By far the most commonly, though not exclusively, used vehicle for setting up and operating a corporate joint venture (JV) in Malta is the private limited liability company. If the joint venture parties are crystal clear on how they wish to collaborate and on the manner in which power will be wielded among them, the joint venture may be set up relatively quickly but should by no means be a rushed or thoughtless exercise. The detailed elements regulating the joint venture are commonly fleshed out in a joint venture or shareholders' agreement (JVA). Oftentimes, the joint venture parties are keen on keeping the operational and commercial details of the venture private which is why it is useful that in terms of the Maltese Companies Act it is only certain key elements of the structure that must mandatorily be replicated into the company's memorandum and articles of association (M&A) which enter the public domain.


The initial share capital requirement for a private limited liability company is as low as EUR 1,165 and only 20% of this need be paid up; this is coupled with reasonable registration fees. Corporate service fees are also not prohibitive although they tend to vary depending on the provider chosen. This cost-effectiveness allows the joint venture parties to focus their funds on getting the right advice and perfecting the key aspects required to set up their venture while enabling them to pace further funding efforts possibly delaying until operations would need to proceed in earnest. It is not uncommon for the parties to agree on thresholds of commitment for further funding which are normally fully fleshed out in the JVA and only replicated in the M&A if the parties so choose.

Indeed, it is fairly common for the JV parties to have very specific requirements on funding their venture both initially and throughout its lifetime. Whether each party is to contribute equally to the venture financially, or one is to contribute financially while the other through assets (including intellectual property), the Maltese private limited liability company is flexible enough to accommodate many tailor-made requests in this respect. The initial and subsequent funds can be invested in numerous ways including through share capital, by way of gratuitous contributions or even through shareholder loans. Contributions 'in kind' (or 'in specie') are also possible both at incorporation stage and subsequently, although the law does prohibit the issuance of shares in exchange for certain types of 'non-cash' contributions. Future personal services and, in general, any undertakings to perform work or supply services may not be given by way of consideration for shares and any asset contributed as consideration for shares must be capable of economic assessment.

Power and Decision Making

The shares in the JV company can be created and tailored in myriad ways so as to accommodate the most specific of requests from each of the JV parties. Separate classes of shares can be used for each party carrying the particular economic and decision-making rights agreed upon. A central point here is that of ensuring that the dynamic created at inception will protect the JV parties' interests without hampering the day-to-day operation of the JV or bringing it to a standstill should there be strong divergence of opinion at shareholder level.

One factor to take into account here is the level of involvement of the shareholders in decision making processes. It is understandable that the shareholders will want to retain a say in certain key decisions but it is important not to extend their remit to a point where daily operations become impossible without heavy shareholder intervention. The best way to achieve equilibrium is to create a list of reserved matters which will necessarily require the shareholders' input and couple such a list with the appointment of a board of directors that enjoys the JV shareholders' full confidence. The latter can then operate relatively autonomously save in respect of certain, limited and pre-established instances listed as shareholder reserved matters. Such arrangements seek to strike the right balance between the board's ability to run the venture and the shareholders' need to retain a level of control over key issues that impact their interests. The inclusion of such reserved matters can also be boosted by inserting in the JVA ad hoc provisions on shareholder rights to information, such as rights to quarterly financial reports and the like.

There is then the interplay that exists as between the JV shareholders themselves when it comes to shareholder decisions. The correct mechanics for such decision-making can be tough to pin down when the JV parties have equal rights such as in a 50%-50% JV but it is not an impossible feat. In such a scenario the imperative becomes that of ensuring the availability of appropriate deadlock resolution mechanisms so as to cater for any eventuality where the shareholders are at loggerheads. Various options are available here including, to mention but one, the possibility of creating a system whereby the point causing the deadlock is referred to an external panel of experts for a decision within a prescribed amount of time. It is important to ensure that the process for appointing the panel will not itself become susceptible to shareholder deadlock.

When the JV shareholders' interests are not so equally split there is more flexibility and choice as to how to reflect the distribution of power. It can be achieved totally numerically – simply by reflecting the split through the appropriate ratio of shares to be subscribed; or it can be further tailored through the inclusion of specific mechanics like weighted voting rules or veto rights. The granting of powers of attorney by way of security may also serve to ensure that any obligation not observed by the party who bears it becomes vested in an attorney who is bound to follow through on it.

Essentially, once the minimum voting thresholds required at law for certain decisions are respected, additional safeguards can be introduced to tailor the constitutive documents of the JV in a manner which will faithfully reflect the agreement between the parties.

Return and Exit

Much flexibility is also available when structuring the return that will be received by the JV shareholders in terms of dividend and on a liquidation event. Once again, this can be done purely numerically by calculating the appropriate ratio of shares to be subscribed or it can be done by pegging specific dividend and return rights to certain classes of shares. Waterfalls can be created to achieve a chronology for the returns which will ensure that certain shareholders will take priority over others particularly when limited amounts are available for distribution. Specific percentages of guaranteed dividend can also be catered for and, in certain cases, returns can even be pegged to the success or otherwise of a particular project. All this will naturally remain subject to the dividends and returns being paid in accordance with applicable law.

A key factor for JV partners to discuss and agree upon at inception is their exit strategy. Failure to agree on this in advance may lead to significant hurdles at exit time which might prejudice the continued existence of the JV and the shareholders' interests. By far, the easiest method of exit for one or more of the shareholders would be to sell their shares to the other shareholder/s or to third parties. However, buy back options also exist at law although they can at times make for a lengthy exit process.

The JV parties will often want to implement specific rules about sale of their shares to third parties including an initial lock-in period where all shareholders are prohibited from selling their stake for a determined period of time. This is often coupled with a pre-emption process that must be followed once that lock-in period expires which seeks to ensure that any shares up for sale are offered to the remaining shareholders before they are offered to third parties. A sale of the JV company in its totality or its dissolution are also events to be catered for in advance as possible 'exit events' in respect of which, the JV shareholders' rights should be delineated at the outset. Using the Maltese private limited liability company as the JV vehicle offers all of the above possibilities.


Independently of the corporate structuring of the joint venture vehicle but equally important to consider are the tax, regulatory and competition aspects. A tax analysis is fruitful when setting up any new company and significant expertise is available on the island for the JV partners to tap when planning their structure. Similarly, prior to the incorporation of the JV company, it is important to ensure that any regulatory requirements triggered by the prospective activities of the JV are satisfied and that any competition notifications, if required, are made.

This article was first published in The Times, 8 November 2019.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.