, as far as possible, as that in which meetings are convened by the directors, provided that such a meeting is held before the expiration of three months from the date of the deposit of the requisition.

Shareholders have significant influence over the appointment and removal of directors. The first directors of a company are elected by its promoters, who are required to sign off the memorandum and articles of association of the company. All subsequent appointments are made by ordinary resolution passed at a general meeting. Unless the memorandum of articles of association of a company provide for a higher threshold for the passing of an ordinary resolution, shareholders holding in aggregate more than 50% in nominal value of the voting shares represented at that meeting can appoint one or more directors, in accordance with the number of directors required or permitted by the company’s memorandum of association. Similarly, shareholders may remove a director from office before the expiration of their term by means of a resolution at a general meeting. This requires the support of shareholders holding, in aggregate, more than 50% of the voting rights attached to the shares represented and entitled to vote at the meeting.

Additionally, since the memorandum and articles of association of a company may only be amended by extraordinary resolution of the shareholders, the shareholders may also restrict or widen directors’ powers by making the necessary amendments to the memorandum and articles of association. The directors:

• must always act within with the company’s objects as stated in the memorandum of association; and
• must not act ultra vires.

Under Maltese law, shareholders (or members) of a company generally have limited legal duties and liabilities, especially when compared to directors. Shareholders are primarily investors and promoters of the company. They are not involved in the day-to-day management, which is the responsibility of the directors. A cornerstone of Maltese company law is that shareholders enjoy limited liability, which means that:

• their liability is limited to the amount unpaid on their shares, if any; and
• they are not personally liable for debts or obligations of the company.

Under the Companies Act, any person (including shareholders) may be held liable if they are found to have:

• knowingly carried on business with intent to defraud creditors or for any fraudulent purpose; or
• participated in wrongful trading, especially during insolvency, where they:
• • knew (or ought to have known) that the company had no reasonable prospect of avoiding insolvency; and
  • failed to take steps to minimise potential loss to creditors.

Shareholder agreements may impose additional contractual obligations on shareholders. Additionally, shareholders in listed companies may be subject to additional disclosure and conduct rules under the Capital Markets Rules and the Market Abuse Regulation.

While the principle of separate legal personality protects shareholders, the Maltese courts may also lift the corporate veil in exceptional circumstances, including the following:

• Fraud or improper conduct: Maltese courts have not hesitated to lift the corporate veil in circumstances where the corporate form has been used for a fraudulent or improper purpose, including to evade a contractual or other legal obligation.
• Abuse of corporate structure: Where the company is merely an alter ego of its controllers and there is no real separation between the company and its shareholders. Such a company will typically lack assets, have no employees and run no real business – the company is a façade concealing true facts.

Apart from these judicial inroads, there is an additional statutory inroad which imposes liability on a member of a company where the number of members falls below two. In this case, the lifting of the corporate veil arises because a main attribute of separate juridical personality – that is, immunity from liability – is disregarded to impose liability for the company’s obligations on the sole remaining member.

Any issuance of shares in a company is to be decided upon by ordinary resolution of the company, unless the articles of association require a higher percentage. The articles of association or an extraordinary resolution may permit the board of directors to issue shares up to a maximum amount as specified in the articles or the resolution. Such permission is valid for a maximum period of five years.

Whenever shares of a public company are proposed to be allotted for a consideration in cash, those shares must be offered on a pre-emptive basis to shareholders in proportion to the share capital held by them. The shareholders’ right of pre-emption must be exercised within a period of not less than 14 days from:

• the date of publication of the offer:
• • in the Government Gazette; or
  • on a website maintained by the Registrar of Companies; or
• the date of dispatch of letters to the shareholders informing them of the offer on a pre-emptive basis.

As a general rule, the right of pre-emption cannot be restricted or withdrawn by the memorandum or articles of association of the public company; however, for particular allotments, the right of pre-emption may be restricted or withdrawn by an extraordinary resolution of the general meeting.

With respect to private companies, shareholders are not granted pre-emption rights unless stipulated in the articles of association or a shareholders’ agreement. These rights may be waived:

• by resolution of the general meeting; or
• as provided for in the articles or agreement.

While there are no public disclosure requirements for shareholdings in private companies, the Malta Business Registry must be notified of the issuance and allotment of shares in a private company by means of a Form H within one month from the date of their allotment. Regardless of their size, companies listed on a regulated market are subject to specific disclosure requirements, including the notification of:

• major holdings; and
• changes in the voting rights and capital of the company.

Furthermore, under the Companies Act (Register of Beneficial Owners) Regulations, Maltese companies must disclose their ultimate beneficial owners to the Malta Business Registry. These disclosure requirements are applicable vis-à-vis any beneficial owner holding 25% plus one or more of the shares or more of the voting rights or an ownership interest of more than 25% in that company. Companies that are listed on a regulated market and subject to disclosure requirements consistent with EU law or equivalent international standards which ensure adequate transparency or ownership information are exempt from this disclosure requirement.

By default, and unless otherwise provided in its memorandum or articles, a company has the power to borrow money and to issue debentures, debenture stock and other securities, either outright or as security for its own liabilities or those of a third party.

Bank financing remains a popular method for raising working capital, as it is generally more accessible and familiar to businesses, particularly small and medium-sized enterprises (SMEs); though it may involve interest obligations and collateral requirements.

There has been a growing shift towards capital markets, especially among larger companies, by publicly listing securities on the Malta Stock Exchange. Although capital markets give access to larger pools of capital, the costs and regulatory complexities associated with such instruments may be burdensome. Prospects MTF is a more cost-effective and accessible alternative for SMEs seeking to raise capital through public offerings.

Increasing a company’s issued share capital remains a popular route for raising working capital, offering the advantage of not incurring debt; though it may dilute existing shareholders’ interests. Another option is through contributions by undertakings that are directly or indirectly controlled or beneficially owned by the same person that controls the recipient company. These contributions may be made gratuitously without the need to issue shares or provide consideration.

Many businesses in Malta also rely on trade credit. However, this practice is expected to be significantly affected by the proposed EU Late Payment Regulation, which would impose a strict 30-day payment credit limit regardless of any longer terms agreed between the parties.

Dividend distributions are one of the most commonly used route for the return of proceeds in Malta. Under Maltese law, dividends may only be distributed from a company’s profits available for distribution. These consist of the company’s accumulated, realised profits less its accumulated, realised losses. Given the limited local guidance on what constitutes ‘realised’ profits and losses, Maltese practitioners often refer to Institute of Chartered Accountants in England and Wales Technical Release 02/17BL for interpretative support.

Reducing a company’s issued share capital is another widely used mechanism for returning proceeds to shareholders. This process requires:

• the passing of an extraordinary resolution; and
• the filing of a return with the Registrar of Companies reflecting the revised share capital.

However, the reduction becomes effective only after a three-month period following the Registrar’s publication of a notice regarding the receipt of the resolution. During this period, creditors with pre-existing claims may object to the reduction, which can delay or complicate the process. Recent amendments to the Companies Act also introduced the possibility to carry out a reduction in a company’s undistributable reserves, which also requires the three-month creditor period prior to being effective.

Lastly, companies commonly return proceeds through the capitalisation of reserves, including the issuance of bonus shares. This involves converting amounts standing to the credit of any reserve into share capital, thereby increasing shareholders’ equity without distributing cash.

Foreign direct investment (FDI) in Malta is primarily regulated under the National Foreign Direct Investment Screening Office (NFDISO) Act (Chapter 624 of the Laws of Malta), which implements EU Regulation 2019/452. Non-EU investors must notify the NFDISO if they intend to invest in sectors deemed critical to national security or public order, such as:

• energy;
• transport;
• health;
• communications; and
• data infrastructure.

Notification is required when the investment by a foreign investor result in direct or indirect beneficial ownership of 10% or more of an entity operating in these sectors. The notification must include details on:

• the investor’s ownership structure;
• the ultimate beneficial owners;
• the nature and value of the investment;
• the relevant business activities; and
• the source of funds.

The NFDISO may screen the transaction and request further information if necessary. In determining whether a notification is to be made, factors such as the following must also be considered:

• whether the foreign investor is directly or indirectly controlled by government bodies;
• whether the foreign investor has already been involved in activities affecting security or public order in an EU member state; and
• whether there is a serious risk that the foreign investor is engaging in illegal or criminal activities.

Malta does not impose general exchange control restrictions on the movement of capital or foreign currency transactions. Prior to Malta’s accession to the European Union, the Exchange Control Act was in force, which imposed certain exchange control restrictions. However, such restrictions were lifted with Malta’s EU membership in 2004 and the Exchange Control Act was replaced by the External Transactions Act (Chapter 233 of the Laws of Malta). This act does not impose routine controls on capital flows or foreign exchange transactions; however, the Minister of finance retains the authority to impose restrictions on capital transactions in limited and exceptional circumstances, such as in order to:

• prevent a balance of payments crisis; or
• implement international sanctions.

These powers must be exercised in consultation with the Central Bank and the National Statistics Office.

Under the Cash Control Regulations (Subsidiary Legislation 233.07), any person who is entering, leaving or transiting through Malta with €10,000 or more in cash must declare such sum to the commissioner for revenue.

Stakeholders in Malta play a pivotal role in shaping business operations, through both direct engagement and broader economic influence. Businesses often rely on external financing such as bank loans and trade credit. This makes creditors and suppliers key stakeholders – particularly in light of the proposed EU Late Payment Regulation, which:

• will limit payment terms to 30 days; and
• may significantly alter supplier relationships and cash-flow management.

Employees influence operations through their productivity, retention and expectations around working conditions. Pensioners, while not directly involved in operations, impact long-term employment strategies and financial planning, especially as Malta promotes occupational pension schemes. Customers drive product development and service standards, reinforced by strong consumer protection laws.

Beyond the above operational aspects, stakeholders also exert influence on an enterprise by shaping corporate governance expectations, particularly under Malta’s evolving environmental, social and governance and transparency frameworks.

Businesses operating in Malta must navigate a range of legal and regulatory considerations. Compliance with EU and local regulations is essential, particularly in areas such as:

• taxation;
• data protection;
• employment law; and
• anti-money laundering.

Additionally, businesses are encouraged to adapt to sustainability incentives, as government grants and tax reliefs increasingly favour investments in green technology and innovation. ESG factors are becoming increasingly central to business operations in Malta, driven by both EU regulations and growing stakeholder expectations. Businesses must:

• align with EU directives such as the Corporate Sustainability Reporting Directive;
• integrate sustainability into their strategies; and
• demonstrate accountability in areas such as:
• • environmental impact;
  • social responsibility; and
  • corporate governance.

Finally, businesses should remain alert to geopolitical and economic shifts, including inflationary pressures and supply chain disruptions, which may affect:

• pricing;
• procurement; and
• customer demand.

Every company in Malta must keep proper accounting records at:

• the registered office of the company; or
• such other place as the directors deem appropriate.

These records must be open for inspection by the officers of the company at all times. For each accounting period, the company must prepare individual accounts comprising:

• the balance sheet as at the last day of the accounting period;
• the profit and loss account for that period;
• notes to the accounts; and
• any other financial statements and disclosures required by generally accepted accounting principles and practice.

If the company is a parent entity, it must also prepare consolidated accounts along with the individual accounts, unless exempted by law.

For each accounting period:

• the company’s annual accounts must be approved by the board of directors; and
• the balance sheet must be signed by two directors.

A director’s report must be prepared, approved, dated and signed by two directors. The company’s auditors must issue a report to the company’s members on all annual accounts of the company.

The annual accounts, the directors’ report and the auditor’s report must be laid before the general meeting for its approval within the applicable period stipulated by law. Following approval, the directors must deliver to the Malta Business Registry for registration a copy of the company’s annual accounts, together with a copy of the directors’ report and the auditor’s report, within 42 days of the end of the period for the laying of annual accounts before the company in general meeting.

Directors in Malta are responsible for ensuring that the company is compliant with all accounting and reporting obligations under the Companies Act and other applicable legislation. This includes:

• maintaining proper accounting records; and
• ensuring timely preparation and approval of the annual accounts and the directors’ report.

Directors must ensure that the accounts:

• give a true and fair view of the company’s:
• • assets;
  • liabilities;
  • financial position; and
  • profit or loss; and
• are audited by the company’s independent auditor.

It is the responsibility of the directors of a company to lay the annual accounts, together with the directors’ report and auditor’s report, before the general meeting for approval. As outlined in question 6.1, once approved, the directors must submit copies of the aforementioned documents to the Malta Business Registry for registration. Directors must ensure that all documentation required to be prepared and submitted to the Malta Business Registry is prepared within the applicable timeframes stipulated by law.

The accountants of a company typically assist the directors with the preparation of the annual financial statements of the company for that particular financial year, which will comprise:

• the balance sheet as at the last day of the accounting period to which they refer;
• the profit and loss account for that period;
• the notes to the accounts; and
• any other financial statements and other information which may be required by generally accepted accounting principles.

The individual accounts must provide a true and fair view of the company’s financial position and performance.

Meanwhile, a company’s auditors must issue a report to the company’s members on the annual accounts of the company, of which copies are to be laid before the company in a general meeting during the auditor’s tenure of office. The auditor’s report must:

• be drawn up in accordance with generally accepted auditing standards; and
• state whether, in the auditor’s opinion, the annual financial statements:
• • have been properly prepared in accordance with the Companies Act;
  • provide a true and fair view pursuant to the relevant financial reporting framework; and
  • comply with statutory requirements where appropriate; and
• state whether:
• • the information given in the director’s report for the accounting period for which the annual accounts are prepared is consistent with those accounts; and
  • the director’s report has been prepared in accordance with the applicable legal requirements.

One key consideration within the context of accounting reporting in Malta is the period allowed for laying before and approval by the company of a company’s annual accounts in the general meeting:

• For a private company, this period is 10 months after the end of the relevant accounting period; and
• For a public company, this period is seven months after the end of that period.

The directors of both private and public companies must deliver a copy of the company’s annual accounts within 42 days of the end of the relevant period.

The accounting records of a company must be kept for a period of 10 years. If the accounting records are kept in a bound or unified form, this 10-year period begins to run from the date of the last entry made therein.

If, at the end of an accounting period, a company is a parent company, the directors must, as well as preparing the individual accounts for the company, also prepare consolidated accounts. A subsidiary undertaking may be excluded from consolidation if its inclusion is not material for the purpose of giving a true and fair view; but two or more subsidiary undertakings may be excluded only if their inclusion is not material when taken together.

A company which qualifies as a small company in terms of the Companies Act and has the status of an exempt company in terms of Article 211 of the Companies Act need not deliver the company’s profit and loss account to the Malta Business Registry.

Executive compensation is not specifically regulated with respect to unregulated private companies. However:

• Regulation 50 of the First Schedule to the Companies Act states that the remuneration of the directors will from time to time be determined by the company in general meeting; and
• Regulation 69 provides that a managing director or director holding any other executive office will receive such remuneration as the directors, subject to the approval of the company in general meeting, may from time to time determine.

These regulations will apply if:

• the company has not registered any articles; or
• articles have been registered which do not exclude or modify the regulations contained in the First Schedule.

Compensation of executives within public limited liability companies whose securities are listed on the Malta Stock Exchange (MSE) is regulated by the Capital Markets Rules (CMR); while executive compensation for regulated entities is regulated by:

• applicable sector-specific legislation; or
• rules issued by the Malta Financial Services Authority.

For unregulated private companies, compensation arrangements are typically determined by either the company’s board of directors or the shareholders, in accordance with the company’s memorandum and articles of association and any internal company policies.

The compensation of executives within regulated entities is typically determined in accordance with their remuneration policy, if applicable. The Code of Principles of Good Corporate Governance attached to the CMR provides detailed guidance on the remuneration of executives of public limited liability companies whose securities are listed on the MSE. It recommends that:

• the board of directors adopt a remuneration policy for directors and senior executives; and
• a remuneration committee be established for the purposes of:
• • proposing such remuneration policy; and
  • devising appropriate remuneration packages to attract, retain and motivate directors.

Listed entities must include a remuneration statement in their annual report through which they disclose certain minimum information as required by Section 8.A.4 of the CMR, such as information on:

• profit sharing;
• the linkage between remuneration and performance; and
• any pension schemes.

The recently published Bill 136/2025 seeks to introduce a requirement for a remuneration report to be submitted along with the consolidated financial statements and corporate governance statement. This is the first time that the Companies Act would require remuneration reporting in companies’ financial reporting obligations.

Executive performance in Malta is primarily monitored and managed through structured oversight by the board of directors, in some cases supported by the various company committees. These bodies assess executive performance against clearly defined strategic, financial and operational objectives. In regulated entities such as credit institutions and investment firms, internal audit and risk management functions also play a critical role in evaluating whether executive actions align with the institution’s risk appetite and governance framework.

When addressing executive performance and compensation in Malta, several key considerations must be considered:

• The remuneration structures must be aligned with the company’s long-term strategic objectives and risk appetite, ensuring that incentives do not encourage excessive risk-taking.
• For regulated entities, compliance with sector-specific rules is essential.
• Good governance practices, including the establishment of remuneration committees and transparent disclosure of remuneration policies, are critical to maintaining stakeholder trust and regulatory compliance.
• Companies must ensure that local non-executive directors appointed to foreign-owned entities exercise their functions properly by thoroughly reviewing board papers, asking questions and challenging management where necessary. In this way, the companies can ensure oversight over management actions rather than appointing a local director who simply attends board meetings every quarter.

The Employment and Industrial Relations Act (Chapter 452 of the Laws of Malta) is Malta’s primary legislation governing employment. It outlines rules on employment conditions, termination, discrimination protection and industrial relations, supported by subsidiary laws and EU regulations.

Key features include the following:

• Employment contracts may be definite (fixed-term) or indefinite. Fixed-term contracts have a set end date and early termination by either party requires compensation equal to half the remaining wages. Indefinite contracts can only be terminated by the employer for redundancy or valid cause; while employees may resign with notice. Although contracts need not be in writing, employers must provide a written contract or statement of employment conditions within eight working days of the start of employment.
• Leave entitlements vary by industry-specific wage council wage regulation orders. Where none apply, minimum entitlements for a 40-hour workweek include the following:
• • Sick leave: Two weeks with full pay.
  • Maternity/adoption leave: Eighteen weeks (14 paid by employer, four by the government).
  • Paternity leave: Ten days.
  • Parental leave: Four months per parent (two months paid).
  • Marriage: Two days.
  • Carers: Five days.
  • Bereavement: One day.
  • Jury service: As needed.
  • IVF leave: 60/40 hours.
• Injury leave: Up to one year.
• Vacation leave: 192 hours plus adjustments for public holidays which fall on weekends.
• Probation periods are six months for indefinite contracts. For fixed-term contracts, probation is proportional to contract length (two months per six months). For high-level roles earning double the minimum wage, probation may extend to 12 months. During probation, employment may be terminated without cause or penalty.

Trade unions are an integral part of Maltese industrial practice. The right to form part of a trade union is protected by the Constitution of Malta, which stipulates that:

The Employment and Industrial Relations Act also dedicates an entire section to industrial relations. This section regulates:

• the manner in which trade unions are formed and registered (including the contents that must be included in the statute of each union); and
• how to obtain recognition with an employer in respect of a specific class of employees.

One of the main functions of a trade union is that of collective bargaining. The recognised union is involved in discussions with the employer to conclude a collective agreement that benefits the employees. In addition, they generally offer representation to an employee in cases of disciplinary proceedings, for instance.

An indefinite-term contract of employment may be terminated;

• by the employee for any reason by giving the employer notice; and
• in the case of a good and sufficient cause, immediately without the need of giving notice.

However, an employer can only terminate an indefinite-term contract:

• for a good or sufficient cause, without giving notice;
• on the grounds of redundancy by way of notice;
• during probation by way of notice; or
• on the employee reaching the age of retirement.

A definite-term contract terminates on the expiry of the agreed term. If employment is terminated before the agreed expiration, the party terminating will be bound to pay the penalty mentioned in question 8.1 unless they have a good and sufficient cause to terminate, in which case no penalty is due.

The length of the notice period, where applicable, depends on the duration of the employee’s employment.

With regard to collective dismissals, these are contemplated only in the case of redundancies. ‘Collective redundancies’ are defined as the termination of employment by an employer on grounds of redundancy over a period of 30 days, of:

• 10 or more employees in establishments that normally employ more than 20 employees but fewer than 100 employees;
• 10% or more of the number of employees in establishments that employ 100 or more but fewer than 300 employees; and
• 30 employees or more in establishments that employ 300 employees or more.

When effecting a redundancy (whether individual or collective), specific rules and procedures need to be followed. These include:

• giving notice to the employees; and
• abiding by the last in, first out rule – where an employer intends to terminate the employment of an employee on grounds of redundancy, it must terminate the employment of that person who was engaged last in the class of employment affected by such redundancy.

In addition, if the post of a person who was made redundant becomes available again within one year of the date of termination of employment, the employer is bound to offer re-employment.

In the case of collective redundancies, there are additional steps to be followed – the employer must:

• notify the employees’ representative in writing of the intention to terminate the employment of employees on the grounds of redundancy;
• within seven days of notification:
• • commence consultations with the employees’ representative; and
  • provide the employees’ representative with a statement containing all relevant information, such as the reason for redundancies and the number of employees effected; and
• notify the director responsible for employment and industrial relations with written notification of the intention to make employees redundant and the written statement with the relevant information on the same day that these are provided to the representative. Redundancies will take effect only once 30 days have elapsed from the date of notification to the director. This period may be shortened or extended by the director.

Malta has developed a number of targeted work permit schemes and tax incentives administered by Identity Malta and other agencies/authorities, designed to make it easier and faster for employers to recruit non-EU professionals with the skills they need.

The Specialist Employee Initiative provides a fast-tracked permit process for non-EU nationals:

• earning at least €25,000 annually; and
• possessing:
• • a relevant qualification; and/or
  • three years of work experience.

For higher-level roles, the Key Employee Initiative offers an even faster process for individuals:

• earning at least €35,000 annually; and
• holding senior or technical positions.

In addition, Malta participates in the EU Blue Card scheme, which allows highly qualified non-EU nationals to work and live in Malta, offering slightly stronger rights that those granted under the standard Single Permit routes. Applicants must have:

• a degree; and
• a salary that is at least 1.5 times the national average.

Complementing these work permit routes is Malta’s Highly Qualified Persons tax regime, which offers a flat 15% tax rate for foreign professionals working in specific regulated industries.

One key consideration that should be kept in mind about employment in Malta is the fact that employers have limited rights to dismiss an employee once the probation period has elapsed.

Proving that the employer had a ‘good and sufficient cause’ for termination can be challenging, as Maltese law does not define what constitutes a ‘good and sufficient cause’ for termination. The Industrial Tribunal will determine whether the employer acted reasonably in determining whether there was such a good and sufficient cause for dismissing an employee. Factors that the Industrial Tribunal generally considers include:

• previous written and verbal warnings;
• the time which elapsed between one warning and another;
• disciplinary measures taken by the employer against the employee, including the employee’s right to be heard; and
• the gravity of the incident in question.

There is no law which sets out a process to be followed in order to dismiss someone for a good and sufficient cause. However, it has been repeatedly held by the Industrial Tribunal and the courts that the employee must be given the opportunity to be heard before their employment is terminated.

A company is resident for Maltese corporate income tax (CIT) purposes if either:

• it is incorporated in Malta; or
• its management and control of its business is exercised in Malta.

Companies incorporated in Malta:

• are considered to be both domiciled and resident in Malta; and
• are subject to tax on a worldwide basis.

Companies that are tax resident in Malta through management and control are subject to tax on:

• income arising in Malta; and
• income received in or remitted to Malta.

The headline tax rate is 35%.

Shareholders are entitled to claim a partial refund of tax paid in Malta by the company when such income is distributed as a dividend. The most common refund is 6/7ths of the tax paid in Malta. Malta’s tax refund system is applicable to both resident and non-resident shareholders in respect of the tax borne on profits derived from both domestic and international activities, except for profits derived – directly or indirectly – from immovable property situated in Malta.

Subject to certain conditions being met, companies that form part of a group of companies may elect to be treated as one single taxpayer and pay tax directly at the effective tax rate. If a group elects to be taxed as a fiscal unit, it is immediately taxed at the combined overall effective tax rate without the need to wait for an income tax refund on distributed taxed profits.

Malta enjoys a full imputation tax system. Shareholders in receipt of dividends are entitled to a tax credit equal to the tax incurred on the profits from which the dividends are paid. Since the tax rate of 35% applicable to companies is also the highest tax rate in Malta, shareholders will not suffer any additional tax on the receipt of dividends.

Tax is chargeable on capital gains realised on the transfer of:

• immovable property (real estate);
• shares and other securities;
• business;
• goodwill;
• business permits;
• copyrights;
• patents;
• trade names;
• trademarks;
• any other intellectual property;
• interests in a partnership; and
• beneficial interests in a trust.

Gains arising outside Malta and derived by a company that is either not domiciled or not ordinarily resident in Malta are not subject to tax.

The Maltese tax legislation provides for certain exemptions in this respect. For example, gains realised by non-residents on the following are exempt from tax:

• transfers of units in Maltese collective investment schemes;
• similar investments relating to linked long-term insurance business; and
• shares or securities in Maltese companies (except for companies holding certain Maltese immovable property).

In addition to the full imputation system, refunds on the distribution of a dividend and the payment of tax at the effective rate mentioned in question 9.1, the following should be noted:

• Notional interest deduction: A company can avail itself of a notional interest deduction. This is designed to align the tax treatment of the cost of equity with that of the cost of debt.
• Patents: Malta offers a full exemption for income derived from patents. Under the exemption, royalties and similar income (including any amounts paid for the grant of a licence to exercise rights) derived from registered patents in respect of qualifying inventions, whether registered in Malta or elsewhere, are exempt from tax in Malta. The exemption applies regardless of where the underlying research and development was carried out. Moreover, at the option of the taxpayer, any expenditure on intellectual property/IP rights can be deducted in full in the year in which:
• • the expenditure is incurred; or
  • the intellectual property/IP rights are first used or employed in producing the income.
• Participation exemption: Malta’s participation exemption relieves 100% of the income tax on both:
• • dividends derived from a participating holding; and
  • gains derived from the transfer thereof.
• Pillar 2: Malta has opted to apply the derogation afforded by the Pillar 2 Minimum Tax Directive allowing for the delay in the implementation for up to six years. Malta elected not to introduce the income inclusion rule, the under-taxed payments rule and the qualified domestic minimum top-up tax in 2025.
• Transfer pricing: Transfer pricing rules are applicable only to ‘large’ entities (as defined in Annex I to EU Regulation 651/2014) that undertake cross-border arrangements. There are currently no economic substance rules in Malta.

One key concern is the Maltese substance rules. These rules should be monitored and evaluated in light of:

• other relevant factors, such as the ability to rely on Maltese double tax treaty relief; and
• potential future developments, such as the EU Third Anti-tax Avoidance Directive, which introduces new reporting obligations that may result in the denial of tax advantages to EU entities that are deemed to have no or minimal substance. If this directive is enacted at the EU level, Malta will naturally be required to implement it into Maltese law.

In Malta, mergers and acquisitions are primarily governed by the Companies Act. However, such transactions are usually impacted by other laws.

The corporate law aspects of mergers is governed by the Companies Act and occur when one or more companies transfer all their assets and liabilities to another entity. The Companies Act identifies two forms of mergers:

• merger by acquisition; and
• merger through the creation of a new company.

Under Maltese law, M&A transactions can take various forms, including:

• the purchase of shares;
• the purchase of assets;
• the acquisition of a going concern; or
• share exchange.

In both types of mergers, the companies involved are dissolved without liquidation once the merger becomes effective.

In a merger by acquisition, an existing company assumes all assets and liabilities of another company, issuing shares to the shareholders of the acquired company in exchange. Alternatively, a merger by formation of a new company occurs when two or more entities pool their assets and liabilities into a newly incorporated company, which issues shares to the original shareholders.

Before proceeding, companies must prepare draft terms of merger, which must detail:

• the name, legal form and registered office of each merging company;
• the share exchange ratio;
• any cash payments;
• the conditions of share allotment; and
• the profit entitlement date.

A merger will only become effective upon the lapse of three months from the date on which the Registrar publishes a notice in the Government Gazette in relation to the receipt of the draft terms of merger.

Merger control in Malta is regulated by the Control of Concentrations Regulations, issued under the Competition Act. These regulations require mandatory notification to the director general for certain mergers and acquisitions, referred to as ‘concentrations’. The key consideration in assessing a proposed concentration is whether it would significantly lessen competition in the relevant market.

A concentration arises when either:

• two or more previously independent undertakings merge; or
• all of the following apply:
• one or more undertakings acquire control (in whole or in part) of others, through the purchase of assets, securities or other means;
• the combined aggregate turnover of the undertakings in Malta in the previous financial year exceeded €2,329,373.40; and
• each undertaking has at least 10% of the combined aggregate turnover in Malta.

The Maltese merger control regime applies not only to domestic entities but also to foreign companies that derive all or part of their turnover in Malta. The formation of a full-function joint venture that operates as an independent business also qualifies as a concentration.

Concentrations must be notified by the acquiring party, or jointly in cases of mergers or acquisitions of joint control, by submitting a concentration notification form. The transaction cannot be legally implemented until it is notified and declared lawful by the director general.

Notification must be made within 15 working days of:

• signing of the agreement;
• the public bid announcement; or
• the acquisition of control.

The director general may grant a derogation upon request. Details of the notification are published publicly and third parties have seven days to submit objections.

Malta has implemented the Acquired Rights Directive (2001/23/EC) by means of the Transfer of Business (Protection of Employment) Regulations (SL 452.85). In the case of the merger of two companies, all employees will be deemed to be employed by the surviving/new entity and continue to enjoy:

• continuity of employment; and
• the same terms and conditions as their previous employment contract.

In the case of an acquisition of shares of a company, there is no transfer of business but there is continuity of employment under the same company, which now has new shareholding.

Any transaction involving the purchase of shares or significant assets from a target regulated by authorities such as the Malta Financial Services Authority, the Malta Communications Authority, Transport Malta or the Malta Gaming Authority will typically require prior written approval from the relevant regulator. The timeline for obtaining such authorisation varies depending on:

• the regulatory body involved; and
• the complexity of the acquiring party’s ownership structure.

As mentioned in question 5.3, another consideration that should be accounted for is whether the merger or acquisition falls within the threshold of a ‘foreign direct investment’ as defined and will require notification and screening by the National Foreign Direct Investment Screening Office.

Moreover, the Civil Code (Chapter 16 of the Laws of Malta) also provides that in a contract of lease where the lessee is a limited liability company or any other form of company, the cumulative inter vivos transfer of 50% of the shareholder or transfer of actual controlling power of the administration of such company or of the business conducted from the relevant tenement will be considered a sub-lease. Thus, it should be ensured that the contract of lease allows the lessee to enter into a sub-lease of that tenement.

The main provisions which govern money laundering under Maltese law can be found in:

• the Prevention of Money Laundering Act (PMLA) (Chapter 373 of the Laws of Malta); and
• the Prevention of Money Laundering and Funding of Terrorism Regulations (Subsidiary Legislation 373.01), which implements the current EU Anti-money Laundering Directives.

Other subsidiary legislation issued under the PMLA includes the following:

• the National Coordinating Committee on Combating Money Laundering and Funding of Terrorism Regulations (Subsidiary Legislation 373.02), which outlines the functions of this committee;
• the Centralised Bank Account Register Regulations (Subsidiary Legislation 373.03), which implements EU Directive 2018/843 and EU Directive 2019/1153; and
• the Use of Cash (Restriction) Regulations (Subsidiary Legislation 373.04), which sets out restrictions on the use of cash for certain payments and transactions with a view to combating money laundering and other criminal activity. In terms of these regulations, any person who makes, receives, or otherwise carries out a transaction in cash amounting to or exceeding, €10,000 or its equivalent in any other currency, whether carried out in one or several linked transactions, in respect of the purchase or sale of antiques, immovable property, jewellery, precious metals, precious stones and pearls, motor vehicles, seacraft and works of art, will be guilty of a criminal offence.

In addition, the Criminal Code (Chapter 9 of the Laws of Malta) punishes as criminal offences the following activities:

• fraudulent gain;
• misappropriation;
• forgery and counterfeiting;
• bribery and corruption;
• usury; and
• commercial or industrial fraud.

One key concern with regard to financial crime is the evolving fraud landscape. Malta is experiencing a shift in fraud typologies – particularly due to the rise of digital banking and online transactions. Fraudsters are becoming more sophisticated, exploiting technological vulnerabilities and social engineering tactics. Businesses must invest in specialised systems to stay ahead of the fraudsters.

Another concern is the regulatory environment, which is becoming increasingly complex, with heightened expectations from:

• the Financial Intelligence Analysis Unit;
• the Malta Financial Services Authority; and
• regulatory bodies.

Companies must:

• maintain robust anti-money laundering/countering the financing of terrorism frameworks;
• ensure effective transaction monitoring;
• comply with sanctions regimes; and
• managing the rising cost of compliance.

Failure to prevent financial crime can lead to:

• monetary penalties (which may be at a level that would significantly impact the financial stability of a company);
• regulatory sanctions;
• loss of banking relationships; and
• reputational damage.

In Malta, annual accounts must generally be prepared and audited by the company’s auditors at the end of each accounting reference period. A company’s auditors must prepare a report addressed to the company’s members on all annual accounts of the company, of which copies must be laid before the company in a general meeting. These copies of the auditor’s report are to be delivered to the Registrar at the Malta Business Registry within 42 days of the end of the statutory period for laying of the annual accounts.

Private companies are exempt from auditing requirements if, on their balance-sheet dates, they do not exceed the limits of two of the three following criteria:

• a balance-sheet total of not more than €46,600;
• an annual turnover of not more than €93,000; and
• an average number of employees during the financial year of not more than two.

In addition, the Companies Act (Audit Exemption) Regulations (Subsidiary Legislation 386.20) also provide that a company will be exempt from the requirement to have its annual accounts audited with respect to its first two accounting periods if the following criteria are met:

• The annual turnover of the company does not exceed €80,000 or a pro rata amount if the relevant accounting period is a period other than 12 months;
• All shareholders of the company are qualifying shareholders; and
• An application in the form set out in the First Schedule of the regulations is made to the Registrar within six months of the end of the relevant accounting period.

In Malta, at each general meeting at which annual accounts are laid, a company must appoint an auditor to hold office until the conclusion of the next such meeting. The first auditors may be appointed by the directors at any time before the first general meeting at which the accounts are laid; if they fail to do so, the shareholders may appoint the auditor in general meeting. If no auditor is appointed or reappointed, the court may appoint one upon application by a director, a shareholder or the Registrar. The company must notify the Malta Business Registry of the auditor’s appointment within 14 days using the prescribed form.

Casual vacancies in the office of auditor may be filled by the directors before the next general meeting; however, the shareholders may fill such a vacancy themselves in general meeting.

An auditor may be removed before the end of their term by a resolution passed in general meeting by shareholders holding more than 50% of the voting rights represented and entitled to vote at the meeting. Removal must be based on a proper ground of dismissal.

An auditor may also resign by submitting written notice to the company’s registered office. The resignation takes effect either on the date on which the notice is deposited or a later date specified therein. The company must notify the Registrar of the removal or resignation of the auditor within 14 days of the resolution or notice.

There are rules and recommendations in Malta that limit the scope of non-audit services that an auditor can provide to their audit client, particularly in relation to those that are considered. These aim to ensure the independence and objectivity of the auditors and are aligned with the salient EU legislation.

Non-audit services, which auditors of public interest entities (PIEs) are generally prohibited from providing, are broad in scope, including but not limited to:

• the preparation of financial statements and related financial information;
• payroll services;
• valuation services;
• the calculation of current and deferred taxes; and
• internal audit services related to internal controls over financial reporting.

Furthermore, auditors of PIEs must obtain pre-approval from the relevant company’s audit committee before providing any non-audit services. Auditors must declare to the audit committee of the PIE if they receive more than 15% of their total income from a single PIE for three consecutive years.

If auditors provide permitted non-audit services to PIEs, the fees should not exceed 70% of the average audit fees paid by the PIE over the preceding three years.

The primary route for terminating business activities in Malta is through the dissolution and winding-up process, which applies with respect to both partnerships and limited liability companies. The main advantage of the dissolution and winding up process is that it follows a structured process for:

• the distribution of assets among shareholders or creditors; and
• the settlement of all outstanding debts and obligations.

The process involves the appointment of a liquidator, who assumes full control of the company’s affairs in a manner which is neutral and independent from the company’s officers and shareholders.

The appointment of a liquidator and the appointment of auditors required for the purposes of auditing the account of winding up increases the costs involved with the process. For companies that have numerous creditors and substantial assets on their balance sheet, it may take considerable time to:

• prepare the scheme of distribution and the account of winding up; and
• finalise the audit of that account.

Consequently, the dissolution and winding up process may lead to undesirable delays in the closure of the entity.

Companies seeking the termination of business activities in Malta may also avail of the following processes which involve striking off a company from the register, without being wound up:

• Amalgamation: This process is particularly advantageous when the acquiring company holds over 90% of the shares in the company being acquired, as a simplified procedure will apply.
• Re-domiciliation: This involves the transfer of seat/continuation of a Maltese company under the laws of another jurisdiction.

Recent amendments to the Companies Act have introduced a mechanism for dormant companies to apply (by means of a prescribed form to be signed by all of the directors) for a simplified dissolution and striking off procedure. Such procedure may not be availed of if at any time in the six months preceding the date of the application the company would have:

• carried out any changes in its name; or
• traded or otherwise carried out business; or
• employed employees other than any person who is an officer of the company;
• outstanding documents or penalties with the Registrar which remain outstanding as at the date of the application; or
• any of its shares pledged.

The following criteria must also be satisfied in order for the company to be eligible for the procedure:

• the company is not a regulated entity;
• the company has discharged in full any liabilities towards its creditors, other than any outstanding fees to the company’s current officers or current corporate service providers and, or any loans payable to the company’s shareholders;
• the company has no pending court proceedings in or outside of Malta;
• the company does not have any assets in excess of €5,000;
• the company has not entered into any deeds or contracts in the previous six months, other than with service providers to the company;
• the company has no outstanding amounts due to any government authority or body;
• a shareholders’ resolution has been duly adopted to approve the simplified voluntary dissolution procedure;
• all bank accounts of the company must have been closed;
• the company has no employees other than any person who is an officer of the company.

Unlike the traditional voluntary dissolution and winding up procedure under Maltese law, this new procedure allows directors to dissolve a dormant company with little to no assets on its balance sheet without appointing a liquidator and thus offers a faster process for the closure of the company. It therefore follows that the directors and company secretary of the company retain all their powers under the Act until the company’s name is struck off from the register. Nonetheless, the three-month creditor protection period which applies to the dissolution and winding up process under Article 214 of the Companies Act is retained for the simplified dissolution procedure. The simplified dissolution procedure described above is still to come into force.

Employees are a primary consideration when terminating business activities, as the company must comply with employment laws concerning:

• notice periods;
• redundancy; and
• the settlement of any outstanding wages or benefits.

Clear communication with both employees and the Department of Industrial and Employment Relations, along with proper documentation, is essential to avoid disputes or claims.

In the context of insolvency, all actions taken by the company must be in the best interests of its creditors. Any act, payment or transaction that prejudices creditors’ interests:

• may be subject to legal challenge; and
• could result in personal liability for the company’s directors.

These responsibilities arise even at the pre-insolvency stage, when directors become aware – or ought to be aware – that the company is imminently likely to be unable to meet its financial obligations.

Tax compliance is another critical area. The company must ensure that all tax returns are submitted and that any outstanding liabilities are settled. A tax clearance certificate from the commissioner for tax and customs is typically required before the company can be considered as struck off from a tax perspective.

The last key area is record keeping. Liquidators must keep the accounts, accounting records and documents of a company for a period of 10 years from the date of publication of the striking of the company’s name off the register; in the event of default, the liquidator will be subject to a penalty.

Malta offers a dynamic and resilient environment for doing business, underpinned by steady economic growth and a strategic location within the European Union. The economy – driven by robust performance in the services sector, particularly financial services, i-gaming, fintech and tourism – continues to expand. The country’s pro-business regulatory framework further enhances its appeal.

In recent years, Malta has made significant strides in digitalisation and innovation. The government has introduced various incentives to:

• support startups;
• attract foreign investment; and
• promote sectors such as AI and blockchain.

Malta’s startup ecosystem is rapidly evolving, with growing venture capital activity and supportive public initiatives, including residency incentives and tax benefits.

The real estate and tourism sectors remain strong pillars of the economy, though both face increasing pressure from infrastructure limitations and environmental concerns. Meanwhile, ongoing investment in sustainable development, green mobility and urban infrastructure signals a national commitment to:

• environmental, social and governance goals; and
• long-term quality of life.

Despite these strengths, doing business in Malta does come with challenges. Governance and transparency remain key concerns, with recent calls for stronger institutional accountability. Nevertheless, Malta’s flexible legal and competitive tax frameworks continue to position it as an attractive jurisdiction for both established companies and new ventures.

Overall, Malta presents a compelling proposition for businesses seeking EU access combined with a pragmatic regulatory approach.

Malta offers a supportive environment for doing business due to its:

• strategic location;
• English-speaking population; and
• attractive tax regime.

Engaging local legal, tax, and corporate service providers early on is highly recommended. Understanding Malta’s tax system is essential for effective planning and compliance.

While Malta is generally efficient, certain processes – such as licensing and regulatory approvals – may be time consuming. Operational costs, such as rent, have been rising, which may affect long-term budgeting. The limited size of the domestic market means that businesses often need to look beyond Malta for growth opportunities. Finally, strict compliance expectations – especially in areas such as tax, anti-money laundering and data protection – require careful attention and investment in resources including human resources and technological set-ups which will assist businesses with complying with such obligations. Being proactive, well informed and locally connected can help businesses to navigate these challenges effectively.