The most common business structures in Malta
Malta offers a wide variety of options when it comes to the structures you can use to establish your business. Whichever option you pick, there are laws and regulations that are quite accommodating to both local and foreign investors alike. This might explain why the Island is one of the most preferred business and investment destinations in the world.
The type of company you form depends mostly on the kind of business you want to run. Many entrepreneurs opt for the limited liability company structure, while professional services providers form partnerships. Below are some of the legal structures by which you can establish your business in Malta.
Limited Liability Companies
Under the Companies Act of 1995, a company can exist as either a public company or a private company. When it comes to limited liability companies, all the liability is extended to every shareholder, and it is limited to the amount that each shareholder has invested in the company.
Private Limited Company
This is the most common company structure employed by investors in Malta. For a Private Limited Company, the number of shareholders can range for as little as two to as many as fifty. Shares can be obtained and held through a licensed Trustee and Fiduciary. With this option, at least one of the directors has to be licensed as the corporate director. Also, the position of secretary has to be held by at least a single natural person.
A private limited company can also be referred to as a “Single Member Company” in the case that it has only one shareholder. When the company also qualifies as a private exempt company, that sole trader can even name themselves as the secretary. All private exempt companies should present profit and loss accounts and abridged balance sheets. They can, however, forego reports and audited accounts.
This type of company holds the right to trade its bonds or shares to members of the general public. The articles of the company set out rights to the unrestricted transfer of shares and conditions for purchasing shares that members of the public should abide by. Public companies should have at least two directors and one company secretary. The secretary has to be a natural person.
Holding Companies and Trading Companies
The Maltese jurisdiction further divides Public Limited and Private limited companies into holding companies and trading companies.
A holding company’s activities involve holding shares in other types of companies. They can also hold assets such as immovable and movable property, cash, securities or intellectual rights to property anywhere. A Maltese resident holding company could be utilized for an assortment of fiscal and non-fiscal objectives, including the following:
- distributing income generated to shareholders at an effective tax rate
- Separation of specific assets from the trading operations of a group
- Implementing repatriation strategies,
- Tax grouping
- Minimization of risk to double taxation
The business structure also allows businesses to take advantage of incentives, like the participation exemption.
A Trading Company
A trading company can carry out business in Malta as well as abroad. This business structure incorporates activities like the selling and buying of commodities, providing consultancy services and acting as representatives. You should note, however, that some trading activities like investment and financial services will require licensing from the respective regulatory authorities.
The Malta jurisdiction recognizes two types of partnerships. These are as follows:
- Partnership en nom collectif – general partnership
- Partnership en commandite – limited partnership
A general partnership, also known as an en nom collectif, is made up of two or more partners. The partners can either be individuals or corporate bodies. General partners all have general obligations that are assured by their unlimited liability. When none of the general partners is a limited liability company or an individual, it is not necessary for their obligations to be assured by unlimited liability.
An en commandite (limited) partnership is made up of limited partners and general partners. For limited partners, limited liability is specified by their contribution. The liability for general partners is classified as unlimited. If it so happens that a corporate body is a general partner, it is a requirement that at least one shareholder has to guarantee, with unlimited liability, all the obligations of that partner with regard to all the activities of the partnership.
To gain more insight into the Maltese business and company structures, you can reach out to the many consultants, accountants and lawyers that are well versed in the latest business regulations and trends in Malta. If you wish to understand the process on your own fully, this article and others like it can also be of great assistance when it comes to getting relevant information which will guide you to do everything in your favour.