By a Special Correspondent
In Malta a lot of trade is carried out by sole traders. However it is common for individuals to join in partnership and undertake a business venture to make a profit. When two or more persons join in partnership, they usually form a company under the regulation of the Companies Act 1995. Our law has been amended to reflect the company law harmonisation directives of the European Union.
Moreover, there are other laws which affect how Companies operate such as financial legislation through the Income Tax act, Vat Act, Duty on documents Act. There are also specialised acts to regulate specific types of companies such as maritime, investment co-operatives and insurances.
Statistics show that as at end September 2005 there were 55 Public Limited Companies (p.l.c), 13,700 private exempt companies, 4,800 private non-exempt companies and circa 800 single member companies. The latter three types of companies may be distinguished as they have Ltd at the end of the company’s name.
A ‘plc’ may be listed on a stock exchange but may also be unlisted. When it is a listed company all its shares are listed on the stock exchange. For example, HSBC Bank (Malta) plc has all its share listed on the stock exchange even the 70% owned ultimately by HSBC Holdings plc which is incorporated and registered in England.
But only 30% shares, held by the 4,700 private shareholders, trade daily on the MSE. Such companies cannot have restrictions for shareholders to transfer their shares. In some cases transfers of shares is done through the stock market. However, there are plc firms that are not yet listed such as Midi plc. This means that Midi can make an invitation to the public to subscribe for its shares to be listed on the Malta Stock Exchange. Even though the number of plcs is low, they are usually of national importance, like Air Malta and Maltapost.
The other Category of partnerships is those known as Private Companies. In this case a private Company may have only one director, and in its statute it will not allow invitations to the public to subscribe for its shares. Moreover the Minimum Share Capital must not be less than Lm500 and of which 20% must be paid up. So with Lm100 one may open up a Company and start trading. It is no wonder there are 19,300 of such companies operating in Malta.
The first benefit of forming a company is that it has a separate legal personality from its shareholders. The shareholders liability is limited to the amount of any unpaid shares.
The biggest chunk of private companies formed are private exempt. These 13,700 entities cannot have any other private exempt company as its shareholders. However, it can make loans to its directors and better still a sole director of this private exempt company is entitled to be also its company secretary. So for a board meeting this sole person debates, decides and records the minutes. The legislator allows these private exempt companies not to submit their Profit & Loss accounts and director’s report to the Registrar of Companies, which is the depot for research on financial information by the general public, be they creditors, potential clients or just curious persons. However, this company must submit to the registrar of Companies abridged annual accounts showing an abridged balance sheet, notes relating to it and an auditors’ report. In specific cases even the auditors’ report may be kept from being filed in.
Another popular type of Company formation is the private non-exempt Company of which there are 4,800 in Malta. The company may start with Lm500 share Capital and is to be subscribed by at least two persons and not less than 20% must be paid up. This is another type of company that can be set up and start operating with only Lm100.
The single member company is a private exempt company with one shareholder only. This single member company is possible as a result of Malta adopting the 12th EU Council directive of December 1989 on such companies. The objects clause shall specify its main trading activity and shall consist principally of the activity.
This single member company shall have the facility to exercise the powers of the General meeting if the company and its decisions must be recorded.
The scenario is composed of a majority of companies (71%) that are private exempt. Therefore if you were thinking of tendering for the supply, installation and support of network equipment for the Mate Dei Hospital Companies Network issued by the Foundation of Medical Services CT43/2006, you can register a private exempt company, with a Lm100 minimum paid up share Capital to buy the Tender document and if you win the tender you will submit the minimum accounting requirements of an abridged Balance sheet, notes and auditors report but without the Profit & Loss account and the directors report.
Quite an achievement if you win a multi million liri tender with a Lm100 company. It seems to be the typical Maltese way of doing business.