Gauci-Maistre Xynou (Legal | Assurance) | View firm profile
By virtue of Legal Notice 248 of 2020, new regulations were issued under the Companies Act entitled Companies Act (Shipping and Aviation Cell Companies) Regulations (the “Regulations”). These Regulations were introduced to complement the recently introduced enabling provision under article 84E of the Companies Act (Chapter 386 of the Laws of Malta) (the “Companies Act”). The Regulations and article 84E extend the possibility of the creation of, or the conversion into, cell companies by companies carrying on or engaged in shipping or aviation business, which benefit could previously only be availed of by insurance companies, securitisation vehicles, investment companies with variable share capital and more recently by foundations and associations. These Regulations and article 84E of the Companies Act shall be read in conjunction with each other.
A cell company is defined as “a company formed or constituted as such or converted into a cell company and creating within itself one or more cells for the purpose of segregating and protecting the cellular assets of the company” in accordance with the Regulations and article 84E of the Companies Act. A cell has the same meaning as that assigned to it under the Companies Act, namely a cell is “a cell created by a cell company for the purpose of segregating and protecting the cellular assets of the company in such a manner as may be prescribed”. It also includes a reference to segregated accounts, compartments or units within a company having multiple accounts, compartments or units.
Interestingly, the Regulations introduce the definition of “cell shares” and “cell share capital”. Cell shares means shares created and issued by a cell company in respect of one of its cells, the proceeds of the issue of which (the “cell share capital”) shall be comprised in the cellular assets attributable to that cell.
For the purposes of these Regulations, the term “company” is extended to include partnerships en commandite or similar or equivalent body corporates, the capital of which is divided into shares. In order for a company to be so formed or converted, it shall be required to obtain a licence and, or authorisation in order to carry on any relevant activities or to be formed or constituted as a cell company and to carry out specific acts whilst being a cell company.
Within the ambit of these Regulations, the definition of shipping or aviation business is wide ranging, which definition stems from article 84E of the Companies Act. Firstly, it includes the ownership, operation by charter, lease or otherwise, administration and management of any ship together with the carrying on of all ancillary financial security, commercial and other activities connected therewith. In this respect, administration and management includes personnel engagement, as well as employment and management both onboard or otherwise. Additionally, such “business” extends to the holding of shares or other equity interest in any undertaking, whether such undertaking is established in or outside of Malta, provided that such undertaking is solely established or mainly established for the purpose of carrying on or out any one of the activities listed within this definition together with the carrying on of all ancillary financial, security, commercial and other activities connected therewith. The aforementioned activities also extend to the activities of the parent company which holds shares or other equity interest in undertakings, whether Maltese or otherwise, established solely or mainly for the carrying on or carrying out of any of the aforementioned activities. Furthermore, such activities also include the raising of capital through loans, the issue of guarantees or the issue of securities by an undertaking where the intention of the activity is to achieve the objects or activities cited in this article.
Cell companies shall be distinguished from other companies through the inclusion of the words “Mobile Assets Protected Cell Company” or “MAPCC” by their name and through the specific reference to the fact that it is a cell company in its memorandum and articles of association. Furthermore, each cell must be distinguished from one another by each cell being assigned its own distinct name.
In terms of these Regulations, a cell company is bestowed with single legal personality and such cell company may create numerous cells. However, the creation of a cell does not create a legal person separate from the cell company.
Any interest of an owner of a ship or aircraft shall be noted, provided that any registered mortgagee or registered security interest holder has provided its consent. It should be noted that such attribution shall not prejudice any rights of any creditor of the company existing prior to the conversion to a cell company or that of a registered mortgagee or security interest holder.
The cell company is allowed to pay a cellular dividend in respect of cell shares, which cellular dividends may only be paid with respect to the cellular assets and liabilities or profits attributable to the respective cell. Furthermore, if the cell company is obliged to make a payment from cellular assets attributable to a particular cell which are insufficient, the company shall make up for the deficiency from its non-cellular assets.
The Regulations require that separate records, accounts, statements and other documents are kept in order to show the assets and liabilities of each cell as distinct and separate from the asset and liabilities of other cells in the same company. The creditors of a particular cell should only be able to avail themselves of the assets of that particular cell and should not reach to other cells to cater for the debts due by that particular cell. In default of which, the Regulations provide for rules through which the affected cell may be reimbursed for its losses suffered.
The broadening of the law to accommodate cell companies in the shipping and aviation industries should prove to yield diverse opportunities within these sectors which would surely be attractive to the players within the industries. In view of the above, it is evident that owing to the fact that Malta has long appreciated the maritime industry as one of its economic pillars, efforts are continuously being made in order to ensure the industry remains competitive and robust whilst also attracting further business in the aviation industry.