MALTA Law and Practice Contributed by: Dr Josef Cachia Fenech Gonzi and Cherise Abela Grech, GTG Legal
• Corporate governance: the internal corporate governance and management of the issuer is of critical importance when dealing with an IPO, as they provide a view of the internal workings of the company and certain levels of disclosure would be required as part of the prospectus. These would include internal committees, remuneration policy principles and operational strategy. The disclosure of related party transactions is particularly important, especially with shareholders and directors. • Tax and fiscal considerations: an IPO, as part of the restructuring mentioned above, would also need to consider any fiscal and tax impli - cations on the operations of the company. With Malta’s taxation system, which is greatly geared to benefit foreign investors, issuers of securities in an IPO would need to structure the issue to maximise any tax benefits and reduce tax leakage. • The financials: the prospectus must contain specific financial information of the company, including past and future projections. Key financial information is critical for the success of an IPO as investors, with an emphasis on institutional investors, would look at these numbers closely. Apart from the general pro - jections, the prospectus would also contain a market analysis and key trends likely to impact the issuer. • Pre-issue housekeeping: prior to any IPO, the issuer would usually engage lawyers and financial consultants to “clean up” its internal legal and financial operations. Such exercise would consist of a due diligence exercise to consolidate the issuer’s legal and financial obligations as these would reflect negatively on the issuer. It is important to note that there are a number of requirements in the capital market rules specifi -
cally related to collective investment schemes and, hence, should a VC fund wish to be listed locally, these requirements must also be consid - ered and adhered to. 7.2 Restrictions Foreign VC investors considering investments in Maltese growth companies should be aware of several regulatory frameworks that may impact their investments. Malta implemented the National Foreign Direct Investment Screening Office Act 2020 (the “Act” ), aligning with Regulation (EU) 2019/452, to monitor FDI that could affect national security or public order. This legislation mandates that non-EU investors aiming to establish or maintain lasting and direct links to carry out economic activities in Malta must notify the National For - eign Direct Investment Screening Office (NFDI - SO) before proceeding with their investments. The scope includes investments enabling effec - tive participation in the management or control of a company engaged in economic activities. Investors are required to notify the NFDISO if: • the Maltese entity intends to engage in activi - ties listed in the First Schedule of the Act, which encompasses sectors such as energy, transport, water, health, communications, media, data processing or storage, aero - space, defence, electoral or financial infra - structure, and sensitive facilities; • the entity will have a non-EU investor who is a beneficial owner or holds a direct or indirect controlling interest; or • there is a change in the ownership structure resulting in a foreign investor holding at least 10% of the shares.
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