The aim of the family Business Act is to address obstacles and problems that those operating a family business face especially in instances of business transfers.
Family businesses constitute 75% of Maltese enterprises and they employ a substantive number of people. Most of these family enterprises pass on to the second generation. However, during this transition, only 30% of these family businesses succeed and only 10% make it to the third generation.
Dr Sant highlighted that the structures of family businesses, the vast majority of whom are micro-enterprises, are often poorly defined. She said that to have an efficient and effective legal framework, widespread consultation has been carried out.
Dr Sant explained that the proposed Family Business Act aims to encourage family-owned businesses to register themselves, who occupies what position, the actual ownership structure, who has voting rights and decision-making rights. Amongst other things, the Family Business Act will include a clear definition of what constitutes a family business. This will control abuses and is a very important initiative considering that family businesses registered under this Act will be eligible for tax incentives.
The Family Business Act allows a broad spectrum of legal scenarios through which a family business may be operated: limited liability companies, registered partnerships, unregistered partnerships, and even listed or trading companies on a multilateral trading facility. The act defines family businesses as those owned by at least two members of the same family, although a small minority stake by non-family members is permissible.
The registered family businesses would qualify for operational assistance and fiscal benefits. The benefits introduced with the new Act are mainly twofold: those pertaining to the operation of the business per se, and those pertaining to prospective transfers between family members of immovable property or shareholdings on which Duty is payable.
The Operational Benefits
Micro Investment of a maximum tax credit of €50,000 over a three-year period, naturally subject to Malta Enterprise’s terms and conditions;
Legal and Accountancy advisory services up to €2,500 over a five-year period; to any family business owners that would require assistance in the case of transfers
Assistance for Arbitration sittings to address any possible disputes relating to the transfer of assets (five free sessions).
Education and training for owners and their employees of up to €1,000 annually per family business;
The positive consideration of lease renewals occupying government premises;
Loan guarantees of up to €500,000 per business for the purpose of acquiring the business or parts thereof.
The Fiscal Benefits:
Duty on Documents on immovable property being transferred between family members of a family busiess shall be chargeable on the first €500,000 of the value of the property transferred at the advantageous rate of 3.5% or part thereof;
In the case of Duty on Documents payable on the transfer of shares of a family owned company between family members, or interests in a partnership, trust or foundation, no duty will be chargeable on account of the first €150,000 of the value of the shares or interests in a partnership, trust or foundation transferred.
GRTU is one of the main stakeholders which has worked on the legal framework of the Act in conjunction with other stakeholders which have worked on the Family Business Act.