MALTA: An Introduction to General Business Law
General Business Law – Malta
Malta’s general business law has developed over the years, and contains elements of Continental law, English law and European law, with Malta having a mixed legal system.
Malta’s civil law background is based on Roman law, with this having developed as a result of the occupation by the Knights of St. John and by the French, who were in Malta until the years 1798 and 1800 respectively. The concepts found in the Maltese Civil Code, and Maltese civil law generally, are therefore very similar to those found in continental European countries, such as Italy and France. With Malta having obtained its independence from the United Kingdom in 1964, a number of laws and regulations dealing with business have the laws of England as their main source – by way of example the Maltese Companies Act of 1995 was based on the UK Companies Act of 1985 (as amended by the UK Companies Act of 1989). Furthermore, as Malta joined the European Union in 2004, most laws regulating business in Malta were updated to comply with European Union laws, and Maltese law continues to be influenced by European Union law on an ongoing basis.
Throughout the years, specific laws have also helped certain industries develop – examples of these have been the financial services sector, the maritime industry, the aviation industry, and others. The promulgation of laws regulating each of these sectors has given industry players and their financiers much needed certainty within which to operate, thereby enabling the growth of these industries. Other laws have also been introduced throughout the years to provide flexibility to the laws of Malta and to businesses operating in or from Malta – possibly one of the best examples of this would be the introduction of the law on trusts and trustees in 2004.
Given that Malta is the smallest member of the European Union, in both size and population, joining the European Union in 2004 has resulted in significant changes taking place to the way in which local companies operate, and also to the way in which foreign investors look at Malta. The main benefit that European Union membership brought has been that of significantly stretching the borders within which companies operate – being established in Malta generally allows a company to operate within the internal market of the European Union, which is significantly different to the limitations of the Maltese market that existed before 2004. This has resulted in a number of financial services operators establishing themselves in Malta while seeking to passport their services across the European Union.
Given the larger market available to business entities established in Malta, regulators have been constantly seeking to ensure that all European Union Regulations and Directives are implemented and enforced in Malta, and that guidelines issued by other international bodies are also followed and adhered to. Thus, local regulators are now seeking to ensure that despite Malta being a small jurisdiction, and though the resources of Maltese authorities and regulators may be somewhat limited (when compared with the resources which authorities in larger jurisdictions than Malta have), Malta establishes itself as a high quality jurisdiction that requires strict adherence to European Union laws and regulations, which are rigorously implemented and enforced. This has resulted in most local business entities investing heavily in their compliance departments and there has also been an increased demand for compliance related services from law firms and legal professionals.
COVID-19 has also significantly affected most business entities in Malta – particularly those involved in the tourism, maritime and aviation sectors. While business entities have had to adapt to allow for greater flexibility for their employees to work remotely, for general meetings to be held remotely (through the use of technology), and to provide their services notwithstanding the various restrictions that were imposed from time to time, other entities have been negatively impacted as a result of the particular industry within which they operated.
The hospitality sector, in particular, suffered a downturn as tourism levels dropped to new lows as a result of COVID-19. The Government has therefore provided incentives to businesses to get through these times, and also introduced restrictions on the possibility of commencing insolvency proceedings (when a business faced financial difficulties as a result of COVID-19). As a result, a number of entities have been looking at refinancing possibilities, and other business entities have been the subject of an acquisition from new investors. The downturn caused by COVID-19 has therefore also resulted in an increased demand for the services of legal professionals as business entities have sought to navigate through the restrictions that have been imposed, and resort to the advice of their lawyers to deal with various contractual problems they have been facing.
The Maltese legal sphere has therefore continued to see a number of developments as a result of the above matters, with it being likely that these developments will continue to take place over the coming months. It is therefore envisaged that legal professionals will continue to be occupied as clients continue to navigate through these times. Compliance costs for clients will, however, probably continue to increase in light of the above. There does, however, seem to be an acceptance that these costs will only serve to ensure that operating in Malta will be a mark of seriousness and professionalism, and that being allowed to operate in or from Malta will, in itself, result in one being certain of one’s continued compliance to the relevant laws, regulations and international guidelines that may be applicable to a business entity.