Q & A – Company Operation

Your question is two fold and I shall try to answer both.

First…there are two ways to go about increasing the share capital and allotting shares to your wife and children. This can be done either by the transfer from you of existing shares or else by increasing the company’s share capital and allotting these to the wife and children.

The first option would be a private agreement between you and the wife and children and no cash need be injected into the company.

For the second option, since the company is issuing new shares, there must be some form of compensation. In your case you stated that you did not wish to inject cash. Then perhaps these shares can be paid for by converting some existing loan that you have with your company. This would first need to be loaned or granted to the wife and children through a private agreement and then capitalized into share capital.

To retain control of the company affairs, there are various ways to go about it. Such include the allocation of preference shares to the children or to a different class of ordinary shares with non-voting rights.

To form a company we suggest that , first of all, you ensure that there is exist enough scope in doing so This means that the benefits of operating a company outweighs the initial costs of setting it up and of the annual running costs.

To form a company is quite a straightforward affair as long as one is an EU citizen (or company). One requires a copy of the ID card (or registration certificate in case of a foreign company), a bank account in which the share capital in deposited (minimum of Euro 235 paid up for a private company) and a Memorandum and Articles of Association as per the requirements of the Companies Act ’95.

A registration fee is payable according to the authorised share capital a company opts to have (minimum Euro 350).

A private company can be either with one shareholder (single member) or with a number of shareholders.

Any amalgamation can be done in two ways. Either through merger by acquisition, whereby a company acquires the assets and liabilities of the other company (ies) in exchange of shares and the acquired company (ies) is (are) dissolved.

Otherwise it can be done through a merger by formation of a new company whereby both assets and liabilities of the company (ies) is (are) taken over by the new company and the existing company (ies) is(are) dissolved.

One has to assess whether the method qualifies for the short process or the long one. To qualify for the short process, the company taking over the other company (ies) has to hold at least 90% or more of its(their) voting shares. If it holds 100% of its voting shares, then the amalgamation procedure and accordingly the time frame will be shortened further. In fact, in such a case the amalgamation would then take effect after the expiry of 3 months from the publication of the notice of amalgamation.In case where a company does not have a shareholding in the acquiring company (ies) or it only has a minority shareholding, then this entails the long process which normally takes around nine months to complete.

The company secretary is normally appointed by the directors and should be an individual who has the requisite knowledge and experience to discharge the function attributable to a company secretary.

The law does not provide an indication of the duties normally delegated to a company secretary. However, one can find such an indication if the First Schedule to the Companies Act 1995. These include:

  • be responsible for keeping the minutes book both for general meetings and directors’ meetings
  • be responsible for the upkeep of registers of members
  • ensure proper notices are given of all meetings
  • ensure that all returns and documents of the company are prepared and registered with MFSA and other regulatory
  • entities within the requirements of the Act.

One also needs to point out here that, under various Maltese laws, the company secretary is presumed to be an OFFICER of the company and therefore PERSONALLY responsible for many acts and obligations just as a director is.