Cross-border Conversions of Limited Liability Companies Regulations – Draft terms of Cross-border conversion

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 […]

Written By Stephen Balzan

On April 29, 2024
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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:

  1. The legal form and name of the Company and the location of its registered office in Malta
  2. 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
  3. The instrument of constitution of the company in the destination jurisdiction, where applicable, and the statutes if they are contained in a separate instrument
  4. The  proposed  indicative  timetable  for  the  cross-border conversion
  5. 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
  6. Any  safeguards  offered  to  creditors,  such  as guarantees or pledges
  7. Any special advantages granted to members of the administrative, management, supervisory or controlling bodies of the company
  8. Whether any incentives or subsidies were received by the company in Malta, as the departure jurisdiction, in the preceding five (5) years
  9. Details  of  the  offer  of  cash  compensation  for dissenting members
  10. The electronic address to be used by members for the  purposes  of  exercising  their  right  for a cash compensation
  11. The  likely  repercussions  of  the  cross-border conversion on employment
  12. 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.
  13. 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.

If you need any help or assistance with the above-mentioned, please do not hesitate to contact us on [email protected]

How can we help?  

 

For further information, please contact us on [email protected]. ACT can help you understand the changes to the income tax, accounting, corporate and VAT rules and how these can impact your business.   

 

Apart from its offices in St. Julian’s Malta, ACT operates from a second office in Gozo, which is situated in the capital city of Victoria.  For an appointment in our Gozo office, please call on +356 21378672 or send us an email on [email protected]. 

Disclaimer: This article contains general information only and is not intended to address the circumstances of any particular individual or entity. ACT, by means of this article is not rendering any accounting, business, financial, investment, legal, tax, or other professional advice or service. This article is not a substitute for such professional advice, nor should it be used as a basis for any decision or action that may affect your finances or your business. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. Before making any decisions or before taking any action that may affect your finances or your business, you should consult a qualified professional adviser. ACT shall not be responsible for any loss whatsoever sustained by any person who relies on this article.