Easing The Prohibition Of Financial Assistance Rules In Malta - Recent Developments

Article by Dr. Andrew J. Zammit - Managing Partner and Dr. Richard Bernard - Associate

Introduction

The giving of financial assistance by a company for the purchase of its own shares was introduced into Maltese law by the Companies Act in 1995, which replaced the Commercial Partnerships Ordinance originally promulgated in 1962.

Drawing extensively on the UK rules, the Maltese law provisions were introduced to bring Maltese law in line with developments in company law theory and practice in Anglo-Saxon jurisdictions in this regard, primarily curbing abusive practices in takeovers and acquisitions by protecting the company's capital and, as a result, safeguarding its shareholders, creditors and employees. Whilst the motivation for introducing such rules were well-intentioned, the absence of flexibility in the implementing provisions translated into a categorical prohibition of any form of leveraged buyout ("LBO") structuring in respect of Maltese