Business Entities

Companies

Commercial entities are usually limited liability companies with share capital. A company may be incorporated either as a public or a private company. Only a public company ('plc') may offer shares or debentures to the general public. A public company must have an allotted share capital of at least Lm 20,000 25% paid-up.

The minimum share capital for a private company ('Limited') is only Lm 500 20% paid-up. A public company must have at least two shareholders. A private company may have only one shareholder. Private companies are limited to a maximum number of 50 shareholders. There are no limitations in respect of public companies.

A private company need have only one director, but a public company must have at least two. There is no requirement that directors must be Malta or EU nationals.

Partnerships

Partnerships can be either general partnerships, where the partners each have unlimited liability for the debts and obligations of the firm as a whole, or limited partnerships, where one or more of the general partners have unlimited liability and the limited partners have liability only up to the amount of their capital contributions. A partnership is defined in law as the 'relationship which exists between persons carrying on a business in common with a view to profit'. A partnership is not regarded as a separate legal entity distinct from its members.

Sole Partnerships

Many smaller businesses in Malta fall into this category.

Trusts

There are two main types of trusts - fixed and discretionary. The type of trust utilised determines the method by which income and capital will be distributed to the beneficiaries of the trusts. The operations and conduct of a trust is governed by the Trust Deed. The trustee, either natural persons or an incorporated body (for limited liability), runs the business of the trust and incurs the liabilities on behalf of the trust. In return, the trustee receives a right of indemnity from the assets of the trust equal to the liabilities incurred. A trust is a useful vehicle for splitting income, however similar effects can be achieved in other structures.

Branches

An overseas company can set up a place of business in Malta without forming a Malta subsidiary company, and in that case it is said to have a branch in Malta. A branch is not a separate legal entity, but an extension of the foreign company, and the foreign company is therefore responsible for its liabilities.

Audit and Accounting Requirements

All businesses need to maintain proper books of account for taxation purposes and to retain the accounting records and associated documents for not less than 10 years. All limited liability companies, irrespective of their annual turnover must have their accounts audited by a qualified accountant. Companies that are subsidiaries of a foreign company as well as branches must also be audited.

Filing Requirements

All limited companies must file accounts at a central registry (Registry of Companies) but small companies may file in an abbreviated form of accounts. An annual return giving details of directors and shareholders must also be filed. Branches of foreign companies must file details of the branch, its head office and legal representative in Malta at the Registry of Companies within one month of setting up a branch. Accounts of the foreign parent must also be filed annually.