By means of Subsidiary Legislation 386.27, the Government of Malta has published the above-mentioned rules, the scope of which is to transpose into Maltese legislation the European Union Directive 2019/2121/EU amending the EU Directive 2017/1132 as regards cross border conversions, mergers and divisions. This EU directive, also referred to as ‘The Mobility Directive’ is part of the major efforts being undertaken by the EU in order to enhance cross-border mobility and freedom of establishment with a view to sustain the development of the Single Market.
In this article, we shall be describing the duty of the board of directors of a Maltese limited liability company in Malta (hereinafter referred to as ‘the converting company’) which resolves to be converted into a company which is formed and registered in another EU member state to prepare and draw up a report for members and employees, explaining and justifying the legal and economic aspects of the cross-border conversion, as well as explaining the implications of the said conversion for employees. By means of this procedure, the Maltese company will no longer be regulated by the Companies Act (Chapter 386 of the Laws of Malta), but will from the effective date be regulated by the applicable laws of the jurisdiction to which the Malta company will be converted to (hereinafter referred to as ‘the destination jurisdiction’), without being dissolved or wound up or going into liquidation.
The report shall include a section for members and a section for employees. The company may decide either to draw up one (1) report containing those two sections or to draw up separate reports for members and employees respectively, containing the relevant section.
The section of the report for members shall, in particular, explain the following:
(a) the cash compensation and the method used to determine the cash compensation
(b) the implications of the cross-border conversion for members
(c) the rights and remedies available to dissenting members
The section of the report for members shall not be required where all the members of the company have agreed to waive that requirement in writing or where the company being converted is a single-member company
On the other hand, the section of the report for employees shall, in particular, explain the following:
- the implications of the cross-border conversion for employment relationships, as well as, where applicable, any measures for safeguarding those relationships
- any material changes to the applicable conditions of employment or to the location of the company’s places of business
- how the factors set out in paragraphs (a) and (b) affect any subsidiaries of the company
The above-mentioned reports shall be made available electronically, together with the draft terms of the cross-border conversion, if available, to the members and representatives of the employees or, where there are no such representatives, to the employees themselves, not less than six (6) weeks before the date of the general meeting approving the ross-border conversion.
Where the board of directors of the company receives an opinion on the information referred to above in good time from the representatives of the employees or, where there are no such representatives, from the employees themselves, the members shall be informed thereof and that opinion shall be appended to the report. The section of the report for employees shall not be required where a company and its subsidiaries, if any, have no employees other than those who form part of the board or other administrative or management bodies of the company or those of its subsidiaries.
Where the section of the report for members and the section for employees referred to above is waived or not required, the report shall not be required.
A report drawn-up as above shall be signed by one (1) director if the company has a sole (1) director or by two (2) directors if the company has two (2) or more directors.
In terms of the above, and provided that all formalities in terms of the Regulations as well as under the Laws of the destination jurisdiction are satisfied, the Company shall, by virtue of the Cross-border Conversion, be converted into the Converted Company without being dissolved, wound up or going into liquidation and shall, with effect from the effective date of the Cross-border conversion, be struck off the company register in Malta in accordance with the provisions of regulation 20 of the Regulations.
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