Malta Family Business Act

In recent years, Malta has witnessed a growing number of family-owned enterprises navigating generational change, restructuring ownership, and adapting to modern governance standards. As founders step back and the next generation assumes control, issues of succession, ownership, and continuity have become increasingly prominent. Against this backdrop, Malta’s Family Business Act (the “Act”) provides a timely legal framework for the recognition, regulation, and long-term sustainability of family-run enterprises.

The Act establishes a legal framework for the recognition, regulation, and long-term sustainability of family-owned enterprises. A key element of the Act is its definition of “family members”, as this determines whether a business qualifies as a family business and, consequently, whether it may benefit from the protections and incentives available under the law.

The Act adopts a broad approach to the concept of family. In addition to spouses and children, it recognises ascendants, descendants, siblings, relatives by marriage, and legally adopted children as family members. In certain circumstances, extended relatives may also fall within this definition, provided that the familial connection can be clearly established. This inclusive scope reflects the structure of many Maltese businesses, where ownership and management often extend beyond the immediate family. It also allows succession planning to take place across generations and branches of the family without jeopardising the business’s legal status.

The definition of family members is not merely descriptive; it has concrete legal consequences. Only businesses that remain substantially controlled by qualifying family members may be registered as family businesses in terms of the Act. A family business registered in terms of the Act shall have access to fiscal incentives and the ability to benefit from the governance and succession planning mechanisms.

Importantly, the Act does not require ownership to be entirely confined to the family. A family business may include external shareholders, minority investors, non-family directors, or operate through corporate or trust structures, provided that the family retains effective control over strategic decision-making. This flexibility enables family businesses to attract capital, benefit from external expertise, and pursue growth opportunities without surrendering their identity or long-term vision.

Allowing non-family participation offers clear commercial advantages. External investors can support expansion and innovation, while independent directors can strengthen governance and accountability. At the same time, the family’s controlling role preserves continuity, values, and strategic direction, ensuring that the business remains aligned with its founding principles.

Eligible applicants under the Act are businesses that are primarily controlled by family members, have been operational for the required period, and satisfy the ownership and governance criteria established by the regulator. Registration is voluntary but necessary to access the benefits associated with family business status. Businesses that no longer meet the control requirements, or whose ownership is entirely external, fall outside the scope of the regime.

Registration brings a range of advantages, which can be grouped into three broad categories:

1. From a legal and governance perspective, registered family businesses benefit from formal recognition and a framework that supports structured succession planning, clearer management arrangements, and long-term continuity.
2. From a fiscal standpoint, qualifying transfers of a family business may benefit from reduced stamp duty at a rate of 1.5% on eligible donations of shares between qualifying family members, as well as access to incentive schemes, particularly in the context of intergenerational succession.
3. Operationally, registration promotes stability, reduces the risk of internal disputes, and encourages forward planning, helping family enterprises remain resilient in changing economic conditions.

The Family Business Act therefore strikes a careful balance between preserving family control and enabling commercial flexibility. By recognising a wide range of family relationships, permitting external shareholding, and encouraging sound governance structures, the Act provides Maltese family businesses with the tools needed to grow, professionalise, and transition across generations without losing their character. Registration under Chapter 565 is not simply a legal label, but a strategic mechanism for safeguarding the future of family-run enterprises.

GTG can support family businesses at every stage of the transition, from registration under Chapter 565 and stamp‑duty‑optimised share donations, to governance redesign and succession‑planning documentation tailored to the Family Business Act.

For any other information or assistance, please contact us at info@gtg.com.mt

Author: Dr Neil Gauci