New regulations under the Companies Act entitled the ‘Shipping and Aviation Cell Companies Regulations’ (the “Regulations”) were introduced on the 16th June 2020. The main objective of these Regulations is to provide for a new structure which can be used by companies operating in shipping and aviation by means of cell companies.
These Regulations apply to companies conducting shipping or aviation business as defined in article 84E of the Companies Act and essentially carrying out any one of the following activities:
-The ownership, operation under charter, lease or otherwise, administration and management of any ship or of any aircraft or aircraft engine and the carrying on of all ancillary financial, security, commercial and other activities in connection therewith;
-The holding of shares, directly or indirectly as a parent company, in an undertaking established mainly to carry out the abovementioned activities;
-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 aforementioned objects or activities;
The Regulations stipulate that companies may be formed or constituted as a cell company to carry on shipping or aviation, or else a company carrying on such business may be converted into a cell company, if authorized by its memorandum and articles of association. Cell companies should be distinguishable from other companies by means of the name ‘Mobile Assets Protected Cell Company’ or ‘MAPCC’.
A cell company may create one or more cells for the purpose of segregating and protecting the cellular assets of the cell company. The assets of a cell company shall be either cellular assets or non-cellular assets. The Regulations require that the directors of a cellular company delineate between the cellular assets and non-cellular assets whereby the cellular assets should be separately identifiable from the non-cellular assets. The cellular assets of a cell company comprise the assets of the cell company relating to the cells of the cell company. The directors should also ensure that there is the necessary documentation in place to evidence the distinctness of the assets and liabilities of each cell such as separate records, accounts and statements.
A cell company is a single legal person, and the creation of a cell by a cell company does not create, in respect of that cell, a legal person separate from the company. The registration of such cell is subject to the decision or resolution approving the creation thereof, together with the necessary instruments giving effect to such decision or resolution, being delivered to the Malta Business Registry.
A cell company may, in respect of any of its cells, create and issue shares. In such case, the proceeds of the issue shall be comprised in the cellular assets attributable to the cell in respect of which the cell shares were issued. Cellular dividends may then be paid with respect to cell shares by reference only to the cellular assets, liabilities or profits ascribed to the particular cell in which the cell shares were issued.
This cellular mechanism is a prime example of ring-fencing as each cell has its own assets and liabilities. Cellular assets are only available to the creditors of a singular cell resulting in absolute protection from the creditors of the other cells belonging in the cell company.
It is expected that the new Regulations will continue to make Malta an attractive jurisdiction and help it attract further business in a sector which is very important to the country.
In the current high interest rate environment, investors have many opportunities to deploy excess liquidity into positively yielding financial instruments