Re-domiciliations of Companies

Continuation of companies in another jurisdiction is often sought by investors, seeking to move their companies to other jurisdictions, however, numerous jurisdictions have various exit and entry barriers which make it very difficult for companies to change jurisdiction. However, under Maltese law companies formed, incorporated or registered under the legal provisions of an approved foreign country may request the Malta Business Registry (‘MBR’) to be registered as continued in Malta, as long as the company’s constitutive documents permit it to do so.  

Maltese law regulates the re-domiciliation of companies through the Continuation of Companies Regulations (S.L. 386.05 - ‘the Regulations’) which state that the foreign company seeking to change its domicile must be incorporated in an approved jurisdiction. Then, the Regulations continue by providing that the request on the part of a foreign company to the MBR to be registered as continued in Malta must be accompanied by the following information and documentation:

1. The foreign company’s resolution, or any equivalent document, which authorises said foreign company to be registered as continued in Malta, together with a certified translation of said resolution where this is appropriate and required;
2. A copy of the revised constitutive document of the foreign company;
3. A certificate of the foreign company’s good standing issued by the foreign competent authority;
4. A declaration signed by at least two directors of the foreign company confirming information ranging from the name of the foreign company and that of the foreign jurisdiction to a notice that no proceedings for breach of the laws of the country or jurisdiction of incorporation exist;
5. A declaration signed by two directors, or more, of the company attesting to its solvency;
6. A list of directors of the foreign company and the company secretary, if any, or of the persons vested with the administration, or representation, of the foreign company; and
7. any other information the MBR might require.

The registry may refuse a continuance request for various reasons, such as

1. if the company is dissolved, bankrupt or insolvent,
2. if the company has any recovery action or any other similar process issued against it,
3. if the foreign company appoints a liquidator, administration or property receiver, or
4. if there are plans or orders which would risk suspending or limiting creditors’ rights.

Where the MBR grants approval for the continuance request, a notice to this effect is published in the Government Gazette and in a Maltese newspaper. For three months following the publication, creditors of the company re-domiciled whose debt existed before having received the notice shall be entitled to oppose said continuation through the fling of a sworn application in Court, provided that a valid justification is shown attesting to the prejudicial nature of the continuation of the Company in Malta.  

One should also consider EU Directive 2019/2121 of the European Parliament and of the Council, which revised EU Directive 2017/1132 (‘the Mobility Directive’). The advent of this Directive brought with it a harmonised regime to ease cross-border re-domiciliations, setting out guidelines to protect relevant stakeholders such as employees, creditors and members.

Re-domiciliation of a company to Malta offers significant advantages. This option is attractive since a foreign company planning to re-domicile to Malta would be able to benefit from Malta’s corporate tax system, whereby the effective corporate tax of a company registered in Malta may be lowered to as low as 5%. The redomiciled company may benefit from having no withholding taxes or stamp duty on the distribution of dividends or profits to shareholders. Moreover, the extensive number of double tax treaties entered into by Malta, together with other forms of double taxation relief and the participation exemption, all offer various advantages to the foreign company aiming to re-domicile to Malta.

The option of re-domiciliation negates the risk that companies be liquidated or dissolved in their jurisdiction of incorporation and, subsequently, re-incorporated in Malta. This process would imply the disruption of their business and the contractual relationships into which they would have entered and the risk that financial losses would be made. Moreover, re-domiciliation offers many practical benefits, including the fact that it does not trigger any form of taxes and is not subject to stamp duties or entry taxes.

Therefore, the option of re-domiciliation offers a practical method of continuation of business operations from a foreign country to Malta. It is, undoubtedly, a suitable and, arguably, more efficient alternative to other corporate restructuring models such as cross-border mergers and acquisitions, which may prove too burdensome and time-consuming. Having said that, the Continuation of Companies Regulations provide for certain stringent criteria which are required to be met and satisfied in order that the re-domiciliation may take place.

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

Author: Dr Karl Cauchi