The re-domiciliation of a company, also referred to as a ‘continuation’, is the process whereby a company incorporated and having its domicile in a particular country moves to another jurisdiction while maintaining the same legal structure.
Through re-domiciliation, a company seeking to continue operating in another jurisdiction would not be required to go through a liquidation process in the existing country and an incorporation process in the continuing country. While the essence of re-domiciliation therefore lies in the continuation of the company’s existence, a company that opts for re-domiciliation would also be able to benefit from the advantages of the continuing country.
The Continuation of Companies Regulations, 2002
For the re-domiciliation of a company incorporated in Malta to another country and also of a company incorporated elsewhere to be re-domiciled to Malta, the requirements set out in the Continuation of Companies Regulations 2002 (Subsidiary Legislation 386.05 of the laws of Malta) (hereinafter "the Regulations") must be adhered to.
The Regulations provide that for a foreign company to re-domicile to Malta, it must be incorporated in an approved jurisdiction, which is defined as "such country or jurisdiction as may be established from time to time by guidelines issued by the Registrar". While there are no guidelines to refer to, usually only those countries or jurisdictions that are classified as high-risk by the Financial Action Task Force (hereinafter "FATF") or are otherwise blacklisted or sanctioned would be deemed by the Malta Business Registry (hereinafter "the Registry") not to be accepted. Moreover, for the re-domiciliation of a company to Malta to occur, its composition and structure must be recognised under the Maltese Companies Act, while the legislation in the original jurisdiction must also allow for companies to be re-domiciled. Re-domiciliation should also be allowed by the company’s statute, its memorandum and articles of association, or any other constitutional instrument.
Mobility Directive proposed changes
Additionally, the newly transposed Directive (EU) 2019/2121 of the European Parliament and of the Council of November 27, 2019, revising Directive (EU) 2017/1132 (also known as the ‘Mobility Directive') is also a significant piece of legislation in this field. This new Directive introduces a harmonised regime for cross-border conversions and divisions for the first time, namely those involving more than one Member State, establishes standardised procedures for conducting cross-border re-domiciliations, and sets out guidelines that provide stakeholders, including employees, creditors, and members, with increased protection. Before the introduction of this Directive, the lack of a unified legal framework led to legal ambiguity and barriers to the application of the right to freedom of establishment.
Advantages of re-domiciliation to Malta
Re-domiciliation is an attractive option for companies since a foreign company planning to re-domicile to Malta would benefit from Malta's advantageous tax structure with a lower effective tax rate and no withholding taxes or stamp duty on the distribution of dividends or profits to shareholders. The re-domiciled company would also be able to benefit from Malta’s extensive double taxation treaty network and other forms of relief from double taxation, as well as Malta’s tax refund system and its participation in the exemption regime. Additionally, the re-domiciliation would not have an impact on the company's property, allowing it to retain all of its assets, rights, liabilities, and obligations.
The process of re-domiciliation in Malta
A request made by the foreign company to the Registry for continuance in Malta must be accompanied by the documentation that is required by the Regulations. This documentation includes the following documents:
- an extraordinary resolution authorising the company to be registered as being continued in Malta;
- a copy of the constitutive document of the foreign company;
- a certificate of good standing or equivalent issued by the foreign competent authority; and
- a declaration signed by at least two (2) directors confirming the general company details
- the foreign entity must also provide evidence of a notice issued by the authorities of the foreign entity that the company is being re-domiciled to Malta;
- a declaration signed by two (2) directors or equivalent confirming the solvency of the company;
- a list of the directors and company secretary of the foreign company, and
- a payment of the relevant registration fees to the Registry.
The Registry will not approve a continuance request in the event of a company's dissolution, bankruptcy, insolvency, recovery actions, or any other analogous process that has been commenced by or against the company. The request will also not be approved if a foreign company has appointed a liquidator, administrator, or receiver of its property, if there are any plans or orders that would suspend or limit the rights of creditors, or if the foreign company has ever been sued for violating the laws of the nation or jurisdiction where it was founded.
If the Registry approves the continuance request, a notice to this effect shall be published in the Government Gazette and in a daily Maltese newspaper. For a period of three (3) months following the publication, any creditor of a company whose debt existed before receiving the notice shall have the opportunity to oppose the continuation by filing a sworn application in court. If a valid reason is shown as to why the company's continuation in Malta should not be acceded to, the court shall either uphold the objection or approve the continuation of the business with the provision of sufficient security. If, after these three (3) months, no creditor opposes or if the court does not accede to such requests, then the Registry would be able to issue the continuance certificate.
It is only upon the satisfaction of the Registry that none of the aforementioned events have occurred or are occurring and that the documents submitted comply with the Regulations that it shall proceed to issue a provisional certificate showing that the company is registered (provisionally) as continuing in Malta and registered as a Maltese company for all purposes at law. Within a period of six (6) months from the date of the issue of the above-mentioned certificate, the company shall submit documentary evidence to the Registry showing that it has ceased to be a company registered under the foreign jurisdiction, after which the Registry shall then issue the official certificate of continuation. It should be noted that if the foreign company carries on a licenced activity, it has to provide evidence of the consent of the foreign competent authority before the company may be registered as being continued in Malta.
Benefits of re-domiciliation
Without the option of re-domiciliation, companies would have to be liquidated or dissolved in the existing jurisdiction and newly incorporated in another jurisdiction, resulting in their business and contractual relationships being disrupted while also increasing the risk of financial losses. Apart from this, there are a number of practical benefits associated with re-domiciliation, such as the fact that it does not trigger any tax nor is it subject to any stamp duty or entry tax. Re-domiciliation is therefore a practical way of continuing to operate a business in another country and may therefore be considered a more efficient alternative to other corporate re-structuring methods such as a cross-border merger.
How can BDO help?
At BDO Malta, we have extensive experience in assisting businesses with the re-domiciliation process. Our expert team can provide comprehensive guidance and support, ensuring a smooth and successful transition for your company. Contact us today to discover how we can help your re-domicile your business to Malta.
Article written by Dr. Christabelle Buhagiar (Lawyer) and Daisy Grima (Legal Intern)
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