Cross-Border Conversions Under the Mobility Directive

Introduction to the Mobility Directive

The EU Directive 2019/2121 amending Directive 2017/1132 as regards cross-border conversions, mergers, and divisions, referred to as the Mobility Directive, was transposed into Maltese law with effect from 31 January 2023. Three sets of regulations were published as follows:

Regulations Implementing the Directive

• ‘Cross-Border Divisions of Limited Liability Companies Regulations, 2023’ introduced by virtue of Legal Notice 26 of 2023,

• ‘Cross-Border Conversions of Limited Liability Companies Regulations, 2023’ introduced by virtue of Legal Notice 27 of 2023, and

• ‘Cross-Border Mergers of Limited Liability Companies Regulations, 2023’ introduced by virtue of Legal Notice 28 of 2023.

Cross-Border Movement of Companies Before Transposition

Before the transposition of the Mobility Directive, Malta already allowed the movement of limited companies in and out of Malta to any other jurisdiction, not just within the EU but also with other non-EU jurisdictions, provided the other state has reciprocal legislation in force. Following the publication of the Cross-Border Conversions Regulations, the Continuation of Companies Regulations remain in force and will be applicable to a re-domiciliation to a jurisdiction outside the EU (as well as Member States who may not have yet implemented the Mobility Directive).

Draft Terms, Directors’ Reports, and Shareholder Protections

The Regulations contemplate the drawing up of draft terms of the cross-border operation and a directors’ report explaining and justifying the legal and economic aspects of the operation, as well as its implications to the Maltese company’s shareholders and employees. The directors are also required to submit a declaration of solvency accompanied by a statement of affairs of the company.

The Regulations provide for the possibility of the employees of the Maltese company to provide their feedback on the operation in question before the operation being approved by shareholders. In case of approval, any dissenting shareholders are given the opportunity to dispose of their shares in the Maltese company in return for adequate compensation equivalent to the value of the shares. Independent experts’ reports may be required although certain waivers for such a requirement are also contemplated under the Regulations.

Publication Requirements and Creditor Rights

The Regulations also necessitate the publication by the Malta Business Registry of certain documentation prepared and drawn up in order to implement the operation in question, as well as a creditor contestation period for any creditors of the Maltese company to oppose the implementation of the operation.

In the case of cross-border conversions, the publication periods consist of:

• a one-month period following the submission of the draft terms, and

• a three-month period after filing the prescribed form to obtain a pre-conversion certificate.

The latter may be filed once the shareholders approve the draft terms and the instrument of constitution which will apply in the other jurisdiction.

Completion of the Operation and Tax Considerations

The operation will be deemed complete following the lapse of all timeframes and other formalities and the issuance by the Maltese Registrar of Companies of the relevant certificate.

It is also pertinent to point out that guidelines issued by the Maltese tax authorities clearly state that the re-domiciliation process or change of residence of a Maltese company does not constitute a reporting obligation under DAC6 (Reportable Cross-Border Arrangements).

How we can help

EMCS may assist in the drawing up of the draft terms as well as other corporate documents, completion of forms, and submission and liaising with the Malta Business Registry. We will also liaise with the advisors in the other jurisdiction to ensure a smooth process in both jurisdictions.