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 protection afforded by Maltese Law to shareholders 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. 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.
When a Maltese registered converting company approves the draft terms of conversion by means of an extraordinary resolution, it shall be required to redeem the shares held by any dissenting shareholders who so request, for the cash compensation as specified in the draft terms of cross-border conversion in accordance with the conditions laid down in the Regulations. Any dissenting shareholders wishing to exercise their right, must declare to the company their decision to exercise their right to have their shares redeemed. The declaration must be made in writing and must be received by the Company not later than one (1) month after the general meeting.
Upon receipt of any such declarations, the company shall redeem the shares held by the dissenting shareholders and pay the cash compensation specified in the draft terms of the cross-border conversion by no later than two (2) months after the cross-border conversion becomes effective. Any dissenting shareholders who have declared their decision to exercise the right to have their shares redeemed but who consider that the cash compensation offered by the company has not been adequately set may, by means of an application filed in Court not later than one (1) month after the above-mentioned general meeting , request the company to pay additional cash compensation. The court shall decide the application on its merits within not more than thirty (30) days from the date of service of the application on the Maltese registered converting company.
The substantive merits of any disputes relating to the shareholders’ rights shall be decided in accordance with Maltese legislation and, without prejudice to any valid and binding arbitration agreement recognised by Maltese legislation, any such disputes shall be subject to the exclusive jurisdiction of the Courts in Malta.
Any holders of securities, other than shares, in a Maltese registered converting company, to which special rights are attached, shall be given rights against the Maltese registered converting company in accordance with the draft terms of the cross-border conversion at least equivalent to those they possess prior to the conversion. Provided that any dissenting holders of those securities shall be entitled to have their securities redeemed by the said Maltese registered converting company in accordance with the Regulations.
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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