This article was written by Dr Nicholas Valenzia and Dr Joshua Chircop.
Amendments have been made to the Companies Act allowing for the introduction of regulations regarding Cell Companies carrying on or engaged in Shipping or Aviation Business (the “Regulations”).
The Regulations
The amendments have introduced a new article[i] to the Companies Act, which gives the authority to the Minister responsible for the registration of commercial partnerships (the “Minister”) to make the Regulations. The Regulations are expected to be promulgated under Maltese law imminently.
The Regulations are expected to provide for the formation, constitution, authorisation and regulation of Cell Companies carrying on or engaged in Shipping or Aviation Business. Companies carrying on or engaged in the Shipping or Aviation Business will be able to convert into a Cell Company.
The Regulations are also expected to make provision regarding the contents of the memorandum and articles of association of a Cell Company, including provision for the creation by the Cell Company of any one or more Cells, and for segregating and protecting the Cellular and other assets of the company, and establish reporting and other disclosure requirements.
The Regulations may provide for the exemption of such company from any of the provisions of the Companies Act or of any other law in force, subject to such modifications, variations and conditions as may be specified therein. Moreover, the Regulations may make provision for the manner and the form whereby a Cell Company may create and issue Cell shares and to make any provision relating to the assets of the Cell Company, including the requirement that the assets of a Cell company should be of a specified class or description, or any other requirements in respect of the quality, nature or extent of such assets.
The Regulations are expected to make provision allowing Cells or the Cellular assets attributable to any Cell of a Cell company to be transferable to any other person and to make provision for considering individual Cells as separate and distinct entities for such purposes as maybe established therein.[ii]
The Regulations are also expected to provide for the formation, constitution, authorisation and regulation of incorporated Cell Companies and incorporated Cells as limited liability companies with separate legal personality under the Companies Act, and which make it possible for such companies to carry on or be engaged in Shipping or Aviation Business, and for all other matters related, connected or ancillary thereto or that may arise in connection therewith.[iii]
Shipping or Aviation Business
Shipping or Aviation Business means all or any of the following:
(i) the ownership, operation (under charter, lease or otherwise), administration and management (including personnel engagement, employment or management whether on board or otherwise) of any ship or of any aircraft or aircraft engine and the carrying on of all ancillary financial, security, commercial and other activities in connection therewith; or
(ii) the holding of shares or other equity interests in any undertaking, whether Maltese or otherwise, established solely or mainly for the carrying on or carrying out of any one or more of the activities referred to in this definition and the carrying on of all ancillary financial, security, commercial and other activities in connection therewith; or
(iii) the activities of a parent company which holds shares or other equity interests in undertakings, whether Maltese or otherwise, where any one or some of these undertakings is established solely or mainly for the carrying on or carrying out of any one or more of the activities referred to in this definition and the carrying on of all ancillary financial, security, commercial and other activities in connection therewith; or
(iv) the raising of capital through loans, the issue of guarantees or the issue of securities by an undertaking when the purpose of such activity is to achieve the objects or activities stated in the preceding sub-paragraphs for the undertaking itself or for any other undertaking within the same group; or
(v) the carrying on of such other objects or activities within the maritime or the aviation sector and related or connected matters which the Minister may, on the advice of the Malta Financial Services Authority, from time to time prescribe by regulations.[iv]
The terms “group”, “parent company” and “undertaking” have the same meaning as is given to them in the Companies Act.
Cells, Cellular Assets and Cell Companies
A Cell is created by a Cell Company for the purpose of segregating and protecting the Cellular Assets of the company in such manner as may be prescribed and includes a reference to segregated accounts, compartments or units within a company having multiple accounts, compartments or units, by whatever name designated.
Cellular Assets of a Cell Company are the assets of the company attributable to any Cell of the company as may be prescribed.
A Cell Company is a company formed or constituted as such or converted into a Cell Company and creating within itself one or more Cells for the purpose of segregating and protecting the Cellular Assets of the company in such manner as may be prescribed.
References to a “company” include references to a partnership en commandite or similar or equivalent body corporate, the capital of which is divided into shares. [v]
Cell Companies in Malta
Cell Companies have been regulated under Maltese law for some time and are used by insurance companies under the Companies Act (Cell Companies Carrying on Business of Insurance) Regulations and by securitisation vehicles and investment companies with variable share capital under the Securitisation Act. Recent amendments to the Civil Code also allow for the use of segregated cells by foundations and associations.
Benefits of Cell Companies
- The assets and liabilities of each individual Cell are a distinct patrimony and are segregated from the core Cell Company and from other individual Cells allowing for the structuring and ring-fencing of each Cell.
- The core Cell Company is a single legal person and the creation of each new Cell does not create a new legal person separate from the Cell Company and so each individual Cell is bound to transact by means of the core Cell Company.
- Once the Cell Company is established, it is relatively quick for new Cells to be set up and begin operations.
- There is one board of directors and one set of Memorandum and Articles of Association for the Cell Company and all its Cells.
- This allows for simpler administration and shared overhead costs.
- One operative license is required for an entire Cell Company even though it has individual Cells.
- A creditor of one particular Cell only has recourse to the assets that particular Cell and not the remaining Cells or the core Cell Company.
- The insolvency of one particular Cell has no impact on the remaining Cells or the Cell Company.
- Individual Cells are easier and quicker to close down than a regular Company.
- Cell Companies and their Cells benefit from Malta’s tax imputation system.
[i] ibid, Article 84E
[ii] ibid, Article 84E(1)(a)
[iii] ibid, Article 84E(2)
[iv] ibid, Article 84E(1)(b)
[v] Article 84E(1)(c), Companies Act, Chapter 386, Laws of Malta