Malta Business Registry set to reap benefits from projects
When the Malta Financial Services Advisory Council launched its strategy for financial services in 2024, there were a number of deliverables listed for the Malta Business Registry (MBR).
The MBR, under the leadership of Geraldine Spiteri Lucas, was well prepared. Many of the projects had already been identified in its own strategy, starting with digitisation, while three of the MFSAC’s five pillars – speed, simplification and specialisation – were already guiding its progress. The other two, standards and sustainability, were already part of the ethos for the MBR, as well as for other regulators and authorities.
One of the projects that was already underway at the launch of the financial services strategy was digitisation, aimed not only at external users but also to help with internal processes. For example, artificial intelligence is going to be used to vet the hundreds of thousands of annual accounts sent in every year, which is currently done by the MBR staff.
“From our end, it is just a checklist exercise, which can easily be automated. We will use AI concurrently with the staff for about 18 months to ensure that the system has learned all the possibilities, but after that AI will be able to take over this task, we will be in a better position to free up our staff from these duties and use them where is more required,” she said.
It will also speed up the process, meaning that once annual accounts are filed, they will be uploaded immediately.
“Once this system is up and running, we will consider automating other forms, such as annual returns and also possibly the resignation of directors. We are already working on an AI strategy which should be in place later this year.”
Some of the projects involved other entities – like the Central Data Repository system – for which the tender has now been awarded, with work about to start , a much awaited initiative aimed as lessening unnecessary bureaucratic procedures for prospective investors. But others were for specifically for the MBR, such as the introduction of an online system, which it delivered in November 2023 and is being continually enhanced.
One of the most complicated projects was the thorough review of the 1995 Companies Act, which it aimed to complete within just 18 months. The MBR had to be prepared for various issues that would arise and set up a subcommittee to scrutinise the amendments, including those affecting the financial services sector, which included representatives of the Malta Financial Services Authority, the Financial Intelligence Analysis Unit, as well as stakeholders such as the Institute for Financial Services Practitioners (IFSP) and the Malta Institute of Accountants (MIA).
Another of the Act’s amendments relates to electronic mail, which affects not only communication with the registry but also with other suppliers. It will be possible to change an email address through a form, as opposed to the current system of having to file a new Memorandum and Articles. The company will also be obliged to ensure that the email addresses provided to the MBR – up to five are accepted – is actively monitored.
“It is quite an important issue as the MBR is one of the authorities that sends official notifications by email, reminding them of their obligations,” she explained. “Companies should not be able to claim that they did not receive these. There should be no excuse.”
Another major change was introducing the ability to increase share capital through non-cash means: for example, through shares in other companies. Of course, the issue was how to value these non-cash considerations, which up till now has had to be done by an auditor. Once the Act comes into force, amounts up to €50,000 can be verified by a simple directors’ declaration if they so choose.
The MBR has been working with the IFSP to ensure that the approach is consistent and that there are no loopholes, creating a template for the declaration, complemented by guidelines on its use.
Another interesting amendment affects listed entities, which needs to send the same financial statements to the MFSA, the Malta Stock Exchange (MSE) and the MBR. An amendment to the Act will enable the entity to submit the statements just once to the MFSA, and for the MSE and the MBR to then access them directly from the MFSA’s system. This is in line with the ‘one stop shop’ approach and can be implemented as soon as the IT systems are aligned.
Apart from resolving such pain points, the MBR also looked at ways to improve the attractiveness of the jurisdiction. One of the upcoming changes involves the use of cell companies – which up to now were limited to assets such as ships and planes – for other mobile assets from cars to diamonds.
“Protected cell companies have been fundamental for the development of the insurance sector. We explored whether there were other areas that Malta could consider as they are many advantages,” she said. “Cell companies have the benefit of being within the risk appetite of banks when it comes to advances, for example.”
There were also lacunae in the system which resulted in huge costs and delays, the main one being the dissolution framework. If a company wanted to wind up its operations, it had to appoint a liquidator, for example, who would establish liquidation accounts and a scheme of distribution.
“However, there was no distinction whatsoever between a non-trading company and a fully-fledged trading company with employees and a turnover of millions. All too often, for the former, when a company was faced with the bureaucracy involved in dissolution, it was easier to just resign and leave, forcing the MBR to strike off the company – which means there is no liquidation process whatsoever and any assets would devolve upon the Government of Malta.
“We wanted something in between and after researching what other jurisdictions were doing,” she said.
There are a number of restrictions on the eligibility of companies wishing to use this procedure, but a simple dissolution application will be all that is needed, without the need for a liquidator to be appointed.
“Malta has always promoted itself as having a straightforward registration. But it was also important to be able to dissolve a company!” she explained.
The final step will be for these amendments to come into force, which will be done through a legal notice in the coming months. This will mark the end of an important project for the MBR, which has had to weigh through numerous, sometimes conflicting, solutions proposed by stakeholders. At the end it had to weigh up all the feedback and take a decision.
“Among these amendments in place, important thing is to ensure that you have a full picture of the implications and come up with a system that applies to all users and which is not open to abuse, enhances transparency and safeguards the Maltese jurisdiction,” Dr Spiteri Lucas said.