Cell Companies in the Shipping and Aviation Industries
By virtue of Legal Notice 248 of 2020 the Minister for Economy, Investment and Small Businesses introduced the Companies Act (Shipping and Aviation Cell Companies) Regulations (the “Regulations”) with the aim of regulating cell companies carrying on or engaged in the shipping or aviation business. The enactment of the Regulations was made possible by means of the Companies Act (the “Act”), which power was inferred onto the Minister by virtue of Act V of 2020.
In accordance with Article 84E(b) of the Act, “shipping or aviation business” consists of:
- The ownership, operation under charter, lease, or otherwise, administration and management of a ship, aircraft, or aircraft engine, and the carrying on of all ancillary financial, security, commercial and other activities in connection therewith; or
- The activities of a parent company and/or the company which holds shares or other equity interests in any undertaking established solely or mainly to carry out any one or more of the aforementioned, and carrying on of all ancillary financial, security, commercial and other activities in connection therewith; or
- The raising of capital through loans, the issue of guarantees, or the issue of securities by an undertaking, when the purpose of such activity is to achieve the objects or activities stated above for the undertaking itself or for any other undertaking within the same group; or
- The carrying on of any other objects or activities within the maritime or aviation sector as the Minister may prescribed from time to time.
Where a cell company is formed or converted from an existing company, the cell company shall be distinguishable from other companies by the inclusion of “Mobile Assets Protected Cell Company”, or “MAPCC” in the company’s registered name. Moreover, each cell of a cell company shall be easily identifiable by having a distinct name or designation.
When forming a cell company, the cell companies, together with its Memorandum and Articles of Association shall be registered with the Malta Business Registry (the “MBR”) against a fee prescribed by law. In the event of a conversion of a pre-existing company to a cell company, a copy of the resolution amending the memorandum and articles of association together with the amended version of such must be delivered to the MBR. Notably, once the cell company is registered, the company shall be considered as a single legal person which enables the cell company to segregate and protect its cellular assets. However, any cells created by the cell company shall not constitute a separate and distinct person from the company.
For this reason, directors of a cell company are under the obligation to identify and maintain a clear distinction between cellular and non-cellular assets. Whilst the former relates to the assets which are attributed to a specific cell, the latter relate to those which do not. Hence, it is imperative for directors to maintain separate records, accounts, statements, and any other documents so as to ensure that a clear distinction is made between the assets and liabilities pertaining to each cell, and any non-cellular assets. In any case, when dealing with third parties, the cell company shall inform such third parties that they are dealing with a cell company.
The Regulations also provide for cell shares which may be issued by the cell company, the proceeds of which constitute the cell share capital. The cell share capital comprises of cellular assets attributable to the issuing cell.
Furthermore, a cell company may issue cellular dividends with respect to the cellular assets or profits which are attributable to the particular cell. However, this shall be strictly limited to the cellular assets as no account shall be taken of assets of any other cell or non-cellular assets. Similarly, any liabilities attributable to a cell shall only be satisfied through the cellular assets attributable to that cell.
Finally, the Regulations state that cell companies and their shares shall comply with the Companies Act (Register of Beneficial Owners) Regulations which apply mutatis mutandis to cell companies and their cells.
Given the benefits associated with cell companies, the new Regulations are a welcomed addition to Maltese legislation, envisaged to be advantageous and useful for the shipping and aviation industries.
If you require further detail in relation to this update, please contact Dr Andrew Massa andrew.massa@df advocates.com who will be happy to assist you.