The Companies Act (Cap. 386 of the Laws of Malta) and its subsidiary legislation were recently amended to reflect the current and pressing needs for further digitalisation and simplification of procedures and enhancements to Malta’s company law framework. These amendments were brought about by an Act of Parliament (Act LX of 2021) and two legal notices (Legal Notice 422 and Legal Notice 423 of 2021), which served to transpose a European Union (EU) legislative act – Directive (EU) 2019/1151, referred to as the “digital tools and processes in company law Directive” (or “the Directive”).
The Directive’s scope is to harmonise fundamental company law requirements across the EU’s single market by introducing digital standards across the board. Among the Directive’s main aims is the obligation for EU Member States to provide adequate means and rules of procedure for citizens to form a company, or register a branch of a company, in the EU solely online. By resorting to online means, citizens would be able to submit the necessary documentation electronically without being physically present in the jurisdiction where the respective company or branch is being incorporated or registered. The Directive provides an exception to this rule, however, by leaving authorities in Member States with the discretion to demand a person’s physical presence on a case-by-case basis, specifically where there is reason to suspect identity falsification or non-compliance with the rules on legal capacity and on an applicant’s authority to represent a company.
Following the Directive’s provisions, changes introduced by Act LX of 2021 include the new requirement for newly appointed directors to give their consent in writing for such an appointment and to declare whether they are aware of any circumstances that could lead to disqualification from being appointed or to hold the position of director of a company registered in any Member State. These requisites are provided for by Article 139(1) and (5) of the Companies Act and concern directors who apply when a company is being formed, as well as for new appointments in existing companies. This legislative update seeks to improve the standards associated with company directors across the EU.
Any disqualification information recorded by each Member State’s registry may be inquired into by another Member State through a regulated electronic procedure via a system of interconnected business registers, under the responsibility of the EU’s e-Justice portal. This system facilitates the exchange of information between registries and is especially useful when a Member State is required to verify whether an applying director is disqualified in any other Member State.
As a result, Article 142(6) of the Companies Act has been introduced to denote that, when a person is applying to be a director, the Registrar shall consider any disqualification or relative information in other Member States. Accordingly, in such instances, the Registrar may decide not to accept a person’s appointment as director if that person is disqualified in another Member State.
In addition, digital processes being enhanced through these legislative amendments include the facility to file documents electronically during various company law processes, starting from the incorporation stage and spanning the company’s lifetime on the register. Detailed legislative provisions on the various digital processes and the exchange of information across Member States’ registers are contained in the subsidiary legislation as amended by the already-mentioned Legal Notices, the Companies Act (System of Interconnection of Registers) Regulations, and the Companies Act (Use of Digital Tools and Processes) Regulations.
More advanced initiatives, both local and EU-wide, are envisaged for the near future. These legal initiatives reflect technological developments and the needs of society, as well as continued commitment to improving the legal framework in which companies may operate, which ultimately bodes well for both Malta’s economic development and the EU’s single market.
Consequently, the Malta Business Registry is currently in the final preparatory phase to launch a new online portal, which will enable people to file documentation electronically in a more user-friendly manner and without the need for complex infrastructure. The only cardinal requirement is the use of qualified electronic signatures by all those submitting documentation. Such measures aim to increase efficiency by reducing the need for the physical presence of company officers or service providers at the registry.
Dr Damian Paul Cassar, Senior Professional Officer, Legal and Enforcement Unit at the Malta Business Registry
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