MALTA Law and Practice Contributed by: Dr Josef Cachia Fenech Gonzi and Cherise Abela Grech, GTG Legal
6. Exits 6.1 Investor Exit Rights
ups to gain access to external finance with less stringent rules and lower costs than the main market. Prospects allows start-ups to seek alter - native funding routes, through a less regulated market. However, Prospects allows issues for amounts below EUR8 million, to avoid requiring a prospectus.
There are various mechanisms that sharehold - ers and companies utilise to regulate exit rights between themselves. Such mechanisms are generally also considered to be transfer restric - tions, and this impacts how investors are able to divest of any interest in the enterprise. These generally include: • pre-emption rights; • transfer restrictions; and • drag-along and tag-along rights. These are discussed in detail in 3.3 Investment Structure and 3.5 Investor Safeguards . 6.2 IPO Exits Maltese start-ups or foreign-owned Malta-based start-ups rarely issue an IPO in Malta as the market is very small. In the event that a com - pany is planning for an IPO exit, the company would undergo major restructuring to issue an IPO in a foreign jurisdiction with a bigger market for IPOs. However, Computime, a local IT hard - ware provider, launched an IPO in 2024 to sell 22,987,600 shares at an offer price of EUR0.45 per share whereby the then current shareholders sold approximately 33% of their shareholding. 6.3 Pre-IPO Liquidity Investors looking to obtain liquidity would typi - cally engage directly with other investors, rather than through an IPO. The primary market in Mal - ta, being the Malta Stock Exchange, is not active in relation to IPOs for local start-ups. However, a few years ago, the Malta Stock Exchange set up a secondary market targeted towards local start-ups, namely Prospects MTF. Prospects is specifically designed to assist start-
7. Regulation 7.1 Securities Offerings
A securities offering, which is deemed to fall under the definition of an “offer of securities to the public” will require the issuer to prepare a prospectus as required under the Companies Act. In addition, the issuer also needs to adhere to the capital markets rules issued by the MFSA. In drafting the prospectus, there are certain key points to be considered. • The corporate structure: the corporate struc - ture of the issuer and other affiliated entities is essential and, before an issue of any kind, the issuer would undergo major restructuring and consolidation, typically with equity issues, by setting up a holding entity and consolidating all operating companies under it. • The management body: The composition of the management body is essential for any issue as potential investors would need assurances as to the competence of the board. In main market IPOs, the competence of the management body is also scrutinised and the issuers are legally obliged to ensure that the management body is “fit and proper” . Issuers are also obliged to ensure that during an IPO, independent non-executive directors are also appointed as part of the board to ensure a fair balance with non-independent directors.
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