Mergers and Acquisitions and Re-domiciliation
Mergers and acquisitions are regulated by the Companies Act (Chapter 386 of the Laws of Malta). A merger can be effected between limited liability companies, as well as between partnerships en nom collectif and/or en commandite. There are two ways in which a merger of two or more companies may take place:
- By means of a merger by acquisition; or
- By means of the formation of a new company.
The former refers to a situation where an acquiring company takes on all the assets and liabilities of another company or companies. The acquired company’s shareholders receive shares in the acquiring company and a cash payment (if any) which does not exceed 10% of the nominal value of the shares so issued.
A merger by formation of a new company involves the delivery by two or more companies of all their assets and liabilities to the company being set up, where the shareholders of the merging companies are issued with shares in the new company and a cash payment (if any) not exceeding 10% of the nominal value of the shares so issued.
The Control of Concentrations Regulations (Subsidiary Legislation 379.08) provide that, unless it is otherwise specified in the Regulations themselves, the Director of the Office for Fair Competition must be informed of the acquisition of two or more undertakings. His approval is required prior to implementation in the event that there is a change of control of a lasting nature and if two or more previously independent undertakings merge, or if one or more undertakings acquire control of one or more undertakings, whether by purchase of securities or assets, by contract, or by any other means. These events give rise to a ‘concentration’. They may occur in or outside Malta, where in the preceding financial year the aggregate turnover in Malta of the undertakings involved exceeded €2,329,373.40, and each individual undertaking had a turnover in Malta equivalent to at least 10% of the aforementioned combined aggregate.
Other legislative instruments regulating merger activity in Malta are Council Regulation 139/2004/EC on the control of concentrations between undertakings - known as the ‘EC Merger Regulation’ - and Directive 2005/56/EC on cross-border mergers of limited liability companies. The Commission must be informed of concentrations having a ‘Community dimension’ (the relevant requirements are specified in the Regulation). Where mergers and acquisitions are concerned, the parties involved must complete this notification jointly.
Following Malta’s accession into the EU in 2004, the local Mergers & Acquisitions sector expanded greatly, fuelled by Malta’s improved tax treatment of foreign companies carrying out cross-border acquisitions.
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This information has been provided merely for information purposes and does not constitute legal or specialist advice. Should more information be sought it is recommended to contact Valletta Legal.
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