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 draft terms of cross-border conversion. 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 said draft terms of cross-border conversion shall include at least the following particulars:
- The legal form and name of the Company and the location of its registered office in Malta
- The legal form and name proposed for the converted company in the destination jurisdiction and the proposed location of its registered office in the said jurisdiction
- The instrument of constitution of the company in the destination jurisdiction, where applicable, and the statutes if they are contained in a separate instrument
- The proposed indicative timetable for the cross-border conversion
- The rights conferred by the converted company on members enjoying special rights or on holders of securities other than shares representing the company capital, or the proposed measures concerning them
- Any safeguards offered to creditors, such as guarantees or pledges
- Any special advantages granted to members of the administrative, management, supervisory or controlling bodies of the company
- Whether any incentives or subsidies were received by the company in Malta, as the departure jurisdiction, in the preceding five (5) years
- Details of the offer of cash compensation for dissenting members
- The electronic address to be used by members for the purposes of exercising their right for a cash compensation
- The likely repercussions of the cross-border conversion on employment
- Where appropriate, information on the procedures by which arrangements for the involvement of employees in the definition of their rights to participation in the converted company are determined.
- Where the destination jurisdiction is not a Member State or EEA State, a reasoned opinion of one or more practising advocates confirming that the proposed cross-border conversion is permitted by the laws of the destination jurisdiction must be attached to the draft terms of a cross-border conversion.
The draft terms of a cross-border conversion 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 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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