This Act is the first of its kind in Europe and is intended to address the various needs of family businesses. The Ministry of the Economy, Investment and Small Business of the Government of Malta created this Act to encourage the regulation of family businesses and their governance. Furthermore, it aims to assist family businesses to operate their in an efficient way and work towards a successful transfer of business from one generation to the next.
Some of the key aspects of the Act is the formal
definition of what constitutes a family business and a family member. A business shall only be registered as a family business once it has been accepted for registration by the Regulator and, a business shall be disqualified if it has not been actively trading or in operation without interruption for a minimum period of at least three consecutive calendar years. According to this Act, no single family member should hold more than 80 per cent of the shares in a family business to qualify for registration.
Prior to this Act, many family businesses in Malta did not succeeded to transfer their family businesses beyond their second generation. The newly enacted Chapter 565 aims to assist and reduce such difficulties for family businesses and their members, to be able to successfully transfer their business from one generation to the next.
The Family Business Act makes it possible for family businesses outside of Malta to register under this Act which in turn means that they will qualify for the incentives as well. This makes Malta an attractive jurisdiction for the restructuring of Family Businesses wherever the operation may be situated. Also, it is not limited to the limited liability structures only but encompasses unincorporated firms, holding structures and informal partnerships often founded in families. In addition to, the
Maltese law that caters for the redomiciliation, this may be a very useful tool for relocating foreign family businesses to Malta.