Last Updated on Thursday, 30 November, 2023 at 11:02 am by Andre Camilleri
Sarah Fenech is a Senior Associate within the Commercial and Corporate Department of Fenech & Fenech Advocates
These FAQs are the second part of a three-part series on the scope and application of the Companies Act (Cross-Border Conversions of Limited Liability Companies) Regulations 2023 (the “CBC Regulations”), governing the re-domiciliation (referred to therein as cross-border conversion) of companies into and out of Malta.
Part 1 of the FAQs provides an introduction on the CBC Regulations and considers the applicability of the Continuation of Companies Regulations, 2002, following the coming into force of the CBC Regulations, whereas this Part 2 shall consider the procedure and other relevant considerations with respect to the cross-border conversion of a Maltese converting company, i.e. when Malta is the “departure jurisdiction”.
What is the general procedure for the cross-border conversion of a Maltese converting company?
a) The Board of Directors (the “Board”) shall draw up draft terms of the cross-border conversion which must include specific minimum information as further delineated in the CBC Regulations;
b) If applicable, the Board shall draw up a report for the company’s members and employees, justifying the legal and economic aspects of the cross-border conversion;
c) If applicable, the Board shall make a written declaration of solvency confirming that it is unaware of any reason why the company may, after the cross-border conversion takes effect, not be in a position to meet its liabilities when they fall due;
d) If applicable, an independent expert’s report shall be drawn up for the company’s members not less than 1 month before the date of the general meeting;
e) The Board shall prepare a notice to the members, creditors and employees stating that they may submit to the company, at least 5 working days before the date of the general meeting, comments concerning the draft terms of the cross-border conversion;
f) The draft terms of the cross-border conversion, the declaration of solvency (as applicable) and the notice shall be filed with the Registrar of Companies of Malta (the “Registrar”), who shall register the documents and publish a statement in respect of the cross-border conversion in question;
g) At least 1 month after registration of the documentation in f. above, the general meeting shall approve the cross-border conversion by means of an extraordinary resolution, which shall be submitted to the Registrar. The Registrar shall register the resolution and publish a statement to this effect
h) Upon the lapse of 1 month from the last publication concerning the extraordinary resolution, the company shall apply to the Registrar to obtain a pre-conversion certificate. The application shall be accompanied by the submission of all documents under a. – e. above, together with any other applicable ancillary documents in the event that the company is licensed or quoted on a recognized stock exchange or where the shares therein are pledged
i) The Registrar shall issue the pre-conversion certificate upon being satisfied that all necessary procedures have been completed, which certificate is to be provided to the registrar of the destination jurisdiction;
j) Once the Registrar is notified of the effective date of the cross-border conversion by the registrar of the destination jurisdiction, the Registrar shall publish a notice indicating that the cross-border conversion has been completed and shall strike the name of the company off the register.
What form of shareholder protection is available in respect of a Maltese converting company?
- At least 5 days before the date of general meeting, the shareholders are entitled to submit comments concerning the draft terms of the cross-border conversion.
- No later than 1 month from the general meeting, any shareholder who is opposed to the draft terms of cross-border conversion, is entitled, upon written request, to dispose of its shares in return for a cash compensation, which shall be paid no later than 2 months after the cross-border conversion becomes effective.
No later than 1 month from the general meeting, any shareholder who considers that the cash compensation offered by the company has not been adequately set, may, by means of an application filed in court, request the company to pay additional compensation.
What form of protection is available to creditors (whose debt existed prior to the publication of the draft terms of cross-border conversion) or other interested persons in respect of a Maltese converting company?
- At least 5 days before the general meeting is called to decide on the operation, creditors are entitled to submit comments concerning the draft terms of the cross-border conversion.
- Within 3 months from the publication by the Registrarof the relevant information/documentation concerning the draft terms of cross-border conversion, any creditor of the company who feels that the safeguards offered in the draft terms of cross-border conversion are not adequate, may apply to the court to request adequate safeguards;
- Within 2 years from the date the conversion takes effect, any creditor may institute proceedings against the company before the Courts in Malta on grounds other than those cited above concerning the adequacy of the safeguards provided in the draft terms of cross-border conversion.
- Within 1 month from the publication by the Registrar concerning the draft terms of the cross-border conversion, any interested person may apply to the court to contest the draft terms of the cross-border conversion on the ground that they were not drawn up in accordance with the law;
- Within 1 month from the last publication by the Registrar concerning the extraordinary resolution, any interested person may apply to the court to contest same on the ground that the extraordinary resolution is void or voidable.
How long would it typically take for the Registrar to issue the pre-conversion certificate?
The Registrar has 3 months from receipt of the pre-conversion certificate application within which to review the application (and the supporting documents thereto).
Once satisfied that all the requisite conditions and procedures have been adhered to, the Registrar shall issue the pre-conversion certificate – which shall not, in any case, be before the lapse of 3 months from the MBR publication concerning the draft terms of the cross-border conversion, the declaration of solvency and the notice.
The above timeframe is without prejudice to any judgment pending in respect of a court application filed by any creditor or interested person with respect to the cross-border conversion.
Can the Registrar refuse to issue the pre-conversion certificate?
Yes, where it is determined that the cross-border conversion is set up for abusive or fraudulent purposes leading to, or aimed at, the evasion or circumvention of Community or national law, or for criminal purposes, the Registrar shall not issue the pre-conversion certificate.
In addition, where it is determined that not all the relevant conditions and/or procedures for the cross-border conversion have been complied with or completed, the Registrar shall not issue the certificate and shall inform the Maltese converting company of its reasons by not later than 7 days from the lapse of the 3-month application review period granted at law. In such case, the Registrar may grant the company a timeframe within which to fulfil the conditions or complete the procedures as applicable.
Part 3 of these FAQs will consider the procedure and other relevant considerations with respect to the cross-border conversion of a foreign converting company, i.e. when Malta is the “destination jurisdiction”.
Should you require any further information or assistance on the matter, please do not hesitate to reach out to Sarah Fenech personally on email@example.com.