The digitalization of company formations in Malta : the effect of Directive 2019/1151

Abstract

This paper intends to analyse the effects of digitalisaton on company formations as a result of the recent Directive (EU) 2019/1151 on the use of digital tools and processes in Company Law, with a particular focus on Malta. The amending Directive came into force in 2019 and aims at making it easier to create and operate companies through online procedures. However, considering that it is a Directive, its future impact on Maltese Law is very dependent on how it is transposed at the national level. The author will begin by analysing the provisions of the Directive as well as Maltese legislation transposing the Directive. The intention here is to understand what changes the Directive will bring about and how Malta will implement such changes in its already existing process of online incorporation. Moreover, while considering the various benefits of company incorporation being digitalized, specifically relating to time and cost, the author will analyse if these benefits are weighed against the risks of identity theft and letterbox companies. Thus, the author examines the reality that providing an overly simplified system with no control may benefit individuals intending to use the company for different reasons such as fraud, tax evasion and money laundering. Finally, as a company can be incorporated more easily through an online system, the Directive anticipates situations where disqualified directors may attempt to circumvent national laws by applying to become a director in different Member States. Nevertheless, there are manners in which such risks can be avoided with the proper implementation of the Directive which will be analysed, particularly from a Maltese company law perspective. Hence, the author will analyse the measures in place by the Directive to prevent such scenarios from happening and Malta’s stance with regard to the matter.