Recently, Malta has enacted new regulations, Act XX of 2013 (hereinafter the ‘Act’) to regulate company service providers providing services in Malta in order to implement Act 36 of EU Directive 2005/60/Econ the prevention of the use of the financial system for the purpose of money laundering and terrorist financing, with respect to company service providers.
Definition of a Company Service Provider
The Act defines company service providers as any natural or legal person which by way of business provides any of the following services to third parties:
Incorporation of companies and other legal entities;
Acting as or arranging for another person to act as director or secretary of a company or a similar position in other legal entities;
Provision of a registered office or other related services for a company or other legal entity.
Registration of a Company Service Provider
Any person resident or operating from Malta who acts as a company service provider shall be required to be registered with the Malta Financial Services Authority (MFSA), with the exception of those persons who possess a warrant to act as an advocate, notary, legal procurator or accountant and persons authorised to act as a trustee in Malta; albeit, such persons are still obliged to notify the Financial Intelligence Analysis Unit in Malta.
A person is considered to be acting as a company service provider if it holds itself out to be a company service provider or provides company services on a regular and habitual basis and, is being directly or indirectly in receipt of remuneration for such company services.
Requirements of a Company Service Provider
A company service provider is required to be a fit and proper person, by the MFSA, to provide the services concerned and in the case of legal persons, the activities of the legal person include acting as a company service provider, the directors are at least two in number, in order for the legal person to adopt the four eyes principle and the direct or indirect ultimate beneficial owners that own or control at least 25% of the shares or voting rights or otherwise exercise control over the management of the company are fit and proper persons. In the event that a company is not incorporated in Malta, it should be incorporated in a reputable jurisdiction.
De Minimis Rule
The MFSA has established a rule that in order for the said authority to determine whether an individual is holding himself out as providing directorship services by way of business and therefore subject to registration in terms of the Act, the MFSA shall consider whether the individual holds an aggregate of more than ten directorships and company secretarial positions in companies, other than those licenced, recognised or authorised by the MFSA. However, individuals holding directorships or company secretarial positions in companies which are licenced, recognised or authorised by the MFSA shall not be considered as providing directorship or company secretary services by way of business. Employees of a registered company service provider who are appointed as directors or company secretary in other client companies and whose appointment is arranged by a registered person are not considered to be providing such services by way of business.
Obligation to Notify MFSA
Following registration, a company service provider is obliged to notify the MFSA of changes or circumstances which may have a bearing upon its status as a registered person and in the case of a change in the statute of the company, changes of directors or members; such changes shall not be effective until they are notified and approved by the MFSA.
Obligation to Appoint a Compliance Officer and a Money Laundering Reporting Officer (‘MLRO’)
The MFSA required registered company services providers to appoint a Compliance Officer who will be responsible for ensuring that the company service provider adheres to its ongoing obligations in the rules established by the MFSA with respect to Company Services Providers and the law. Consent needs to be sought from the MFSA prior to the appointment of a Compliance Officer. The MFSA also requires registered company service providers to appoint a Money Laundering Reporting Officer to adhere to the day to day anti-money laundering obligations. Once again, consent needs to be sought from the MFSA prior to the appointment of a MLRO.
Financial Resources Requirement
Arstered company service provider is required to have sufficient financial resources at its disposal to enable it to conduct its business effectively and to meet its liabilities. A legal person is required to have at least five thousand Euros in paid up share capital whilst an individual is required to have at least two thousand five hundred Euros in working capital, throughout the time spent registered under the Act.
General Organisational Requirements
A registered company service provider is required to establish, implement and maintain decision-making procedures and an organisational structure, which clearly documents reporting lines and allocates functions and responsibilities. Furthermore, staff members should be aware of the procedures to be followed when carrying out their responsibilities and internal control mechanisms should be established to secure compliance with the decisions and procedures of the registered corporate services provider. Staff employed should also have the necessary skill, expertise and knowledge necessary to carry out their responsibilities. Moreover, a registered corporate service provider should establish effective internal reporting and communication of information, maintain adequate and orderly records of its business and internal organisation, ensure that staff members do not have too many functions which prevent them from carrying out their responsibilities in a sound, responsible, honest and professional manner. Staff training should be an ongoing and frequent occurrence.
A registered company service provider shall establish a client agreement with every one of its clients which shall include the services to be provided and the fees charged, a record of how and by whom requests for action are to be given, clear procedures regarding termination of the agreement and consequences of termination, a description for the procedure to deal with complaints and a statement that the registered person is registered with the MFSA.
Segregation of Funds
A registered company service provider should ensure that at all times, any monies in its possession but belonging to a client should be kept separately from the funds pertaining to the registered company service provider and should not be confused with funds belonging to different clients.
Customer Acceptance and Due Diligence
Prior to accepting to provide services to a client, a registered corporate services provider should ensure that such person is of sufficient good standing and repute and a confirmation in writing of the following should be given in writing, where the client specifies whether he has:
Ever been convicted of an offence;
Ever been adjudged bankrupt;
Ever been subject to an investigation by a government, professional or a regulatory body;
Ever been a director, shareholder, officer or manager of a business entity which has been the subject of an investigation as aforesaid;
Ever been a director, shareholder, officer or manager of a business entity which has been adjudged bankrupt, compulsorily wound up or has made any compromise or arrangement where its creditors or has otherwise ceased trading in circumstances where tis creditors did not receive or have not yet received full settlement of their claims and
Ever had or currently has any direct or indirect beneficial interest in or whether he ever was or currently is a director of any other company registered in Malta.
The client should also confirm that he is not acting on behalf of any third persons.
Annual Reporting Documents
Every year, the registered company service provider is obliged to prepare and sign an annual return prepared by the MFSA and also a Certificate of Compliance, which documents should be submitted to the MFSA.