Although over the years business ownership trends have evolved significantly, there is no doubt that worldwide a significant portion of businesses is still owned by families, who pass on their business down from one generation to the next as a family legacy. Family owned businesses have significantly contributed to a sizeable portion of employment in the EU’s private sector. Recognition of family businesses as significant proprietors in the business world has been profoundly underwhelming in the EU and its member states.
The Maltese government has an appreciation of the contribution family businesses make in the society, the role they play in driving the industry and the economy. Statistics prove that at least two-thirds of businesses in Malta are owned by families. Furthermore, an EU tabulated research showcased that a chunk of start-up businesses struggle with growth and development due to lack of capital, poor revenue generation, and goodwill devaluation as the business is handed down generations.
The family business Act
Through the family business Act of January 2017, Malta engineered a legislation program to support and protect the growth and development of family businesses from generation to generation. The enactment of this legislation which is superseded by none ensures that family businesses can survive generations through sustainable guidance and development aid schemes. It is in the best interest of the Maltese government to ensure that these businesses survive so that they can continue with their contribution to society—offering more employment opportunities to the public.
The FBA helps businesses to build up their competitive marketing stamina. This is very critical for their survival in an extremely tough and competitive environment. Professional legal advice and planning assistance is also a package of the FB Act, hence family businesses can benefit from business restructuring assistance programs, course planning, take over and success facilitation training among others The family Charter ensures that the assets owned by the business are protected wholly and all liabilities of the company are inherited properly.
Trusts and foundations
Asset evaluation, preservation, and management is the fundamental key to preserving marketable value and goodwill of an entity owned by a family. Trusts and foundations are very resourceful in the above-mentioned respects. They are two separate fundamental programs serving a similar function which is handling a succession of business or assets from one generation to another.
PTC's ( Private Trust Companies)
It should be noted that when assets and or family business is handed over to a trust scheme the owners lose direct control of their assets or company, thus many family business proprietors opt for retaining control of their assets or companies during a succession. A PTC can be very handy in such situations. A PTC is a form of expeditious and reliable means of settling all assets controlled by the trust. A PTC also allows conjoined decision making between the settler, his family and the trust holding their assets.
Most family entities face extinction due to limited funds. Banks are the main source for business loans, however, the monetary legislation governing banks restricts family entities which are mainly SMEs to limited and viable loans, which can hardly sustain the intended development. Breakthrough for family businesses located in Malta came with the creation of PROSPECTS by Malta's stock exchange. This market allows access of 1million to 5million to family companies. Its significant feature is that it provides for the monetary credit lines with indefinite thresholds, however, the business gets to keep all its shares on the stock market.
For more insights into the Maltese family business, you may contact SIGTAX. Our invaluable team, which consists of expert lawyers, accountants and consultants will give you detailed information and counsel during each step. Our lawyers can also provide you with finer details on the legal aspects pertaining to family business in Malta so that you don’t skip any necessary steps.