Approved Malta Family Business Act

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Approved Malta Family Business Act

Update on the Family Business Act: Approved Family Business Act by Cabinet
 

Family Business Advisers Ltd has the pleasure to inform you that another milestone has been achieved in June 2015, approved Malta Family Business Act. The Chairperson of the Family Business Act Committee has confirmed during a business breakfast seminar held during the third week of June by Bank of Valletta announced that the proposed draft Malta Family business Act has been approved by Cabinet and the White Paper is being prepared to be issued soon. This Act is an exciting piece of legislation. It is a first of its kind and is unique. The downside being that there are no templates that one could draw upon and furthermore this Act is being developed around existing legislative frameworks prevalent in Malta.

A main difference of this approved Malta Family Business Act compared to other Acts is that this will be an enabling Act and not a regulatory one. The objective being of motivating family businesses to apply if they so wish to be registered as Family Businesses and to help them develop better governance structures both for the family and the business and at the same time encourage family business owners to start planning for the continuity of the businesses at an early stage.

The legislation begins by defining and understanding what we mean by the word “family” and especially who is to be considered as an eligible family member for the objective of the approved Malta Family Business Act. Therefore ‘Family Member’ shall mean the owner’s spouse, descendants in the direct line and their relative spouses, brothers or sisters and their descendants. In comparison to EU guidelines on family businesses this definition is wider. Furthermore spouses does not only mean a husband and a wife under Malta’s Marriage Act but also partners in terms of the Civil Unions Act.

The approved Malta Family Business Act also clarifies what constitutes a family business in terms of size of the business, ownership, control, decision making and voting rights, and management control.

The legislation notes that family businesses can come in any shape and size and to cater for the various models, the legislation will be identifying and defining them individually. The EU guidelines on family businesses assume they are companies owning shares, thus restricting the exercise to Limited Liability companies and those listed on the stock exchange.

The approved Maltese Family Business Act is much wider and also recognises that family businesses may be partnerships or owned directly and indirectly through holding companies, trusts and foundations and also includes micro businesses which are not registered but which employ family members.

The various business models will be defined individually but there will still be consistency in relation to the criteria as to the requirements of ownership, number of family members involved and governance of both the family and the business.

Also the  approved Malta Family Business Act introduces the position of a Regulator who’s role will not simply be to act as a licensor but will be the vehicle navigating the legislation to make it more accessible to the widest number of family businesses possible.

The next phase which is now being awaited is the publication of the  approved Malta Family Business Act White Paper for general consultation before being forwarded to parliament for discussion and enactment. 

 Family Business Advisers Ltd being a leading a leader in family business advisory and consulting services to Maltese and international family businesses will keep you updated with developments on this Act. We are also planning a number of information seminars so that we could forward our feedback and suggestions to the Family Business White Paper.

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