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REDOMICILIATION

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Malta has implemented flexible and effective redomiciliation rules for corporate bodies way back in 2002, which have since then been successfully used by an increasing number of commercial companies and financial services vehicles, including collective investment funds. Foreign companies and corporations incorporated in any jurisdiction (except FATF blacklisted countries) are allowed to migrate to Malta.

The main attraction of redomiciliation is that the entity can maintain its corporate existence without the necessity of being wound up, with all the benefits this clearly entails in terms of cost saving and continuity of infrastructure, operations and performance.

The financial crisis in 2008-9, and the various initiatives taken by the EU, the US, OECD and FATF, which are resulting in a tighter scrutiny of offshore jurisdictions and a global trend towards higher levels of regulation, is inevitably leading more companies, group structures as well as fundsto move their operations from the traditional offshore centres to onshore ‘friendly’ domiciles. Malta is an onshore EU jurisdiction which has a strong reputation for being well regulated and flexible at the same time, and which has a very extensive network of double taxation agreement based on the OECD model, has been very much on the radar of these entities, and the number of these using Malta’s migration procedures is growing at a fast pace.The main attractions about Malta are the following:

  • Malta is traditionally a civil law jurisdiction, but its company law is largely based on UK company law, a mixture which facilitates the smooth continuation of entities originally set up under any legal system;
  • As a member of the EU, Malta aligned its laws with the acquis communautaire, making available the passporting and other harmonisation benefits sought by commercial entrepreneurs and financial services operators targeting Europe for the sale of their goods and services;
  • Malta applies international accounting and auditing standards and practices, making it easier for migrated entities to draw up their financial statements;
  • Straightforward re-domiciliation procedure with clear and basic documentation submission requirements;
  • Malta is cost-competitive, with salary and office costs, professional fees and other costs being materially lower than those prevailing in other EU commercial and financial services centres; and
  • The extensive double tax treaty network Malta has with almost 70 countries and the refund mechanism (reducing the net tax leakage in Malta to 5%) provide excellent tax planning opportunities for migrating entities and their shareholders.

In the context of funds and other licensed entities, there are also further specific attractions, including:

  • MFSA, the single regulator of financial services, is very approachable and takes a pro-active and open approach to new proposals;
  • The availability of the necessary infrastructure and technology, skilled human resources and choice of services providers;
  • The Professional Investor Fund regime in Malta, available to three categories of non-retail investors, allows funds to invest in any asset classes and to adopt any investment strategy, to borrow without restrictions (with a few exceptions), and also to appoint foreign managers, custodians and other service providers, allowing migration of funds of any type (be they hedge funds, fund of funds, private equity, real estate or other funds) which can retain their operational infrastructure without modifications (subject to any modifications which may result necessary should the fund and its manager be captured by AIFMD);
  • Funds already listed outside Malta may retain their existing listing (subject to approval of the relevant exchange) and/or apply for listing (including a secondary listing) on Malta’s recognized investment exchange;
  • Promoters of offshore funds can take opportunity from the redomiciliation event to convert their fund into the UCITS brand or into an AIF subject to AIFMD (by complying with the documentation and infrastructural requirements of the UCITS Directive or, as applicable, the AIFMD), thusbecoming eligible to the EU passport granted by the respective Directive and thereby using Malta as a gateway to European markets;
  • The tax neutrality on income and capital gains available at the level of the fund and non-resident investors, exemption from stamp duties, just add onto the fiscal benefits which increase the attraction of Malta as a domicile to migrate to.

APPLICABILITY OF CONTINUATION

The Continuation of Companies Regulations (Legal Notice 344 of 2002 – hereinafter the “Regulations”) allows for the continuation of corporate entities in Malta and out of Malta (inward and outward redomiciliation) under the Companies Act (Chapter 386 of the Laws of Malta) and the general direction of the Registrar of Companies.

The said corporate entity must be a body corporate registered or incorporated in an “approved country or jurisdiction” (not blacklisted by FATF) and set up in a structure similar to those recognised by the Maltese Companies Act. Moreover this continuation must be permitted by the law of the foreign jurisdiction and the constitutive documents of the corporate entity.

LEGAL EFFECTS OF CONTINUATION

Continuation signifies that a corporate entity may retain its already existing status as a body corporate, in the new jurisdiction where it is continued.

In effect, no new legal entity is created and this arrangement is intended to ensure that nothing prejudices or affects the continuity or continued operation of the entity. That is to say, the corporate entity retains all its assets and liabilities and remains bound by all obligations incurred as from the date of its incorporation in the first jurisdiction.

Continuation of a company in Malta does not affect any legal or other proceedings instituted or to be instituted by or against the company. In addition, continuation does not operate to release or impair any conviction, judgment, ruling, order, liability or obligation due or to become due or any cause existing against the company or against any member, director, officer, or persons vested with the administration or representation of the company.

Continuation in Malta is excluded only in exceptional cases, particularly where: –

  1. Proceedings for dissolution/winding-up/insolvency or proceedings of a similar nature, have been commenced by or against the company;
  2. A liquidator or special administrator has been appointed;
  3. There is a scheme or order whereby creditors’ rights are suspended or restricted;
  4. Proceedings for breach of law have been commenced against the company (not being in relation to some event which at the date of the occurrence thereof did not constitute a breach of law).

A body corporate that is continued in Malta under these provisions will enjoy the benefits (including tax benefits) available under Maltese legislation.

APPLICATION PROCEDURE FOR REDOMICILIATION

The continuation involves a procedure leading to approval by the Maltese Registrar for the company to be continued in Malta. In case of funds or other licensed entities, a dual continuation application procedure will be necessary, namely the corporate continuation application and the regulatory licence application, which procedures are however co-ordinated and moved ahead concurrently.

Documentation

The request for registration for continuation in Malta made to the Registrar of Companies must be accompanied by the following documents:-

  • an extraordinary resolution, or equivalent, by the foreign company approving the migration of the company to Malta;
  • a copy of the constitutive documents (Memorandum and Articles of Association or equivalent) of the foreign company, revised in order to comply with Maltese legislation;
  • a Certificate of Good Standing, or equivalent issued by the foreign competent authority, confirming compliance with the registration requirements of that foreign jurisdiction;
  • a declaration signed by at least two directors (or the sole director) or other persons vested with the administration or representation of the company confirming:
  • the name of the foreign company and the name under which it is being continued;
  • the jurisdiction where it is incorporated and the date of incorporation;
  • the decision to have the foreign company registered as continuing in Malta;
  • notification to the relevant authority of the decision to redomicile the company;
  • that no proceedings for breach of law have been commenced against the company;
  • a solvency declaration signed by at least two directors (or persons as aforesaid);
  • a list of the directors of the foreign company and the company secretary, or of the persons vested with the administration or representation of the company;
  • evidence of similar laws in the foreign country allowing for the foreign company’s migration and of the required stakeholders’ consent for redomicilation in terms of such foreign legislation (usually this evidence takes the form of a legal opinion).

Licensed companies: In addition to the documents which are required to be submitted to the Registrar of Companies as stipulated above, in the case of collective investment schemes as well as other corporate bodies performing activities which are subject to licensing in Malta, such as, for example, credit and financial institutions, insurance companies and investment firms, these will be required to apply for and obtain the applicable separate licencefrom the MFSA in accordance with Maltese law and will need to submit additional documents to the MFSA, details of which may be provided on request, depending on the type of licensable activity/ies in question.

Public companies: These are also subject to special requirements stipulated in the Companies Act, dealing principally with the need to submit a revised prospectus for the public offer of their securities in compliance with local prospectus requirements and, in the case of listed entities, the requirement to submit evidence of any required consent from the overseas authorities of the relevant exchange.

CERTIFICATION AND LICENSING

Licence – In case of redomiciliation of funds or other licensable entities, the MFSA will process the licence application (which should initially be submitted in draft form), vet all documents submitted (also in draft form, where applicable) and carry out the necessary due diligence enquiries as appropriate, following which, upon satisfaction that these are in order, it will issue an in-principle approval which would list the pre-licensing outstanding issues to be actioned by the applicant before issuance of the licence (these will primarily consist of the finalization, execution and submission of the licence application form and other documents initially submitted as drafts). Following satisfaction of these outstanding issues by the applicant, the MFSA will issue the licence on the same date as the Provisional Certificate of Continuation issued by the Registrar of Companies mentioned hereunder, which will enable the fund or licensable entity to start operating in Malta. During the whole process, the MFSA will liaise with the Registrar of Companies accordingly.

Provisional Certificate – a Provisional Certificate of Continuation will be issued by the Registrar of Companies once the application and supporting documents have been received and vetted. Such certificate will mean that (i) the companycontinues to be a body corporate registered in Malta and subject to all the obligations and capable of exercising all powers of a Maltese company registered under the Companies Act; (ii) the revised constitutive documents is considered as the Memorandum and Articles of Association of the company; and (iii) the company retains all its assets, rights, liabilities and obligations.

The company shall remain subject to any legal proceedings or judgments commenced or given prior to registration in Malta.

There is no difference at law and in practical terms between the effects of a provisional registration and a final registration and the company may start operating in Malta upon issuance of the Provisional Certificate of Continuation.

Final Certificate – within 6 months of the date of issue of the Provisional Certificate, the company should provide proof to the Maltese Registrar of Companies that the company has ceased to be registered in the original jurisdiction. Upon receipt of acceptable proof to this effect the Registrar will issue a Final Certificate of Registration.