Capital Requirements

The Malta Gaming Authority (“MGA”) has published the Capital Requirements Policy (“Policy”). It shall be applicable to all Licensees and Licence Applicants and is meant to provide a foundation to financial soundness for MGA licensees.

It applies to both B2Bs and B2Cs, in different manners.

The Policy delineates minimum share capital requirements (which are not changed), obligations to maintain a Positive Equity Position, and the process which Licensees shall follow when they are at a Negative Equity Position in order to restore at a Positive Equity Position.

Licensees are expected to maintain a Positive Equity Position for the duration of the MGA licence, and this to ensure that all licensees are best financially placed to sustain their operations. Such assessment shall be conducted by the MGA through the consideration of the total assets versus the total liabilities as put forward by the Licensee in its audited financial statements.

On the other hand, should a Licensee be in a Negative Equity Position, the MGA imposes a timeframe within which the Licensee would be required to restore its equity position in line with the Policy. Licensees shall be able to use issued and paid-up share capital, share premium reserves, and other reserves or components that are classified as equity within financial statements to restore the Licensee’s equity position.

Licensees closing their financial year end with a Negative Equity Position shall be required to restore their capital within 6 months from the closing of their financial year (“Restoration Period”).

During this Restoration Period, licensees are prohibited from increasing their loans payable unless the additional loans qualify as capital under the applicable accounting standards or are exceptionally approved by the Authority subject to appropriate safeguards.

The Policy does consider that B2B Licensees face a reduced level of risk due to only providing critical gaming supplies. Hence, in relation to these B2B suppliers, the Policy requires attainment of a Positive Equity Position when Negative Equity Position exceeds €3,000,000. That being said, the MGA shall retain discretionary power to mandate B2B Licensees to an earlier restoration should it deem necessary.

The MGA’s position is that it shall not require its Licensees to lock away their capital and thus, equity can be employed towards the Licensee’s working capital needs.

Licensees may also be permitted to maintain a Negative Equity Position and derogate from the obligation to restore a Positive Equity Position, provided that this is at the discretion of the MGA, which discretion shall consider the following:

• The MGA is satisfied with the overall financial stability and performance of the corporate group to which the Licensee belongs;
• The Licensee has implemented sufficient safeguards, which may include a pledge over group assets in favour of the MGA, bank or parent company guarantees, or insurance coverage; and/or
• Corporate Group Entities that are unable to restore their individual equity positions may be exempted from doing so, provided the group’s consolidated financial statements show a positive equity position and this is demonstrated to the satisfaction of the MGA.

Licensees granted a licence in 2025, or any year thereafter are required to restore their Positive Equity Position by no later than 30^th June of the year following the granting of the licence, irrespective of their financial year end. Any future instances of Negative Equity Position shall be rectified within the Restoration Period.

For licensees with a Negative Equity Position as at 31^st December 2024, the Authority may grant an Extended Restoration Period of up to five years from the publication of the Policy. This period will be determined on a case-by-case basis, taking into consideration the Licensee’s business model, operational status, extent of negative equity and overview of the financial performance of the Licensee, financial standing of group entities, and proposed capital injections.

In cases where the Negative Equity Position exceeds €1 million as at 31^st December 2024, Licensees are required to submit a detailed recapitalisation plan by 30^th November 2025, including audited financials and forecasts. The MGA shall approve this plan. Should there be material changes during the Extended Restoration Period, the Authority reserves the right to request updated plans and earlier corrective measures.

For information or assistance regarding Gaming & Betting Law please contact us at info@gtg.com.mt.

Authors: Dr Terence Cassar and Dr Neil Gauci