MAFE update on the Family Business Act

MAFE President Mario Duca explains the latest developments regarding the Family Business act in Malta.

Family Business Act Approved by Cabinet

Written by Mario Duca, President of MAFE

The Malta Association of Family Enterprises has the pleasure to inform you that another breakthrough has been achieved in June 2015. The Chairperson of the Family Business Act Committee has confirmed that the proposed draft Family Business Act (FBA) has been approved by the Cabinet. The White Paper is being prepared to be issued soon. The FBA is an exciting piece of legislation and the first of its kind in the world.

The act is going to be an enabling act with an opt-in procedure. The objective is to support family businesses who wish to be supported as such. Family Businesses that successfully register will be assisted in developing better governance structures both for the family and the business, as well as encouraged to consider the planning for the continuity of the business.

The legislation begins by defining the word “family” and who ought to be considered as an eligible family member. Therefore ‘Family Member’ shall mean the owner’s spouse, descendants in the direct line and their relative spouses, brothers or sisters and their descendants. In comparison to EU guidelines on family businesses this definition is wider. Furthermore spouses does not only mean a husband and a wife under Malta’s Marriage Act but also partners in terms of the Civil Unions Act.

The Act also clarifies what constitutes a family business in terms of size of the business (more than one person), ownership, control, decision making and voting rights, and management control.

The legislation notes that family businesses can come in any shape and size and to cater for the various models, the legislation will be identifying and defining them individually. The FBA recognizes that family businesses may also be partnerships or owned directly and indirectly through holding companies, trusts and foundations and also includes micro businesses which are not registered but which employ family members.

Despite the different business entities covered, the criteria regarding the requirements of ownership, number of family members involved and governance of both the family and the business will be consistent.

The act furthermore introduces a regulator whose task it is to make the legislation accessible to the widest number of family businesses possible.

The next phase which is now being awaited is the publication of the White Paper for general consultation before being forwarded to parliament for discussion and enactment. 

The Malta Association of Family Enterprises has been at the forefront in lobbying for this ACT and an active member of the FBA Committee developing the draft Act. MAFE has been the Association which had initiated the lobbying with the political parties and is continuously holding ongoing conferences and seminars, delivering information sessions and training programs. Once the White Paper is published, we will be holding a series of seminars within the family business community to forward the proposals received.