STEP Journal: Chetcuti on Shaping Malta’s Family Business Act

When “Kin Win” appeared in STEP Journal, Malta had not yet enacted dedicated family business legislation. Chetcuti was therefore writing from within an active policy-development process rather than retrospectively explaining an established statutory regime.

At the time, he was Chair of the Malta Association of Family Enterprises, through which he participated in consultations with Government on the development of Malta’s proposed Family Business Act. The STEP article consequently provides not only commentary on the emerging framework, but a contemporaneous record of some of the policy concerns and proposals being advanced during its formation.

The article began from a practical problem. Family-owned businesses could represent a substantial part of an economy while still falling between conventional company law, tax law and succession planning. In Malta, Chetcuti identified three recurring pressures: governance arrangements that could impede professional management, fiscal costs associated with transferring the business, and the disruption that could accompany an inadequately planned transition between generations.

Against that background, the article described the work of MAFE, established in 2011 to provide education and training to family businesses, represent the sector and engage with stakeholders at national and international level. Its policy work attracted support across the political spectrum and contributed to the Government’s commitment to legislate specifically for family businesses.

The proposals discussed in the article centred on three related interventions.

First, a dedicated legal definition of “family business” would permit Malta to identify the sector more clearly, gather relevant data and determine which businesses should qualify for particular measures.

Second, the proposals sought a more appropriate fiscal framework for ownership transfers between generations, including transfers of shares inter vivos and causa mortis. The article’s discussion of the tax and stamp-duty rules reflected the law and policy context prevailing at the time and should therefore be read historically rather than as a statement of current Maltese tax law.

Third, the proposals linked legal and fiscal measures with family and business governance and succession planning. Public support for training and professional advice was contemplated, while access to benefits would be directed towards family businesses taking identifiable steps towards stronger governance and succession preparedness.

This third element is particularly significant. It recognised that fiscal incentives alone could not secure continuity where ownership structures, family decision-making or succession arrangements remained unresolved.

“Malta has established itself as an attractive platform for family-business governance and family-office management.”

Dr Jean-Philippe Chetcuti, originally published in STEP Journal

The article therefore captures an important stage in the development of Malta’s family business framework: the point at which practitioners, family-business representatives and Government were seeking to translate recurring succession and governance problems into a dedicated legislative response.

It also illustrates a broader proposition that remains relevant to private client practice today: family-business continuity requires law, tax, governance and succession planning to work together.

Original Article in STEP Journal: “Kin Win”

Published in the Dec/Jan 2013–14 issue of STEP Journal, the original article examines Malta’s developing proposals for dedicated family business legislation and their implications for governance and succession.

>> Read the Original Article

Malta’s family office offering has developed significantly since the original STEP Journal article. Chetcuti Cauchi’s Malta Family Office Structuring practice supports business families with multidisciplinary advisory services covering both family wealth and personal family objectives.

The firm also advises on family office advisory, including the design and management of structures intended to protect family wealth and family businesses across generations.

For UHNW families, Malta may support structures involving holding companies, trusts, foundations, private trustee arrangements, investment vehicles, governance frameworks, and philanthropic entities, depending on the family’s objectives and applicable laws.

“Sophisticated family office planning increasingly requires jurisdictions capable of combining governance flexibility, international compliance standards, legal certainty, and long-term strategic stability. Malta continues to offer an attractive framework in this regard.”

The legislative framework discussed prospectively in 2013 ultimately became law.

Malta's Parliament enacted the Family Business Act through Act XLVIII of 2016. Parliament described the object of the legislation as providing a legal framework to assist family businesses in preparing for transfers from one generation to another, including through governance and incentives supporting better organisation of the family and the business.

The Family Business Act became Chapter 565 of the Laws of Malta and entered into force on 1 January 2017 following the Family Business Act Commencement Notice, Legal Notice 387 of 2016.

This subsequent enactment gives Kin Win additional historical significance. The STEP article did not retrospectively describe an existing regime. It documented the problems practitioners and family-business representatives were seeking to solve and the policy architecture being proposed before the eventual Act was placed on the statute book.

Chetcuti’s role went beyond reporting those developments. Through his chairmanship of MAFE and participation in consultations with Government, he was involved in the professional and policy process through which the proposed family business framework was being shaped.

The enacted legislation formalised a framework around the registration, governance and generational transfer of family businesses. The Act has subsequently been amended, including in 2018 and 2021, so current planning should always be based on the legislation and applicable rules in force at the relevant time.

The strongest feature of Chetcuti’s 2013 analysis is its treatment of succession as a multidisciplinary governance problem rather than merely a transfer of assets.

A family business can technically pass from one generation to another while still experiencing disruption because control, management, family expectations or next-generation responsibilities have not been addressed. Effective succession planning therefore needs to consider not merely who will own the shares, but how the family expects ownership and management to operate afterwards.

For contemporary family businesses, relevant issues can include:

• ownership and voting arrangements;
• management succession and leadership transition;
• family constitutions, charters and governance structures;
• boards, family councils and decision-making procedures;
• preparing and educating the next generation;
• dispute-prevention and conflict-resolution mechanisms;
• wills, matrimonial considerations and estate planning;
• trusts, foundations and holding structures where appropriate;
• personal and corporate tax implications;
• liquidity requirements associated with generational transfer; and
• coordination between the operating business and wider family wealth.

The importance of these questions increases where a family has members, companies and assets in several jurisdictions. A transfer may then engage different tax systems, succession regimes, matrimonial-property rules and residence considerations.

This is also where family business planning increasingly intersects with family office advisory. An operating business may be the source of the family's wealth, but over successive generations family assets may extend into investment portfolios, real estate, private equity, philanthropy and other interests. Governance may therefore need to evolve from managing one company into coordinating the family's wider economic and legacy interests.

The original article was forward-looking in recognising this relationship. Its final section considered Malta not solely as a jurisdiction for family businesses, but as a potential platform combining business governance with trusts, companies, foundations and family-office management.

The Society of Trust and Estate Practitioners – STEP is an international professional body whose members advise families across generations on succession, trusts, estates, family businesses, philanthropy and related private wealth matters.

Chetcuti Cauchi's relationship with STEP Malta extends back more than two decades. Members of the firm's private client team have contributed to the Malta branch through committee leadership, technical work, conferences and professional publications.

Dr Jean-Philippe Chetcuti served in several STEP Malta roles, including Branch Secretary, Technical Chair and Vice Chair, before serving as Chair of STEP Malta during the period in which “Kin Win” was published.

In parallel, as Chair of the Malta Association of Family Enterprises, he was participating in consultations with Government concerning the development of Malta’s proposed Family Business Act. His STEP publication therefore brought insights from an active domestic policy-development process to an international community of trust, estate, succession and private wealth practitioners.

This illustrates an important form of professional-body contribution: using specialist publications not merely to report established law, but to expose developing policy questions to international professional scrutiny and discussion.

Chetcuti Cauchi lawyers have subsequently continued to contribute to STEP on subjects spanning trusts, family offices, international tax, succession, residence and citizenship, reflecting the increasing overlap between the legal structures governing wealth and the mobility of internationally active families.

Dr Jean-Philippe Chetcuti, Senior Partner, is a private client lawyer whose work spans international tax, family office structuring, trusts, estate planning, residence and citizenship.

His involvement in Malta’s family-business policy developed through the Malta Association of Family Enterprises, which he chaired during the formative period of the proposed Family Business Act. In that capacity, he participated in consultations with the Maltese Government concerning the development of the legislative framework and contributed to the wider policy discussion around family-business governance, succession and generational transfer.

He has also served as Chairman of the Malta Branch of the Society of Trust and Estate Practitioners and contributed to STEP publications on private client and international family matters. His current practice continues to involve internationally mobile HNW families, entrepreneurial families, their family offices and professional advisers.

Our Families & Wealth lawyers advise entrepreneurial and business-owning families on the interaction between family governance, succession, ownership structures and private wealth planning.

For a family-held business, this may involve reviewing existing ownership and governance arrangements, planning transfers between generations, coordinating wills and estate planning, considering trusts or foundations where appropriate, restructuring family holding arrangements, establishing governance mechanisms or developing a broader family-office framework.

The work is particularly relevant where the family business forms only one part of a wider international asset base. In those cases, business succession may need to be coordinated with investment structures, personal tax residence, property, philanthropy and the legal position of family members in several jurisdictions.

The objective is not merely to transfer assets from one generation to another, but to create an appropriate legal and governance framework through which ownership, responsibility and family wealth can transition coherently over time.

[question]What did Jean-Philippe Chetcuti’s “Kin Win” article in STEP Journal cover?[/question]

[answer]The article examined Malta’s developing proposals for dedicated family business legislation. It focused on governance, taxation of generational transfers, succession planning and proposals for defining and supporting qualifying family businesses.[/answer]

[question]What role did Jean-Philippe Chetcuti have in shaping Malta’s Family Business Act?[/question]

[answer]During the formative period of the proposed legislation, Chetcuti chaired the Malta Association of Family Enterprises and participated in consultations with the Maltese Government concerning the development of the family business framework.[/answer]

[question]Did Malta enact the Family Business Act discussed in the STEP Journal article?[/question]

[answer]Yes. Malta enacted the Family Business Act through Act XLVIII of 2016. The Act became Chapter 565 of the Laws of Malta and entered into force on 1 January 2017.[/answer]

[question]What were the main proposals for Malta family businesses discussed in “Kin Win”?[/question]

[answer]The article described three principal proposals: defining and identifying family businesses, addressing fiscal obstacles affecting transfers between generations, and supporting family and business governance, training and succession planning.[/answer]

[question]Why is governance important when transferring a family business to the next generation?[/question]

[answer]Ownership transfer alone does not determine who will manage the business, exercise voting control or resolve family disagreements. Governance arrangements can establish decision-making rules, management responsibilities and succession processes before the transition occurs.[/answer]

[question]How can a family office relate to family business succession?[/question]

[answer]As family wealth expands beyond the operating company, a family office can help coordinate business interests with investments, governance, succession and wider family affairs. The appropriate structure depends on the family’s assets, jurisdictions and objectives.[/answer]

[question]Can trusts or foundations be used when planning succession for a Maltese family business?[/question]

[answer]Trusts, foundations and holding structures may form part of succession and ownership planning where legally and commercially appropriate. Their suitability depends on the family structure, assets, governance objectives, tax position and jurisdictions involved.[/answer]