There are various reasons as to why a foreign company may seek to enter the Maltese market. This inevitably raises the question as to the type of corporate vehicle to be employed. Perhaps the more common route is to set up a separate company for this purpose. However, depending on the business needs of the foreign company, the latter may, in fact, opt to establish a branch office - being an extension of the foreign company, which is not a separate legal entity, but which must nonetheless be registered with the Maltese Business Registry.
A foreign company seeking to expand its business in Malta will naturally look to establish some form of physical presence here. However, it may not necessarily wish to set up a separate legal entity for this purpose. So, what route can it take?
Enter… the branch office.
In terms of the Companies Act (Chapter 386 of the Laws of Malta), a company constituted or incorporated outside Malta may opt to conduct business in or through Malta by setting up a branch or a place of business in Malta. The main requirement in this regard is that the company constituted or incorporated outside Malta be registered as an “oversea company” in Malta.
Before delving into the procedure and documentation to be completed in order for a company constituted or incorporated outside Malta to register as an oversea company and establish a branch in Malta, it is relevant to consider the meaning of the term ‘branch’.
A branch may be said to be an extension - or a secondary establishment - of the oversea company (the parent entity), which is set up in a different location and which carries out the same operations as the oversea company. In fact, the oversea company is fully responsible for the liabilities of the branch established in Malta.
Unlike a subsidiary company, a branch established in Malta is not a separate legal entity in its own right, and does not enjoy distinct legal personality from the oversea company. Rather, the oversea company and the branch established in Malta form part of one and the same entity at law. This lack of independency may be said to be the most substantial difference between a branch and a subsidiary company.
A branch directly reports to, and receives instructions from, the oversea company, the latter of which effectively manages and controls the branch and provides all required financial support thereto. It follows, therefore, that a branch does not have a management structure in the typical sense of a company.
In terms of the requirement to maintain and submit financial statements to the Malta Business Registry (the “MBR”), a branch established in Malta is required to maintain and submit the audited financial statements of the oversea company unlike a subsidiary company, which is obliged to draw up its own financial statements.
Having briefly considered the characteristics of a branch established in Malta, it is relevant to understand how a company constituted or incorporated in a country outside Malta may, in fact, set up a branch in Malta. The first step is to identify an authorised representative who is resident in Malta to represent the oversea company in Malta, and within one (1) month of establishing a branch, the oversea company is to deliver to the MBR, the following documentation:
1. An original or certified true copy of the updated charter, statutes or memorandum and articles of the oversea company (or other instrument constituting or defining the constitution of the oversea company), provided that if any such instrument is not written in the English or Maltese language, a certified translation thereof into either of such languages is to be provided.
2. A list of the directors and company secretary, if any, of the oversea company, or where the latter does not have directors or a company secretary, a list of the persons vested with the administration of the oversea company, and in all cases, a list of the persons vested with the representation of the oversea company, which list shall include particulars such as (i) the name, residential address, nationality and occupation in the case of an individual, and (ii) the registered/corporate name and the registered/principal office in the case of a body corporate.
3. A statutory return, containing the following particulars:
- the name under which the branch established in Malta is carrying on its activities where different from the name of the oversea company;
- the address of the branch established in Malta by the oversea company, and where more than one (1) branch has been established, the address of the principal branch.
- the activities to be carried out by the branch established in Malta;
- the name(s) and address(es) of one (1) (or more) individual(s) resident in Malta authorised to represent the oversea company for the activities of the branch established in Malta, and the extent of authority granted thereto, including whether such person is authorised to act alone or jointly with others. In the latter case, the particulars of any such other person(s) are also to be indicated.
4. Unless disclosed by the document specified in point 1. hereabove, a return containing the following particulars about the oversea company:
a. the legal form of the oversea company; and
b. the identity of the register in which the oversea company is registered and the number with which it is so registered
5. Moreover, and as verification of the information provided in the above-mentioned statutory return, an original or certified true copy of the updated register of directors and company secretary of the oversea company, as well as the passport copies of all the persons listed and identified therein, must also be delivered to the MBR.
The registration with the MBR of a branch in Malta is subject to a fee ranging between €245 and €2,250 payable upon submission of the above-stated documents, which fee depends upon the nominal value of the authorised share capital of the oversea company.
Finally, it is relevant to note that following the successful registration of the branch in Malta, any alterations made (i) to the charter, statutes or memorandum and articles of the oversea company, and/or (ii) to the directors or company secretary or persons vested with the administration or the representation of the oversea company; and/or (iii) to the names or addresses of the individuals authorised to represent the oversea company, must be notified to the MBR within one (1) month from such alterations.