Commercial Partnership

General Information

Maltese company law is essentially regulated by the Companies Act, 1995 (Chapter 386 of the Laws of Malta) ("the Act") which replaced the earlier Commercial Partnerships Ordinance, 1962 (previously Chapter 168, now repealed) and adopted many aspects of the United Kingdom's Companies Act, 1985 and the Insolvency Act, 1986. The Act has been amended from time to time, to implement applicable EU Directives on company law. The Registry of Companies is the competent authority within the Malta Financial Services Authority which regulates all legal aspects of companies and their registration, maintenance, winding up and compliance with the provisions of the Act.

Under Maltese Law there are three types of commercial partnerships - partnership 'en nom collectif'; limited partnership 'en commandite'; and company. The latter is dealt with separately in another part.

A commercial partnership has a legal personality distinct from that of its member or members, and such legal personality shall continue until the name of the commercial partnership is struck off the Register of Companies, whereupon the commercial partnership shall cease to exist. A commercial partnership formed and registered under the Act is to be governed by this Act irrespective of the place where the management and control of the commercial partnership are exercised.

Incorporation

Partnership 'en nom collectif'

The principal characteristic of the partnership 'en nom collectif' is the unlimited and joint and several liability of all the partners for all the obligations of the partnership with all their property, present and future, and not merely up to the amount of their contribution to the partnership. The partnership may be formed by two (2) or more partners and operates under a partnership name. The individual partners cannot however be sued before the property of the partnership is first discussed. As between the partners, each partner is liable for the debts of the partnership in the proportion fixed in the Deed of Partnership and, in default, by law. The partner who has wholly discharged a debt of the partnership may claim from the other partners the share due by each of them.

The partners draw up the Deed of Partnership. A partnership shall not be validly constituted unless such Deed is entered into and signed and a certificate of registration is issued. The Deed of Partnership must state:

* the name and residence of each of the partners;

* the partnership's name;

* the registered office of the partnership in Malta;

* the objects of the partnership, i.e. whether the objects are trade in general or a particular branch of trade, and in the latter case, the nature of the trade;

* the contribution of each of the partners, specifying the value of the respective contribution of every partner; and

* the period, if any, fixed for the duration of the partnership.

Limited partnership 'en commandite'

A partnership 'en commandite' or limited partnership operates under a partnership name. It is regulated by the Deed of Partnership. The partnership's obligations are guaranteed by the unlimited and joint and several liability of one (1) or more partners, called the general partners, and by the liability limited to the amount, if any, unpaid on the contribution of one or more partners, called the limited partners. There has to be at least one general partner and one limited partner. At least one of the general partners shall be either an individual or a body corporate which has its obligations guaranteed by the unlimited and joint and several liability of one or more of its members. A person, including a limited partner, who holds himself out as being a general partner shall be held liable unlimitedly and jointly and severally with the general partners for all the obligations contracted by the partnership.

The liability of the general partners is of a subsidiary nature in the sense that no action may be taken against them unless the property of the partnership is first discussed. The provisions governing partnerships 'en nom collectif' apply to this kind of partnership unless inconsistent with the provisions relating to partnerships 'en commandite'.

The contribution of a limited partner shall not include personal services.

The Deed of Partnership, in addition to the particulars prescribed for that of the partnership 'en nom collectif', must specify which of the partners are general partners and which of them are limited partners, and in default the partnership shall resolve itself into a partnership 'en nom collectif'.

Capitalisation and Financing

There are two types of limited partnerships 'en commandite':

* an ordinary partnership with the proportion of interest in the partnership indicated by the respective value of the contribution of the partners as stipulated in the Deed of Partnership; and

* a partnership with the contribution of the partners divided into shares; the provisions relating to shares in respect of a limited liability company, other than the provision regulating the minimum share capital, are applicable in this case, insofar as they are not inconsistent with the provisions relating to the partnerships 'en commandite'; a limited partnership the capital of which is divided into shares may also be used as a (duly regulated) vehicle for collective investment schemes where the Deed of Partnership expressly limits its objects to the collective investment of its funds in securities and in other movable and immovable property, or in any of them, with the aim of spreading investment risk and giving the partners the benefit of the results of the management of its funds.

Board Structure

There is no Board of Directors in the partnerships 'en nom collectif' and 'en commandite'.

Annual Costs

The official government fees to set up a partnership are the same as those applicable to limited liability companies but costs depend on the value of the contribution.

Corporation Taxation and Financial Reporting

The accounting records of the partnership 'en nom collectif' shall be kept for a period of ten (10) years. Where the accounting records are kept in a bound or unified form, the 10 years commence to run from the date of the last entry made therein.

At the end of each accounting period, the balance sheet and profit and loss account of the partnership 'en commandite' must be communicated to the limited partners, who, for the purpose of ascertaining their correctness, have a right of access to the accounting records and other documents of the partnership.

A characteristic of these two types of commercial partnerships which has made them attractive to small and medium-sized entrepreneurs is that they do not have to file annual accounts or Annual Returns with the Registry of Companies.

Employee Participation in Corporate Bodies

Not available under Maltese Law.