Amendments to the Companies Act; Act LX of 2021

Last Updated on Thursday, 11 November, 2021 at 9:31 am by Andre Camilleri

Emma Fenech is an advocate with David Zahra & Associates Advocates

Having been tabled to the House of Representatives, Bill 233 of 2021 has recently come into effect by virtue of Act LX of 2021 (hereinafter referred to as the “Act”). The Act has resulted in a number of introductions as well as significant amendments to the current legislative framework that regulates companies; the Companies Act, Chapter 386 of the laws of Malta.

This article aims to provide insight about the focal aspects of the Act, being essentially the ensuing obligations on the part of companies, as well as the powers and responsibilities of the Registrar of Companies.

Register of Officers’ and Shareholders’ Residential Addresses

Over and above the requirement of each company to maintain a register of members and register of beneficial owners, the Act provides that a company shall also keep a register containing the name, residential and electronic address of all its officers and shareholders.

The legislator takes this register a step further, by mandating the directors and company secretary to deliver a copy of such register to the Malta Business Registry (hereinafter the “MBR”). The Act provides that the register, together with the relevant statutory notification, must be delivered to MBR within fourteen days from the occurrence of any change. The Act is otherwise silent as to whether the register will be required to be submitted to MBR periodically, for instance on an annual basis as at the company anniversary date.

The register shall be kept by the Registrar and shall only be utilised for regulatory purposes. It is made clear that the information contained in the register will not be available for public inspection.

The failure to submit the register to the Malta Business Registry shall result in the company incurring a one-time lump sum penalty and a further daily penalty for every day during which default persists. The Act outlines a single exception, stating that the penalties shall not be imposed if the default in complying with this provision is remedied within one month from receipt of a notice of default issued by the Registrar.

The refusal to comply with this requirement shall also result in the Registrar declining to process any change in the officers or shareholders of the company. The same is applicable in the event that the Registrar is not satisfied with the information provided or its correctness thereof.

Removal of Directors

The legislator has also granted the Registrar additional powers in respect of the disqualification of directors. As a matter of fact, once the Registrar becomes aware that a director is disqualified or is not in possession of a license issued under the Company Service Providers Act (where such license is required), he is obliged to notify the company to execute the termination of such director.

Where the notice issued by the Register is not complied with within fourteen days, the Registrar is duty bound to file a court application requesting the removal of the director from office. A hearing date shall be set by no later than thirty days after the filing of the court application. Consequently, the decision must be delivered within five working days from the date fixed for hearing. Interestingly, the law expressly provides that the costs of the proceedings shall be borne by the company in default.

Coupled with this principle, an additional disqualification criterion in respect of directors and company secretaries has been introduced. It indicates that any individual holding office as a company service provider in terms of the Company Service Providers Act without having obtained the necessary authorisation by the Malta Financial Services Authority to provide such service shall be precluded from holding such office.

Changes to the Memorandum of Association

Apart from the traditional registered address of a company, the Memorandum of Association shall also be required to stipulate an email address of the company. This newly added detail will also feature in the annual return document prepared as at the anniversary date of each company.

The Act also allows the director/s, shareholder/s and the company secretary to provide a service address as opposed to the residential address in the Memorandum of Association.

Furthermore, a proposed director of a company shall personally tender a signature on the Memorandum and Articles of Association to expressly provide consent to act as director. An alternative manner of providing consent is by delivering a consent in writing to the Malta Business Registry.

A proposed director shall also be required to submit a signed declaration to the Registrar, confirming that there are no circumstances which could disqualify the director from being appointed as such in terms of the Companies Act or any European Union Member State. Remarkably, the Registrar will be at liberty to refuse the appointment of a person who would have been disqualified from acting as a director in another Member State.

The rationale behind this addition is to improve the quality of directors, whilst at the same time facilitating communication between the local registrar of companies and the registrars of other Member States.

Additional Details

Furthermore, the Act proposes that any document that requires submission to the Malta Business Registry that presently contains the name and residential address of an individual, will also be required to provide the date of birth in respect of natural persons and the company registration number in respect of legal persons.

Powers and Duties of the Registrar

Alongside the proposition of the aforementioned changes and additional requirements, the Act also delineates supplementary duties and powers of the Registrar.

Firstly, prior to registering a new company, the Registrar shall be permitted to request additional information and/or supporting documentation to ascertain the identity of the involved parties. This has the objective of ensuring that the information provided is accurate and up to date.

The Registrar has also been given the power to provide access of the Malta Business Registry website, to competent authorities and subject persons as defined in the Prevention of Money Laundering and Funding of Terrorism Regulations.

The Act also empowers the Registrar to issue binding procedural guidelines to ensure the effective implementation of the provisions of the Act, after having consulted the minister responsible for the registration of commercial partnerships.

In relation to the processing of personal data, the Act provides that where the Registrar acts as a data controller, there shall be full compliance with the principles laid down in Regulation (EU) 2016/679. In doing so, the Registrar is duty bound to apply appropriate measures to ensure an appropriate level of security, as well as to incorporate the necessary safeguards to protect the rights and freedoms of data subjects.

In conclusion, following the publication of the Act on the Government Gazette on 26 October 2021, companies and corporate service providers ought to be mindful of the changes brought about by the Act and be prepared to implement the necessary changes.

The contents of the article are intended for general informational purposes and shall not constitute legal advice.

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