EU Directive relating to Corporate Cross-Border Mobility transposed into Maltese Law

The processes for implementing each cross-border operation have a number of similarities which feature in each set of regulations, some of these being:

• The requirement to prepare draft terms containing details of the proposed crossborder operation, including where applicable, the details of the offer of cash compensation payable to any dissenting shareholders;

• Preparation of detailed directors’ reports addressed to shareholders and employees;

• Preparation of a report by an independent expert;

• Disclosure requirements in the interest of shareholders, employees and creditors;

• Application of a threemonth creditor notification period which will commence to run upon initial disclosure of the draft terms;

• The requirement of obtaining shareholder approval and protection of minority interests;

• Review of the cross-border operation by the Malta Business Registry (which may take up to three months) with the possibility of the application of an anti-abuse provision if the Registrar has serious doubts on the real purpose of the cross-border operation.

Furthermore, in transposing the Directive, the Maltese legislator has taken onboard certain options which are applicable to all three crossborder operations, namely:

1. Maltese companies wishing to carry out a cross-border operation need to submit a declaration of solvency together with the draft terms;

2. Maltese single member companies are exempt from the requirement of including a section addressed to members in the directors’ report and they are also exempt from the requirement of obtaining a report on the cross-border operation from an independent expert;

3. Cross-border operations are available to companies which are subject to preventive restructuring frameworks or crisis prevention measures.

The implementation requirements, which are derived from the Directive, reflect the EU Commission’s balancing act of harmonising processes while at the same time ensuring the protection of shareholders’, employees’ and creditors’ interests and the prevention of the use of EU freedoms for illicit purposes.

Undeniably the timeframes imposed by the Directive (and which have been reflected in the regulations) lengthen the process for completing a cross-border operation since the Registrar now has up to three months to review the cross-border operation prior to issuing a pre-operation certificate. The period of review may be extended by a further period of three months where the Registrar sees the need to conduct additional investigations due to serious concerns on the ultimate scope of the cross-border operation.

Notwithstanding the lengthened timeframes, the regulations seem to allow companies to apply for a pre-operation certificate while the creditor protection period is still running even though no certificate can be issued prior to the lapse of the said period. This means that the Malta Business Registry should be able to commence its review process in advance and companies would be gaining some time in transactions where usually time is of the essence.

Concluding remarks

Although cross-border operations have already been recognised by the ECJ in its judgments, the lack of harmonised legislation created legal uncertainties and barriers to the exercise of the freedom of establishment. The transposition of the Directive will now give an opportunity to companies situated within the EU to move across borders without having to be concerned whether national legislations permit the cross-border operation and without having to contend with the uncertainties arising from different and unaligned processes for implementation. In this respect, Maltese companies have the added advantage of being able to move within the EU and beyond thanks to the gold-plating exercise undertaken by the Maltese legislator. It is now hoped that through the efficient implementation of the new regulations Malta will increase its attractiveness as a jurisdiction of choice for international corporate business.

“The transposition of the Directive will now give an opportunity to companies situated within the EU to move across borders without having to be concerned whether national legislations permit the cross-border operation and without having to contend with the uncertainties arising from different and unaligned processes for implementation. ”