Opportunities for Family Businesses in Malta

Priscilla Mifsud-Parker | 28 Aug 2017

Family Business Malta

The importance of family businesses as an integral part of a State’s economy has been recognised even at a European level. The European Parliament issued a position paper in 2015 wherein it highlighted that “Family businesses are the single best source of employment in the private sector.” However, it also recognised that genuine recognition of the family business sector has been absent and sorely long due both at an EU level, as well as in the member state individually.

Malta recognises that family businesses stand as the backbone and the ‘beating heart’ of the Maltese economy, contributing greatly towards employment and bringing long-term stability. It is estimated that about 70% of Maltese businesses are run or controlled by families, employing about forty thousand people. However, they face a number of challenges, particularly when trying to raise capital for further growth and provide for the continuity of the business from one generation to the next. It is in the interest of all national regulators to protect these businesses through optimal, business-friendly regulations that promote growth and potential for employment. The Maltese legislator is a pioneer in this respect, as on the 1st January 2017, Malta became the first European Country to enact a Family Business Act.

The newly enacted Family Business Act

The Family Businesses Act is an innovative legislative document as it is the first of its kind. If this act succeeds, it will stand as a model for other European states seeking to help businesses to “considerably increase their changes of survival and to prosper in what is an ever-increasing competitive market”, according to Minister for the Economy, Investment and Small Businesses Chris Cardona.

Through the enactment of this act, family businesses will be able receive legal guidance and assistance to plan adequately and affect a successful transfer of their business when their time comes. Moreover, it will ensure that family businesses implement and follow through with a family charter which will ensure proper internal organisation and structure in order to effectively operate the business.

Currently, Malta offers a number of structures and vehicles for family businesses who are seeking help with the internal management of their businesses, as well as those interested in succession planning.

Trusts and Foundations

Trusts and foundations are two separate vehicles which are often used for wealth and estate management as well as asset preservation. These vehicles are often employed by family businesses who seek to place their property or business in the hands of a trustee for the benefit of beneficiaries. A person, the ‘settlor’, would place trust in another person or a trust company such as Claris Trustees and Fiduciaries Ltd, Chetcuti Cauchi’s trust company, who will be under the obligation to act for the benefit of the patrimony of the settlor without the intervention of personal interest.

Foundations share several characteristics with trusts as they are also efficient vehicles for structuring wealth and estate planning purposes, however, the two institutes vary in their essential elements. Our lawyers have given us an overview of some of the differences between Malta trusts and foundations.  

PTCs – trusts without the trusting

While several family businesses opt for trusts as part of their international family asset protection and tax planning, not every businesses owner is comfortable with becoming a settlor and wholly relinquishing their control of the assets transferred into a trust. Private Trust Companies (PTCs) are the answer to the calamity of such would-be settlors.

Through the setting up of a PTC, settlors and their families may retain control of any assets held under trust. Effectively, a PTC grant the benefits of a trust without the need to trust a settlor. This allows for quick and informed decision-making which allows the family to deal with issues more freely. Additionally, PTCs are not burdened with any licensing requirements which makes them speedy and flexible vehicles for dealing with trust assets and changes in the trust administrators.


Lack of access to finance is very often a setback for family businesses which are very often SMEs which have the potential for growth but lack the source of funds to do so. Over reliance on banks, family finance and retained earnings limit the economic multiplier, making it hard to fully unlock a business' potential for growth and job generation. In the light of this, the Malta Stock Exchange has recently set up Prospects, a new market which is targeted at SMSs and which grants them access to Malta finance for amounts between €1 million and €5 million. This market does not set a minimum threshold of equities in public hands, so SMEs are able to raise equity capital without relinquishing a significant percentage of their shareholding.

Chetcuti Cauchi’s capital markets practice group has set up Prospecta, a corporate services provider which aims to act as a point of reference for small businesses seeking to expand their operations. Our role will ensure that our client companies will set up an efficient corporate governance system which is fully transparent throughout the entire admission process and after this has been completed.


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