Malta’s NFDI Screening Office Act is Out

On the 18th of December 2020, Malta’s National Foreign Direct Investment Screening Office Act (the ‘NFDISO Act’) was published, which came into force on the 11th October 2020 and implements Regulation (EU) 2019/452.Last year, the NFDI Screening Office (“NFDI Office”) was set up in Malta, ahead of the publication of the NFDISO Act in compliance with the Regulation. In accordance with the NFDISO Act, the NFDI Office has the power and authority to assess, investigate, authorise, condition, prohibit or unwind a foreign direct investment (‘FDI’) on grounds of security or public order in Malta, as well as implement screening decisions, report annually to the European Commission, and liaise with the authorities of third countries on FDI screening-related issues.

While the Regulation has been in force since April 2019, the NFDISO Act defines several terms, including “beneficial owner”, “foreign direct investment”, “foreign investor”, “management or control” and “undertaking of a third country”. The NFDISO Act also clarifies that “the establishing of lasting and direct links to carry on an economic activity in Malta” includes investments which enable effective participation in the management or control of the company carrying out such economic activity.

NOTIFICATION FORMS

Prior to carrying out an investment, foreign investors and all persons involved in an FDI must notify the NFDI Office with the investment by submitting the Notification Form, in the following 4 circumstances:

1. Where an investment is with respect to any of the ‘Relative Activities’ as defined in the Schedule to the Act;
2. Where, following an investment carried out in Malta, there is a plan to change the business activity of the foreign investor to one which affects any of the aforementioned Relative Activities;
3. Where, following an investment carried out in Malta which affects any of the Relative Activities, the ownership structure of the investor changes, such that at least 10% is owned by foreign investors; or
4. Where, following an investment carried out in Malta, the direct or indirect controlling interest of the company or group company changes and passes onto a foreign investor.

The information which is to be provided in the Notification Form includes the ownership structure of the foreign investor and undertaking, the approximate value of the FDI, the products, services and operations of the foreign investor and undertaking, the jurisdictions in which the foreign investor and undertaking conduct relevant business operations, the funding and source of the investment, as well as the date when the FDI is planned to be completed, or has been completed.

SCREENING PROCESS

Upon receipt of such notification, the NFDI Office shall, not later than 5 days from such receipt, determine whether the FDI shall be subject to screening. Where the Office concludes that the FDI shall in fact be subject to screening in accordance with the Act, the NFDI Office shall inform the foreign investor within 5 days from the date of its decision. This will trigger the cooperation mechanism and within 60 calendar days, the NFDI Office must determine whether the FDI may affect the security or public order of Malta. This 60-day period may be extended by the NFDI Office where it deems necessary.

If the Office concludes that the FDI affects the security or public order of Malta, it may condition, prohibit or unwind such investment. The Office may also impose administrative penalties according to Article 17 of the Act.

Finally, it is to be noted that the Administrative Review Tribunal, which was set up back in 2006 for the purpose of reviewing administrative acts, as established by the Administrative Justice Act, Chapter 490 of the Laws of Malta, shall be the competent Tribunal to hear any appeals from decisions or administrative penalties imposed by the NFDI Office.

Should you have any queries in relation to the above screening process or Notification Form and require assistance in this regard or require assistance with any other financial services related matters, please contact us on [email protected].