Malta M&A Watch: Amendments in Maltese Law facilitating Cross- Border Activity

The scope of the amendments is to fully transpose Directive (EU) 2019/1151 of the European Parliament and of the Council of 20 June 2019 amending Directive (EU) 2017/1132 as regards the use of digital tools and processes in company law, and to ensure legal certainty in implementing Directive (EU) 2019/2121 of the European Parliament and of the Council of 27 November 2019 amending Directive (EU) 2017/1132 as regards cross-border conversions, mergers and divisions, and to provide for ancillary matters thereto (the “Amendments”).

Part 1 of the Amendments amends the Companies Act (Systems of Interconnection of Registers Regulations) (the “SIR Regulations”). Additional registration requirements have now been imposed on the Registrar of Companies in Malta (the “Registrar”) whereby certain documents and relevant information received by the Registrar for registration in relation to cross-border divisions, conversions and mergers must be made publicly available through the system of interconnection of registers. Pre division, pre-conversion or pre-merger certificates must now also be made available.

Part II of the Amendments concern amendments made to the Companies Act (Use of Digital Tools and Processes) Regulations (the “DGT Regulations”). Whilst various amendments were clarificatory ones, the key amendment is that the Registrar must now ensure that documents and information relative to the submissions necessary for conducting a cross-border division, a cross-border conversion and a cross-border merger may be filed online. This is a much-welcomed amendment which will facilitate the relative processes; particularly since in such operations more than one jurisdiction will be involved.

Parts III, IV and V of the Amendments amend the Cross-border Divisions of Limited Liability Companies Regulations (the “Division Regulations”), the Cross-border Conversions of Limited Liability Companies Regulations (the “Conversion Regulations”) and the Cross-border Mergers  of  Limited Liability Companies Regulations (the “Merger Regulations”). The amendments made to the abovementioned regulations now provide, in line with the move towards filing documentation online, that certain key documents required in relation to the respective processes may now be submitted to the Registrar for registration by online means. These include the terms of cross-border merger, conversion and division respectively as well as, in the later stages of the process, the documents required in order  to obtain the relative pre-operation certificate.

Additionally, whilst previously each of the regulations held that the approval by the general meeting of the draft terms of the cross-border division, merger or conversion respectively required a majority of sixty-seven (67)% in nominal value of shares carrying the right to vote,  the Amendments have removed this threshold and now simply refer to the applicable provisions of the Companies Act. Such an amendment should alleviate any potential concerns with there being a mismatch between the requirements in the Regulations and those in a company’s memorandum and articles of association. Furthermore this amendment will grant public companies (especially the listed ones) the opportunity to call a second general meeting – in terms of article 135 of the Companies Act – should they fail to satisfy the initial voting thresholds at the first meeting.

Another important amendment serves the purpose to impose an administrative penalty on every officer of the company should that company default in submitting to the Registrar for registration the resolution approving the cross-border division, merger or division respectively within the prescribed time period (being 14 days). Indeed, a second schedule has been added to each regulation which sets an administrative penalty of € 465.87 with a daily penalty of € 23.29.

With regards to the Conversion Regulations, Regulation 21(2) has been updated to now set out a prescriptive list of requirements which must be included by the foreign converting company in the draft terms of conversion when these are submitted to the Register in Malta in situations where the destination jurisdiction is Malta. These are the same as those listed in Directive (EU) 2017/1132 with certain additional formalities which are made to apply to entities coming into Malta from non- Member and / or EEA states.

Malta is continuing to move towards a more digital corporate framework through further facilitating the submission of documents to the Registrar through online means. This is more crucial than ever in a cross jurisdictional transaction since this alleviates the need to ship or transport documents by courier. This should give potential investors comfort that processes and filings are becoming ever the more predictable, cheaper and efficient.