Malta Brings Benefits of Cell Companies to Shipping and Aviation - August 2020
Cell companies, which enable the segregation of different pools of assets and liabilities within a single entity, have been a great success since they were incorporated into Maltese law.
Cell companies offer a number of potential advantages:
- The assets and liabilities of each individual Cell are a distinct patrimony and are segregated from the core Cell Company and from other individual Cells allowing for the structuring and ring-fencing of each Cell.
- The core Cell Company is a single legal person and the creation of each new Cell does not create a new legal person separate from the Cell Company and so each individual Cell is bound to transact by means of the core Cell Company.
- Once the Cell Company is established, it is relatively quick for new Cells to be set up and begin operations.
- There is one board of directors and one set of Memorandum and Articles of Association for the Cell Company and all its Cells. This allows for simpler administration and shared overhead costs.
- One operative license is required for an entire Cell Company even though it has individual Cells.
- A creditor of one particular Cell only has recourse to the assets that particular Cell and not the remaining Cells or the core Cell Company.
- The insolvency of one particular Cell has no impact on the remaining Cells or the Cell Company.
- Individual Cells are easier and quicker to close down than a regular Company.
- Cell Companies and their Cells benefit from Malta's tax imputation system.
To build on this, the government has amended Maltese company law to suit the specific needs of shipping and aviation businesses.
Maltese regulations were changed earlier this year under Legal Notice 248 to introduce cell companies in these sectors. According to the Companies Act, a shipping or aviation business is classified as featuring:
- Ownership, chartering, leasing, or otherwise of a ship, aircraft, or aircraft engine, and related financial, security and commercial activities
- Parent company activity that at least partly performs at least some of these activities
- Capital raising through loans, guarantees, or securities to achieve the above objectives
- Other related activity as defined by the minister
Following the changes, businesses in these two sectors will be able to operate cell platforms, accessing the advantages set out above, particularly when considering ownership matters and human resources issues and potential claims arising in these areas.
Cell companies created afresh or converted from an existing company will have the words “Mobile Assets Protected Cell Company” or “MAPCC” added to registered name. Moreover, each cell will have a distinct name or designation. The company, its Memorandum and Articles of Association, and (if applicable) a copy of the resolution converting an existing company into a cell company, must all be registered with the Malta Business Registry.
Equity capital separation
Furthermore, a cell company may issue cellular dividends with respect to the cellular assets or profits which are attributable to the particular cell. However, this shall be strictly limited to the cellular assets.
Finally, the regulations point out that cell companies and their shares shall comply with the Companies Act (including the Register of Beneficial Owners), rules which apply mutatis mutandis to cell companies and their cells.
Cell companies have proven their worth over recent years in a range of business sectors, and now this opportunity has been extended to all types of aviation and shipping businesses. We believe that the benefits of this innovative company structure will be clear to these two industry sectors.
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