Malta Company Share Capital (Authorised and Issued)
Maltese registered companies must have a minimum authorized and a minimum issued company share capital. Different rules apply, depending on whether:
The company is a private or a public company; or
- The trading activities of the company (licensable companies e.g. gaming companies, insurance companies, companies licensed under the Investment Services Act, Financial Institutions Act, must satisfy certain share capital requirements).
Article 72 of the Companies Act prescribes that a private company is required to have a minimum authorised share capital of EUR 1165 (often rounded up to EUR 1200) whereas a public company must have an authorised share capital of approximately EUR 44,600.
When the authorised share capital is equal to the minimum it shall be fully subscribed in the memorandum, effectively meaning that at least EUR 1165 in the case of a private company and EUR 46,600 in the case of a public company must be fully subscribed (albeit the actual paid up issued share capital need not be).
In fact, Article 72(3) prescribes that in the case of a private company, not less than twenty percent (20%) of the nominal value of each share must be paid up, whereas the thresholds for public companies is set at twenty-five percent (25%). Effectively, this means, that a company with an authorised share capital of EUR 1,200 must have an issued share capital of at least EUR 1165 (statutory minimum) or which at least 20% must be fully paid up.
Very importantly, a member’s liability is limited to the amount, if any, unpaid on the shares held by him, unless express exception to this rule is undertaken in writing. This is a fundamental precept – deeply entrenched to the notion of limited liability and effectively protects, the shareholders, bar statutory exceptions where the corporate veil may be lifted, and personal liability extended beyond the amount, if any, unpaid on the shares.
The nominal value of the share can be set at any denomination desired by the subscribers – it can be one Euro each (EUR 1.00) or one Euro cent (EUR 0.01) depending on the wishes of the subscribers. A notable exception to this is afforded by investment companies with variable share capital (“SICAVs”) whose shares have no par value. SICAVs are used as vehicles for collective investment schemes, and are intended to offer the possibility to subscribers to acquire and redeem shares (often referred to as units) swiftly. The share capital of a SICAV has no nominal value and therefore the value varies continuously to reflect the variations in the net asset value of the company pursuant to the acquisition or redemptions of the shares or of the underlying assets of the collective investment scheme.
Currency of the share Capital
The currency of the share capital may be denominated in any convertible currency. It is possible by extraordinary resolution to change the share capital of the company, however, it is not possible to have the share capital in more than one currency concurrently, since every company is obliged to draw up accounts in the same currency as its share capital.
Evidence of paid up share capital
The Companies Act provides that the consideration for the acquisition of shares (whether on original subscription or a subsequent issue) may only consist of assets capable of economic assessment. Future personal services and in general any undertakings to perform work or supply services may not be given by way of consideration. The consideration for shares originally subscribed to in the memorandum or issued subsequently by the company can therefore be either in cash or in kind (but not future personal services or undertakings to perform work or supply services).
The Registrar of Companies will not register the company unless he receives evidence that the paid up share capital of the company as specified in the memorandum of association has indeed been paid up. The form of the evidence to be furnished depends on whether the consideration for the shares is in cash or in kind.
Evidence of consideration of share capital
Where the share capital is paid in cash, evidence thereof, in the form of a bank deposit slip or of a bank letter attesting to the deposit of the share capital shall suffice. There is strictly speaking no necessity of depositing the share capital into a Maltese bank, albeit this tends to facilitate the process. Share capital deposited in a foreign bank would be equally acceptable, insofar that the bank slip or letter clearly states the name of the company in formation and that such consideration is being paid by way of share capital.
In the case of a non-cash consideration, such as share-for-share consideration, assets of a tangible nature, assignment of debts etc; more complex rules apply. A consideration is kind shall be acceptable by the registrar of companies, only insofar that the true value of such consideration is sanctioned by an expert’s report, clearly stating the valuation methodology and the value of the non-cash consideration. This expert’s report (so called Section 73 because of the enabling provision of the Companies Act, must be presented to the registrar of companies, concurrently with the memorandum and articles of association and supporting documentation for the incorporation of the company. Whenever the issued share capital is to be increased, the allotment of shares, is only permissible if preceded by the aforesaid expert’s report.
Increase in authorised share capital
The increase in the authorised share capital necessitates the alteration to the memorandum and articles of association of the company, and therefore may only be undertaken by means of an extraordinary resolution by the shareholders, together with the submission of a revised memorandum and articles of association reflecting the new authorised share capital. The registrar of companies shall only register such alteration, if the updated memorandum and articles of association is duly complied in accordance to the laws of Malta, and upon the payment of the appropriate fee for registration.
Increase in issued share capital
The increase in the issued share capital of the company is normally undertaken by means of an ordinary resolution, although it is possible for the shareholder to delegate such authority to the board of directors by means of an ordinary resolution – in which case such authorisation shall be valid for a period of five (5) years, renewable for further periods of five (5) years.
The increase in the issued share capital follows rules similar to the ones prescribed for the original subscription of shares. The consideration, if in cash, must be evidenced in the form of a bank slip or bank letter, attesting that the consideration is for an increase to the share capital. In the case of non-cash consideration, an experts’ report is possible.
Reduction in issued share capital
Conversely to the aforesaid, it is possible for a company to reduce its issued share capital, a decision that may adversely affect its creditors and members. The reason for this reduction may be various e.g the existing level of share capital is excessive or pursuant to losses undertaken by the Company. In any case, strict procedure to the Companies Act, particularly Article 83 must be adhered to.
The reduction in the issued share capital is only possible by means of an extraordinary resolution, and requires the amendment to the memorandum and articles of association. Furthermore, such reduction shall not be rendered effective, until notice thereof has been duly provided to the general public (and implicitly any interested creditors). The reduction is effective as from three (3) months from publication of the notice of such reduction. Provided however, that no publication shall be necessary, if the reduction is undertaken for the setting off of trading losses. It is strongly advisable, that any resolution to the effect of reducing the share capital on the basis of setting off of financial losses, should be sanctioned by means of management accounts drawn on or close to the date of such resolution.
For more thorough information, and bespoke advice, you are kindly requested to contact one of our officers. Contact us to initiate the incorporation of a Maltese registered company and start reaping the full benefits of an onshore, low-tax, EU jurisdiction. Simply fill in the contact box below or contact us by email on firstname.lastname@example.org