The Maltese flexible but robust regulatory regime favours the expansion of capital markets in Malta. In fact, through the MFSA, Malta offers the possibility for the listing of wholesale securities issued by securities vehicles. Securities may vary from bonds (debt) to shares (equity). The Malta Financial Services Authority (MFSA) is the independent regulator of all financial services in Malta, and this includes the regulation of capital markets. In recent years, and starting from Malta’s accession to the European Union, the Maltese capital market has sustained a significant increase in business generated through new financial instruments as well as an increase in the number of listed organisations and secondary market activity. Maltese regulation achieves the balance between transparent and robust regimes at law, including European-level anti-money laundering regulation, and the development of capital markets and financial services as a whole, and this is a major benefit for investment.
The Malta Stock Exchange is the only exchange available in Malta. It provides for numerous equity and debt transactions, providing facilities for securities to be admitted to trading and to be subsequently traded. Before a financial instrument is admitted to any of the Malta Stock Exchange lists, the financial instruments may be offered to the public. This is known as an Initial Public Offering. This offer is made in terms of an approved Prospectus which contains all the relevant information necessary for the public to be able to make an informed decision on the offering. This is known as the Primary Market. In recent years, however, the Maltese financial market has been rapidly developing the Secondary Market wherein financial instruments, already admitted on the market’s Lists, are traded on the regulated market in accordance with the market rules as laid down by the Malta Stock Exchange.
The Malta Stock Exchange boasts an efficient and personalised approach to the listing of new financial instruments. It encourages preliminary meetings prior to the submission of application for admission in order to achieve a smoother and beneficial result. The financial instruments seeking admission must be freely transferable and, the issuer may seek admission of the financial instrument to the Main List, the official listing, which caters for issuers with a proven 3-year minimum track record or else the Alternative Companies List which does not require a track record proof and has less burdensome requirements. This is aimed at financial instruments which are still being developed. Importantly, issuers who have been granted admissibility to the Listing, for both the Main and the Alternative Companies Lists, may opt to have the financial instrument be traded on the Malta Stock Exchange or else have them traded anywhere else within the EU. This is because both the regulated markets enjoy passporting rights in the EU. Following admission, the issuer must comply with several disclosure requirements as well as appointing a Compliance Officer. GMX may assist in preparing all legal documentation with regards to such financial instruments and their potential access to the markets as well as provide advice with regards to the best option or options for the issuer in question.
In parallel to the above-mentioned admission, the issuer must also be approved by the regulator which is MFSA.
The Malta Stock Exchange is always developing new projects in order to continually increase international market access. The Malta Stock Exchange is also a member of various international organisations in the field of capital markets and central securities depository operations and therefore, this enables the Malta Stock Exchange to provide for further international opportunities that are not just limited to Europe but expand up to Africa and Asia.
The Malta Stock Exchange, in addition, holds a register for all securities in relation to issues of dematerialised securities by corporate or non-corporate issuers. In general, the services of the Central Securities Depository, which include distinct back-end administrative services, are available to listed and unlisted companies, as well as in general to non-corporate issuers such as unit trusts and mutual schemes.
The Malta Stock Exchange, together with the Irish Stock Exchange, created a new regulated market approved as an EU regulated market under MiFiD and as a recognised stock exchange within the meaning of the UK Income Tax Act. The European Wholesale Capital Market (EWCM), as it is known, may be accessed by potential issuers in accordance with the regulatory requirements of the MFSA. The MFSA abides by strict short timelines in order to efficiently deal with submissions of prospectuses in this regard.
A new initiative which the Malta Stock Exchange opened to small and medium sized companies (SMEs) in 2016 is PROSPECTS. In this case, SMEs are as defined under EU regulation and in order to be eligible a company must be a public limited company (plc) and with a minimum issued and fully paid-up share capital of Euro 46, 588. This is a platform which is market regulated and facilitates access to the capital markets for such SMEs. With this new venture, SMEs will be able to raise capital by issuing bonds, issuing new shares, or selling existing shares to a pool of investors removed from direct family. In order for an SME to gain access to this platform, it must appoint its Corporate Advisor who is an approved professional expert in the regulations and guidelines of the platform and its obligations and requirements. This ensures transparency and corporate governance so as to create further investor confidence in the company. The securities are traded on the Malta Stock Exchange as normal. This platform is particularly addressed to family owned businesses as it facilitates succession planning. Application and annual fees are applicable for inclusion. Investors have complete flexibility in how much they wish to invest and may enjoy the advantages of the promoted growth of the SMEs.
Joint ventures are an increasingly sought-after commercial solution for many businesses. This commercial agreement between two or more independent companies may bring about various advantages for the parties involved. The simplest form of the joint venture is the one wherein all parties retain complete commercial independence and govern their relationship with a contract. Otherwise, the parties may also go for a more permanent relationship such as with an ad hoc partnership or a corporate joint venture and therefore the creation of a new company. In all instances, GMX may provide assistance with regards to advising on the best solution and the best tax- efficient structure for the entities in question, as well as drafting the necessary documentation from the contractual agreement, or the corporate documents for the creation of the new corporate entity, to shareholder agreements and other advice on any regulatory matters which may arise. Considering that such agreements may, most probably, deal with entities from different and foreign jurisdictions, jurisdictional and legal implications must also be kept in mind. Importantly, since a joint venture seeks to combine separate corporate entities there might be serious competition repercussions which need to be analysed.
Joint ventures must not breach the Maltese Competition Act (Chapter 379 of the Laws of Malta) which is based on European competition law, in particular Articles 5 and 9 of the same Act. Article 5 states that any agreement with the object or effect of preventing or restricting competition in Malta shall be null. Furthermore, any agreement which has the object or effect of abusing a dominant position within Malta is also prohibited. Therefore, such factors must be taken into consideration when proposing a joint venture agreement. In the case of a so-called full-function joint venture which is a joint venture performing on a lasting basis all the functions of an autonomous economic entity, Control of Concentration Regulations also apply. These were transposed into Maltese law and such a joint venture falls under the definition of a ‘concentration’. Therefore, such joint ventures or concentrations must, by law, be notified to the Director General of the Competition Authority prior to their implementation and following the conclusion of the agreement, within fifteen working days. The notification is examined and the Director General ensures that the concentration in question does not breach the regulations, or in general does not raise serious doubts about its lawfulness. Broadly, concentrations that might lead to a substantial lessening of competition in the
Maltese market or part thereof are prohibited. This underlines the particular importance of professional legal and corporate advice and guidance prior to the negotiation and conclusion of any joint venture agreement.
Different corporate entities may also enter into a strategic partnership which is generally a relationship between the two corporate entities governed by one or more business contracts. This falls short of a joint venture or any other wholly legal partnership. It is usually sought after in relationships with governmental or para-governmental entities. Such strategic partnerships still require adherence to general competition law as well as particular review of the agreements in question so as to protect the interests of the entities represented.
Mergers and Acquisitions (‘M&As’) are broadly regulated by the Maltese Companies Act (Chapter 386 of the Laws of Malta). The process for M&As generally differs for public listed companies and for private limited liability companies or public non-listed companies. There are also specific types of companies which have particular legislation governing them. Therefore, for example, SICAVs are governed by the Companies Act (SICAV Incorporated Cell Companies) Regulations (S.L. 386.14 of the Laws of Malta) and thus such legislation must also be taken into consideration when an M&A in this regard is taking place. The Investment Services Act (UCITS Mergers) Regulations (S.L. 370.19 of the Laws of Malta) regulate mergers for UCITS (Undertakings for Collective Investment in Transferable Securities) specifically. Similarly, M&As within certain fields, such as in gaming or financial services, further require regulatory clearance from their relevant regulatory authority or licensing authority and this is also an important point to take into consideration when contemplating an M&A. Therefore, it is important to note from the beginning that some M&As within specific fields require regulatory authorization in order to conclude the procedure and this usually takes a significant period of time which might need to be factored in.
Acquisitions in the case of private companies or public non-listed companies broadly occur by way of a purchase of shares via a share purchase agreement or by an asset acquisition. There may also be an amalgamation under a process which is governed by the Companies Act (Chapter 386 of the Laws of Malta). It states that there are two main manners in which a merger may take place and these are the merger by acquisition and the merger by the formation of a new company.
In the case of a merger by acquisition, the merging companies draft the terms of the merger which shall include all the relevant details and must be approved by the Registrar of Companies before being registered. A merger by acquisition may only be made by an extraordinary resolution of each amalgamating company. In order for such merger to take place, the law provides that an expert report regarding the potential merger must be prepared for all the shareholders. Therefore, an approved independent expert shall inspect the draft terms and provide his opinion on such terms which would include the share exchange ratio’s reasonableness and any special valuation difficulties which may have been encountered. Special rules apply in the case of acquisition of a company by another of more than 90% of its shares. Some obligations such as approval in a general meeting may not be required in the case of acquisition of all shares. Additionally, in the case of an acquisition of 90% or more (but less than 100%) of the voting shares of a company, the dissenting minority shareholders of the company being acquired have the rights to have their shares purchased by the acquiring company for a consideration corresponding to the fair value of the shares. In the case of a merger by formation of a new company, the terms of the merger are drafted and drawn up by each of the merging company and then the memorandum and articles of association of the newly formed company is registered with the authority.
Generally an M&A for a private company by way of a transfer of shares by private agreement takes less time to conclude since it is completely based on private negotiation between the parties involved. In the case of an amalgamation under the Companies Act (Chapter 386 of the Laws of Malta), there are certain timeframes which must be respected. As an example, the law states that an amalgamation in this regard, whether by acquisition or the formation of a new company, may not take effect until three months after the date of publication of a notice in the Government Gazette and a Maltese newspaper. In this time period, any creditor of each of the companies may come forward and oppose the amalgamation.
Acquisition for a public listed company generally takes place by way of a takeover offer or by a takeover bid which may be mandatory or voluntary. These bids are in actual fact public offers made to the shareholders of a public listed company to acquire all or some of its securities in order to achieve the acquisition of control of that company. These types of acquisitions are significantly regulated under our law by way of EU regulations
and directives which protect the company and the shareholders, including the minority shareholders of such companies throughout the acquisition process. Malta also has Listing Rules which provide further guidelines. A merger may also take place for public listed companies and this is heavily regulated.
The Listing Rules stipulate several steps which must take place within certain timeframes and which must be respected. As an example, the bidder has twenty-one days to make public his offer document following the announcement of the bid. The offer document must present a certain level of information which is disclosed publicly and also includes an independent expert report on the consideration being offered.
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