By virtue of Act XVIII of 2024 entitled the Companies (Amendment) Act 2024 (the ‘Act’), various amendments to the Maltese Companies Act were implemented, specifically in relation to the reduction in companies’ issued share capital, the cancellation or acquisition of a company’s own shares and the requisition of general meetings by shareholders.

This article aims to summarize some of the most salient points introduced by the Act.

Article 83 of the Act – Reduction in Issued Share Capital

In terms of the amended Article 83, a company may now reduce its issued share capital or undistributable reserves, not only to offset losses or because it is deemed necessary by virtue of an extraordinary resolution, but also to create a distributable reserve.

Should the purpose of the reduction be to create a distributable reserve from an undistributable reserve, the newly introduced Article 83 determines that such distributable reserve will be treated as an authorized profit. It is yet unclear as to what the definition of ‘authorized profit’ is since the Act neither defines nor clarifies as to what this refers to. It is expected that additional legislative intervention will be undertaken to determine the exact meaning of this provision.

Article 83(9) confirms that if a reduction is undertaken to reduce an undistributable reserve and create a distributable reserve, the amount from the reduction cannot be used to make any payments or distributions to the shareholders or to discharge any shareholders to pay any calls on their shares. Despite this, Article 83(10) determines that payments or distributions as well as the discharging of shareholders to pay any calls on their shares may be done if authorized through an extraordinary resolution and there are no objections within 3 months from the date of publication of a notice by the Registrar regarding this reduction. This 3-month period allows creditors the opportunity to object to the reduction of the issued share capital if they have an interest.

A specific notice is now also required to be submitted for registration with the Registrar when a reduction in the issued share capital of a company becomes effective. As is custom with similar notices, such notice must be delivered within 14 days from the effective date of the reduction in the issued share capital. This is an additional requirement as prior to these amendments an extraordinary resolution and an updated Memorandum and Articles of Association were sufficient to notify the Registrar of these changes.

Share Buy-Backs

Article 106 of the Maltese Companies Act regulates the concept of share buybacks, which is essentially the acquisition by a company of its own shares other than by subscription and determines the requirements for this to take place.

By virtue of these recent amendments, it has been clarified that a share buyback may take place without the fulfilment of the requirements indicated under Article 106 if they have been acquired by the company through an order of the Court under the provisions of the Companies Act and regulations issued thereunder for the re-purchase of shares held by the dissenting shareholders.

Furthermore, it has been clarified that the undistributable reserve created if the shares bought back by the company are included in the assets of the company shown in the balance sheet shall become distributable if such shares are cancelled in line with the applicable laws.

A notice informing the Registrar regarding the details of the share buyback has also been introduced, however, the format and the information required still need to be issued as at the date of this article.

Requisitioned Meetings

Requisitioned meetings are special meetings that are called on request by the shareholders of a company for a specific reason. Prior to the changes enacted through the Act, the law did not specify a timeframe for when such requisitioned meeting needed to take place.

Through the enactment of the new Article 129, it has been clarified that if the directors of a company are requisitioned to call an extraordinary general meeting by members holding not less than one tenth of the paid up share capital of the company, then such meeting must be convened within 21 days from the date of deposit of the requisition and must take place within 2 months from the date when the requisition was deposited.

Should the directors not proceed with holding the meeting, then the people requisitioning the meeting may convene the said meeting themselves, provided that such a meeting is held before the expiration of 3 months from the date of deposit of the requisition.

Additionally, the requisition must state the objects of the meeting, shall be signed by all the people requisitioning the meeting and deposited at the registered office of the company. Any ancillary documents related to the requisition should also be duly signed by all members requisitioning the meeting. One may argue that these requirements are somewhat onerous and pose an administrative burden on the people making this requisition.

Additional Notices introduced for certain appointments

The Act has also introduced the requirement to submit specific notices with the Registrar
with respect to the following:

• The appointment of the first auditor of a company or the appointment of a new auditor upon the resignation or removal of the previous auditor within 14 days from the appointment and;

• The appointment by order of the Court or other competent authority as an administrator, legal representative or as the person being de facto responsible for the management or administration of a company. The notice must be submitted to the Registrar within 14 days of the date of the appointment and should include specific details as indicated under the Act. A similar notice should also be delivered upon the resignation or removal.

Failure to submit any of the statutory notices in line with the Act shall be subject to administrative penalties.

This article and its content should not be considered as legal, financial or tax advice. Should any further information or guidance be required in relation to the above, please do not hesitate to contact 3a on [email protected].