The Directive (EU) 2019/2121 of the European Parliament and of the Council of 27 November 2019 amending Directive (EU) 2017/1132 as regards cross-border conversions, mergers, and divisions, referred to as the “Mobility Directive” has been transposed into Maltese law on the 31st of January 2023.
The Mobility Directive is aimed at further enhancing the freedom of establishment of companies by creating a harmonized legal framework applicable to all Member States in the sphere of cross-border movement of limited liability companies, particularly cross-border divisions and conversions, which up until the coming into force of the Mobility Directive were largely dependent on fragmented national Member States’ legislation. This legal framework may result in an increased level of cross-border movement of limited liability companies, due to a reduction of costs in performing such mobility operations, especially SMEs, and also in the enhancement and further realization of advantages associated with the EU’s Single Market.
Spearheaded by the Ministry for the Economy, European Funds and Lands, three new Regulations under the Companies Act were put forward – the Companies Act (Cross-border Conversions of Limited Liability Companies) Regulations; the Companies Act (Cross-border Mergers of Limited Liability Companies) Regulations and the Companies Act (Cross-border Divisions of Limited Liability Companies) Regulations. To fully implement the transposition measures required as result of the Mobility Directive, the existing Cross-border Mergers of Limited Liability Companies Regulations (S.L. 386.12) are being repealed in order to be replaced by the new already referred to cross-border Regulations.
Through a national legislative initiative, the legal framework of cross-border mobility will, through the foregoing proposed regulations, equally apply to those limited liability companies which are formed in accordance with the law of other recognized jurisdictions outside of the European Union.
All in all, this will aid both public and private limited liability companies incorporated in one EU Member State to conduct a cross-border mobility operation to or with any other EU Member State, and through the Maltese national initiative, it will also encourage the freedom of establishment of limited liability companies formed or registered in accordance with the law of other recognized jurisdictions outside of the EU to carry out the same cross-border mobility operations available within the EU’s Single Market.
The Mobility Directive has been an awaited legislative instrument in the sphere of company law. Its effects may very well enhance competitiveness, reduce costs and administrative burdens, especially for companies having limited financial resources, thus offering greater productivity advantages as a result of economies of scale, and above all, provide adequate protection to shareholders, workers, and creditors of the involved companies. This protection arises from the provisions of the Mobility Directive itself.
Malta Business Registry’s Chief Executive Officer and Registrar Dr Geraldine Spiteri Lucas remarked that the new legal initiatives in place will encourage businesses to venture in the international markets whilst ensuring that the operation of the company and the employees are safeguarded throughout. ‘In an ever-changing world, the algorithm of businesses is constantly changing, and the transposition of the Mobility Directive caters to this scenario; that is by ensuring a sense of flexibility when it comes to business operations, something that has long been the essence of Malta’s Companies Act, and on the other hand, it ensures to safeguard employees’ said Dr Spiteri Lucas.
Minister for the Economy, EU Funds and Lands Silvio Schembri remarked that 28 cross-border companies have been registered in Malta by end of 2022. The new regulations will encourage free movement, strengthen Malta’s stance in mitigating money laundering, and most important voice employees’ concerns when the company is considering a cross-border mobility operation whilst safeguarding their interests’ said Minister Schembri.