In the Budget speech for 2024, the Minister of Finance announced several measures aimed at aiding family businesses – from the continued reduction of stamp duty applicable to certain transfers to new measures allowing for more flexible family business restructuring and new fiscal incentives for family businesses which innovate, expand and digitalise.
It is through measures like these, says Regulator Joseph Gerada, that the small yet dedicated team at the Family Business Office can begin to see the fruits of their labour.
“More than 70 per cent of SMEs are family businesses, so considering that before 2017 we did not even formally distinguish between family and non-family businesses, and today we are seeing budgetary measures which are specific to them, is a very positive thing. It is here that we can see the work of the FBO, which started in 2017, leaving its effect – we are speaking more about family businesses, and really recognising their importance in the local economy,” he maintains.
Expanding on the reduction of stamp duty – which has been renewed since it was announced for the first time in 2017 – Dr Gerada says that this stands to affect many family businesses, as prior to 2017, there were several cases in which such enterprises could not actually afford to transfer the business to the new generation. “We are still seeing an appetite for this exemption,” he smiles.
Apart from the budgetary measures, the FBO is also working on improving and renewing the family business grant scheme, which is supported by Malta Enterprise. “One of the main incentives we offer here is the business consultancy scheme, through which family businesses can pay for a consultant to help them with the restructuring of the business and succession planning, thus leading to a positive business transfer,” Dr Gerada notes, affirming that the incentive provides up to €15,000 in financial aid, as a reimbursement of 50 per cent of the costs made to a consultant of the business’ choice, with one of the main requisites being that at least one lead consultant be a warranted professional.
Highlighting several other incentives such as Micro Invest (which for family businesses, has had its threshold increased from €50,000 to €70,000), the Regulator is confident that the needs of family businesses on the islands are being recognised.
But the work doesn’t stop there. In October, the Family Business Office played host to the Transeo Winter Summit 2023, bringing together experts in transfers and acquisitions of small and medium-sized businesses from Europe and beyond. Describing the FBO’s involvement with the business transfers platform, which provides merger and acquisition opportunities to its members, Dr Gerada explains, “if there are family businesses which are looking for investment opportunities in other businesses, or which do not have the prospect of being passed on to the next generation, they will have the opportunity to consider the possibility of having their business acquired by third parties through the platform.”
This year, Malta was chosen to host the winter summit – one of two annual summits organised by the platform. This took place on 12th and 13th October and formed part of the SME Week schedule of events.
“During this event, we had more than 80 registrations, and approximately 35 of them were foreign delegates. We also had several sponsors, namely the local branch of KPMG, RSM, and EMCS. During the summit, we discussed business transfers, with a special focus on family business – subjects including the difficulties in passing your business on to new owners or new generation. I was very glad to see that we had a good number of Maltese participants during the summit also, most of them either service providers who deal with family businesses, or family businesses themselves,” he maintains.
The feedback was very positive, the Regulator continues, and the organisation of the summit was successful – but again, the work doesn’t stop there. “Every summit should not stop at the end of it. Off the back of the Transeo Winter Summit, our objective is now to replicate a business transfers platform for Malta: a local platform where business owners in Malta can see acquisition and merger opportunities, as well as the opportunities to invest in other businesses,” Dr Gerada says, keen to collaborate with other local entities to make this happen.
Having recently formed part of a workshop on family businesses at Malta Enterprise’s Startup Festival, he adds, “it was brought up that there isn’t a platform where startups could pitch their ideas to investors who are also family business owners, so we are going to be exploring the idea of joining the two together – having a business transfers platform including a startup investment opportunity area.”
Speaking of the primary challenges family businesses are facing in today’s economic scenario, the Regulator says that chief among these is lack of time. “One of the biggest challenges is for them to realise that we are not here forever, and the owner’s role is not simply that of a manager or director who must focus on the day-to-day running of the business, but also of caretaker of the business,” he affirms, adding that many do not realise this until it is too late, and that it is equally important to think about the strategy and structures they need to have in place as it is to sell their products and services.
Another difficulty he points out is differentiating between the family and the business. “It is not an easy thing to do, but sometimes it is necessary, because not every family member has the ability or entrepreneurial skills to hold certain positions within the business. Being a member of the family should not entitle one to have a main role in the business,” Dr Gerada maintains.
On the other hand, family businesses face all other obstacles other businesses face, but, to their benefit, they have the advantages of being very resilient. “This is often the guarantee that the business will survive obstacles which other businesses may see as their failure, eventually. This advantage needs to be acknowledged more,” he notes, while warning that surviving does not necessarily mean you have a strong business if you don’t have the necessary structures in place and get by through sheer force of will.
Sharing his plans for FBO, moving forward into 2024 and beyond, the Regulator reveals that when the office was set up in 2017, the focus was on assisting family businesses, at the time, to transfer to the next generation. Now, they have come to a stage where, over the past years, many family businesses have become cognisant of the obstacles which they face as opposed to other businesses.
“Recognising this is the first step, followed by recognising that you need assistance from professionals to help you put the right structures in place,” he smiles, sharing the FBO’s plans to continue promoting this as much as possible while recruiting more businesses into their registry.
“We are also trying to streamline our work with that of other entities, including Business First, Malta Enterprise and the Malta Business Registry. The benefit here is creating a network, and capitalising on the fact that strength is in numbers. We are also going to continue our focus on education, and thinking of other ways of reaching out, including a podcast, and conducting research on the continued needs of family businesses on the island,” he adds.
Finally, Dr Gerada concludes, “as a FBO, we will also continue being present even outside of the local scene by participating in conferences and summits, through our membership in Transeo and the European Family Business Association of FBOs” – always with a view to champion the requirements and aid family businesses on the Maltese Islands.
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