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What is a distinct legal personality?
A distinct legal personality is the recognition by law of an entity as a legal person separate from its members, as natural persons. Such an entity can own property, enter into contracts, and sue or be sued in its own name, independently of the individuals who compose it. While the obligations incurred are those of the entity itself, this separation does not necessarily imply limited liability for its members, as the extent of legal personality and liability depends on the type of commercial partnership.What types of commercial entities are there?
Commercial entities under Maltese law are generally classified into two main categories: partnerships and companies.Partnerships
1. Partnership en nom collectif
This is the traditional form of partnership under Maltese law, formed by two or more partners operating under a common partnership name. All partners are jointly and severally liable without limit for the obligations of the partnership, which places each partner equally at risk for the actions and debts of the others. Although creditors are required to first proceed against the assets of the partnership, they may subsequently claim against the personal assets of any one partner, or all of the partners, once the partnership’s assets are insufficient.
2. Partnership en nom commandite
This form of partnership is composed of two categories of partners: general partners and limited partners. The general partners manage the partnership and are subject to unlimited, joint and several liability for its obligations. Limited partners, on the other hand, do not take part in the management of the partnership and their liability is restricted to the amount of their agreed contribution. As with other commercial partnerships under Maltese law, the partnership has a distinct legal personality, allowing it to own property and enter into obligations in its own name.
Companies
These commercial entities are characterised by limited liability and a high degree of legal separation between the entity and its members. Under Maltese law, companies take various forms, including private companies, public companies and specialised vehicles such as investment and cell companies. Private companies are the most commonly used form in practice, as they allow shareholders to carry on commercial activities through a corporate structure while limiting personal liability, public involvement and access. Public companies, by contrast, are designed for larger ventures, as they may offer their shares to the public and are therefore subject to stricter regulatory, disclosure and capital requirements.Unlike partnerships, shareholders benefit from limited liability, meaning that their financial exposure is restricted to the unpaid amount on their shares. Where shares are fully paid up, shareholders incur no further personal liability for the company’s debts, except in exceptional circumstances where the courts may lift or pierce the corporate veil.