Insights

Why a Branch in Malta?

Malta is ideally placed for the establishment of company branches for several reasons:

• the process of establishing a branch is relatively straightforward;
• there is no requirement to establish a physical presence in Malta, although the foreign corporation must appoint a local representative for its branch;
• the establishment of a branch and the registration of a corporation as an oversea company may (coupled with other steps) provide solutions in fiscal migration or redomiciliation exercises whose underlying rationale is to achieve certain fiscal advantages by splitting ‘registration’ and ‘domicile’ across two separate jurisdictions;
• Malta has developed an extensive double tax treaty network spanning over 65 countries;
• it is a politically stable and business-friendly member of the EU having a robust legal system and an attractive onshore tax regime that underlies the country’s success in the financial services sector;
• its company law is closely modelled on the laws of England and Wales, whose jurisprudence and texts on legal doctrine have strong persuasive value in Maltese courts;
• its services sector is run by professional, well-trained and English-speaking service providers driven by a strong work ethic; and
• it has good access to most European capitals, the MENA region and beyond and a modern ICT infrastructure.

As of March 2014, about 1,000 branches had been established in Malta, a figure that is consistently on the increase.

Procedural and Documentary Elements

Our Companies Act, Chapter 386 regulates the establishment of branches or places of business in Malta. Any corporation, wherever incorporated and whatever its legal form, may establish a branch in Malta, but establishment does not confer separate legal personality on the branch. The principal requirements for branch establishment are set out below.

Authorised Representative

Corporations intending to establish a branch or place of business in Malta must appoint an authorised representative in Malta.

Statutory Form M

A body corporate constituted or incorporated in a country outside Malta (a “corporation” or “oversea company”) must deliver a statutory From M to the Malta Registry of Companies (“Registry”), within one (1) month from the establishment of the branch or place of business, containing all relevant information, such as the name and address by and at which the branch or place of business carries on its activities in Malta; the activities to be carried out by it; the name and address of the person resident in Malta authorised to represent the corporation for the activities of the branch; and the extent of his authority to act in that capacity.

A number of documents must also be annexed to the Form M, notably, an authentic copy of the memorandum and articles of association, charter, statute or other instrument that constitutes the oversea company itself and a list (and details) of the directors and company secretary or (where there are none) of the persons vested with the administration of the oversea company.

Registry Fees

Registry fees are payable on submission of the Form M. The sum due depends on the nominal value of the authorised share capital of the oversea company, with the lowest being €245.

Certification

The documents required to be annexed to the statutory Form M must either be submitted as originals legalised by apostille or copies certified by a notary and legalised by apostille.

Accounting Requirements

Once a branch is established in Malta, the corporation is required within 42 days from the end of the period allowed for the accounts to be laid for approval by the company in general meeting to deliver to the Registry a balance sheet, a profit and loss account and notes to the accounts in a form and containing particulars and including documents as are required of companies organised in accordance with the requirements of the Companies Act.

The Registrar has a discretion to accept accounts (including the balance sheet, profit and loss account and notes to the accounts) prepared in the form required under the law of the place of the corporations’ constitution or incorporation. He will exercise that discretion favourably if the accounts give substantially the same or more information than that required to be given under the Companies Act. If the accounting requirements under the law of the corporation vary substantially from those of a Malta company, the Registrar may accept the corporation’s accounts as long as full details are given as regards the branch operations in Malta and special rules apply here.

Where a branch carries on business or has business interests of more than 90% outside Malta, the director of the corporation or the authorised representative of the branch in Malta may apply to extend the deadline for approval of the accounts by the corporation to 18 months if a statutory Form U(1) is delivered to the Registrar of Companies.

Ongoing Corporate Compliance

Changes to Corporation

A corporation having a Malta branch must inform the Registry on the occurrence of any change to its memorandum and articles of association, charter, statute or constitutive document, or to the names and details of the officers of the corporation or the authorised representative of the branch.

Prospectus

Detailed rules apply in relation to the issue or distribution in Malta of securities to the public by corporations incorporated or otherwise constituted outside Malta in a non-EU or non-EEA member state.

Exit Procedure

The affairs in Malta of a corporation may be dissolved and its affairs wound up in the same manner as a Maltese company would, including either voluntarily by its members or by its creditors or otherwise by order of the court. Therefore, should it be required to close down the branch, it is possible to opt for a voluntary winding up in a solvent scenario and this irrespective of whether or not the corporation itself is being wound up. Closure of the branch or place of business must be notified to the Registrar for registration within one month from closure.

The same notification obligation applies in the case that the corporation itself is dissolved or being wound up, and additional rules apply in relation to the liquidator and the liquidation process.

This article was co-authored by Matthew Mizzi.

Disclaimer: The information provided on this page is not intended to impart advice and readers are asked to seek verification of statements made before acting on them.