MALTA Law and Practice Contributed by: Rosanne Bonnici and Rebecca Diacono, Fenech & Fenech Advocates
4.3 Transfer of Partial Interest In a transfer of shares in a Maltese company, the local capital gains tax rules distinguish between a transfer of a controlling interest and that of a smaller holding. A transfer of a controlling interest shall be deemed to have been made at the higher of the consideration and the market value of the shares. However, when deal - ing with the transfer of a non-controlling interest, the transfer value is determined by several factors, includ - ing the date of acquisition of the shares in question. The DDTA applies to both inter vivos transfers and the transmission of shares on death, but makes no such distinction. Disputes relating to succession matters are quite common in Malta and very much in line with similar trends in the rest of Western Europe. Most disputes relate to a spouse or child that has been excluded from the deceased’s will or who has been left merely the reserved portion catered for by law, challenging said deceased’s will. Other cases refer to instances of alleged manipulation of elderly people by their spouse, child or carers, with the deceased having been driven to leave significant assets to such individuals or hav - ing had their assets depleted by them. 5. Wealth Disputes 5.1 Trends Driving Disputes In recent years, there have been allegations that trusts or foundations were used by the deceased to hide assets from family members or to provide for second families/partners of which the deceased’s family had no knowledge. 5.2 Mechanism for Compensation The courts do not typically award damages to aggrieved parties in wealth disputes or disputes involving trusts, foundations or similar entities. The focus of the judgment in such cases is on ensuring that the party in question gets what is rightfully theirs – for instance, a child excluded from its parent’s inher - itance is awarded assets equivalent to the reserved portion to which it is entitled by law.
• the type of regime that is best suited from a legal perspective. As Malta is a civil law jurisdiction, the company has been the vehicle of choice for generations. Given the changing dynamics of family structures over the years, the use of trusts and foundations has increased, as they provide flexibility in planning for future genera - tions, particularly where the family dynamic is “non- traditional”. 4.2 Succession Planning Family businesses – both large and small – have been and remain the key driver of Malta’s economy. In this context, the company has traditionally been the vehicle of choice. Families are increasingly considering trusts and foundations to facilitate the transfer of wealth to future generations and, perhaps more importantly, to ensure the proper management of long-established businesses for the benefit of all moving forward. The Family Business Act was introduced fairly recently and has made a significant contribution at the local level to facilitating the transfer of family businesses to younger generations in a tax-efficient manner through various tax incentives, thereby increasing the likeli - hood that these businesses will remain viable in the future. In most cases, however, the key issue remains control, which the older generations are sometimes less than willing to relinquish. A robust shareholders’ agreement may go a long way towards regulating key concerns such as what happens in the case of the marriage of family mem - bers (which is crucial in Malta when considering that the default matrimonial regime is the community of acquests) or the manner in which a family member may exit the family business, including rules regulating transfers of shares in the business. Another step that families are taking of late to future-proof their busi - nesses is the inclusion of independent non-executive directors at board level; such directors may make a significant contribution by offering expert advice on key areas of the business, improving corporate gov - ernance standards and acting as mediators in situa - tions of conflict.
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