Private Exempt Companies

Understand more about the differentiators between a Private Company and a Private Exempt Company.

The Companies Act, Chapter 386 of the Laws of Malta (hereinafter the ‘Act’) differentiates between a Private Company and a Private Exempt Company. For a company to acquire the status of an exempt company, the following conditions should be present in the Memorandum and Articles of Association:

  1. That the number of persons holding debentures of the company is not more than fifty.
  2. That no body corporate is a director of the company and neither the company nor any of the directors is party to an arrangement whereby the policy of the company is capable of being determined by persons other than the directors, members or debenture holders thereof.

A Private Limited Liability Company in Malta should not have its sole director also acting as its company secretary. Nonetheless, if such a company has acquired a private exempt status, this provision is hereby waived. Therefore, a sole director may also hold office as a company secretary in the same company.

Furthermore, a Private Limited Liability Company in Malta may not make a loan to the company’s director or enter into any guarantee or provide any security in connection with a loan made to a person as aforesaid. However, if such a company has acquired a private exempt status, this provision shall not apply to such companies.

Companies that do not, at their balance sheet dates, exceed the limits of two of the three following criteria:

  1. Balance sheet total of Euro 2,562,31.74
  2. Turnover of Euro 5,124,621.48
  3. The average number of employees during the accounting period is fifty

are classified as small companies in Malta, where such companies do not exceed the limits of two of the three following criteria:

  1. Balance sheet total of Euro 46,587.47
  2. Turnover of Euro 93,174.94
  3. The average number of employees during the accounting period is two

Such companies shall be able to produce abridged balance sheets and profit and loss accounts and shall not be required to have audited accounts.

Therefore, such companies shall be exempt from producing an auditors’ report and from complying with the provisions of Chapter IX of Part V of the Act, which deals with the requirement of auditors. When a Private Exempt Company qualifies to draw up abridged annual accounts relating to an accounting period, the company’s directors may deliver to the Registry of Companies abridged annual accounts in respect of that period.

Act III of 2013 amended clause 211 of the Act by removing the requirement that a company shall not qualify for a private exempt status if such company has a corporate shareholder unless the latter also had a private exempt status. This is to increase the versatility of corporate structures in Malta.