MALTA Law and Practice Contributed by: Dr Josef Cachia Fenech Gonzi and Cherise Abela Grech, GTG Legal
decides to have various share classes as a result of the transaction, these must be listed in the memorandum of association of the company. The document is public and can be accessed by anyone at will. • The standard registration documents: this is a set of documents mandated by law which are required to formally register a transfer of shares in a company in Malta. These include statutory standard registration forms from the Malta Business Registry, standard duty and capital gains taxation forms and a short form share transfer instrument. These are not required if the transaction has occurred in a holding company outside of Malta, although if such transfer resulted in a change of benefi - cial ownership, a specific notification form must be filed in Malta. 3.5 Investor Safeguards There are various key protections that investors can attempt to secure when investing in an enter - prise. Essentially, all such measures are treated through share classes, and, to that effect, spe - cific classes of shares are created which hold different rights, including those listed below. • Pre-emption rights: these rights ensure that in the event of a transfer of shares, such shares are not offered to third parties outside the company, without first being offered to other shareholders. Various mechanisms and rank - ings can be implemented on who gets offered shares first, and there are different pricing mechanisms that can also be used. • Dilution protection: these rights are similar to the pre-emption rights, but apply when new shares are issued. When a company issues new shares, such shares shall be offered first to current shareholders based on specific ranking and pricing mechanisms.
• Drag-along/tag-along rights: these rights ensure that, in the event of a potential trans - fer by the majority shareholder, certain exit guarantees are put in place. Such provisions ensure that the company can be sold as a whole to a potential acquirer, hence ensur - ing that minority shareholders can exit when a total change in ownership takes place, and also allowing the buyer to eliminate minority shareholders. • Reserved matters: in certain situations, shareholders agree that a number of matters should be reserved for the shareholders to decide on, rather than the directors, such as the sale of major assets or intellectual prop - erty. While such a decision would normally be taken by the board, the shareholders may determine that such a decision is too impor - tant and should be decided by the sharehold - ers themselves. • Board influence: it is also quite common that shareholders opt to have representation at board level, and special rights are granted to specific classes of shareholders to appoint their own director at that level too. • Voting rights: different voting rights are also common. Share classes can be created to differentiate between the voting power of shareholders. However, this requires proper structuring, as not all decisions are equal and providing various voting rights at different levels may require modification to the nominal value of the shares. • Veto rights: in certain instances, veto rights are created to ensure that certain decisions cannot be passed unless agreed to by spe - cific share class majorities. Under law, there is also a legal remedy called “the unfair prejudice remedy” , which is an umbrella protection for shareholders in the event that certain decisions are taken by the company
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