Malta Family Business legislation comes into force

Daniela Galea | 28 Feb 2017

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The year 2017 saw the new Family Business Act coming into force. This piece of legislation is acknowledged as being a pioneer in the area of Family Business because of a number of reasons.

Primarily, this new law recognises a ‘family business’ in a new legal form. Malta is the first jurisdiction to specifically legislate for family business and define this business model for identification and regulation purposes. The definition is listed in Article 3 of the Act, consisting of both direct and indirect modes of ownership. Direct ownership of the family business can take the form of a listed company, a limited liability company, a registered partnership, a business set up as a trust, an unregistered partnership and any other business as the Minister may prescribe. Indirect ownership of the family business is identified in holding companies, those held in a trust and private foundations. In view of the fact that prior to this legislation, there has never been an EU harmonised, legally-binding definition of what constitutes a family business, this addition is somewhat significant.

The Family Business Act also establishes and introduces a Regulator who shall be a person appointed for a period of three years to manage, supervise and administer the Register of Family Businesses. The Regulator’s role is to assess all applicants seeking to register as a family business under the Act and ensure on-going compliance with the legislation. The spirit of the Act ensures that a regulatory framework encourages family members within the same family to transfer their family business inter vivos, as opposed to transfer causa mortis. In doing so, this mode would far likely result in the success of the continuity of the business and the law also introduces a number of benefits and assistance which help family businesses facilitate the transfer.

The benefits currently applicable for businesses upon registration as a family business are listed in Article 41(C) of the Duty on Documents and Transfers Act and in 2 measures provided by Malta Enterprises with regards to transfer of ownership and support services. 



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