Answer ... (a) Commercial/corporate
The Maltese Registry of Companies is housed within the infrastructure of the Malta Business Registry (MBR), which operates a very comprehensive online database of all Malta-registered companies and all official documents files by such companies over the years. The uploading of documents onto the MBR’s online systems can sometimes be delayed by several weeks, making it more difficult to get a comprehensive understanding of the target’s corporate standing in the absence of the appropriate declarations from the target’s directors or company secretary.
(b) Financial
All Malta-registered companies must file audited annual accounts (International Financial Reporting Standards or General Accounting Principles for Small and Medium-Sized Enterprises for smaller businesses) with the MBR, providing a prospective buyer with high-level, preliminary information about the target’s historical financial performance.
(c) Litigation
Searches undertaken in the public indexing system maintained by the Registrar of Courts in Malta for any pending suits or causes of action against or involving the target do not necessarily identify all such suits or causes of action within an acceptable degree of certainty. Consequently, the appropriate representations and warranties should be sought from the target and from the vendor by way of assurance.
(d) Tax
The Maltese tax authorities do not accede to requests for any tax clearances, declarations or ‘clean bill of health’ in the context of due diligence exercises. A prospective purchaser will therefore need to ensure that all tax, value added tax and social security filings are duly disclosed and carefully reviewed in the course of the due diligence exercise, to ensure that no legacy issues arise post-acquisition. The Commissioner for Revenue has up to eight years within which to pursue any claims for tax (and penalties) and collect income tax, calculated from the year in which the tax was due.
It is also important for prospective buyers of Maltese companies to obtain Malta tax advice relating to the tax treatment of the proposed transaction, whether structured as a share purchase or an asset purchase, to ensure that any tax implications are duly accounted for in the purchaser’s offer price. At a later stage, it will also be important for the purchaser to ensure that all appropriate tax clearances, clarifications and paperwork are obtained and in place well in advance of the transaction closing, as such documents may take several weeks to obtain from the local tax authority.
(e) Employment
Malta’s employment law framework transposes all EU directives and regulations, including the Transfers of Undertakings Directive (2001/23/EC), which have been implemented through the Employment and Industrial Relations Act and the Transfer of Business (Protection of Employment) Regulations. In the context of a transfer of assets, it is important to assess the applicability of these rules to ensure that any issues are properly managed and the appropriate procedures are duly complied with.
(f) Intellectual property and IT
There are no jurisdiction-specific points to report.
(g) Data protection
Malta has transposed and implemented the provisions of the General Data Protection Regulation. Data protection best practice is expected to be in line with the practices adopted in continental Europe.
(h) Cybersecurity
There are no jurisdiction-specific points to report.
(i) Real estate
Searches for real estate assets and any security rights thereon are undertaken in the public indexing system maintained by the Public Registry in Malta. Public deeds requiring registration at law – such as deeds of purchase and sale of immovable property, causes of preference among creditors, hypothecs, privileges and other registrations – are enrolled in the Public Registry and are searchable on the basis of the target’s name and registration number. While public registry searches are generally accurate and comprehensive, it is not unusual that certain deeds may not be identified in the search due to changes in the target’s name or, less frequently, errors in the search process. For this reason, it is advisable that searches are undertaken in respect of any past name/s that the target may have borne, and that the appropriate warranties and assurances are sought from the target and from the vendor. Public Registry searches take three weeks to be conducted, but a ‘fast-track’ option of one week is also available, at an additional cost.