The appointment of directors under Maltese law : an evaluation

Abstract

This dissertation studies the appointment process of directors under Maltese law. The key research objectives of this study are to consider the current legal requirements concerning the appointment process of directors and how Maltese directors are actually being nominated and appointed. Possible changes that can improve the present local reality are proposed. Research was conducted through an examination and analysis of relevant legislation namely the Company's Act 1995. Legislation applicable in European countries and main Commonwealth countries were also scrutinized. Semistructured interviews were also conducted with a group of seventeen companies comprising listed and public but not listed companies, as well, as large private groups. Two other interviews were also held with a lawyer and an experienced director involved in this sector. The study concludes that in the local context, directors are often appointed through personal contacts. Although NEDs comprise the majority of board directors of public companies, it is still difficult to have an independent NED. Academic qualifications are not considered as the key factor when appointing a director, whereas an individual's business acumen, competencies and integrity are vital in this decision. Before appointment, it should be ascertained whether the individual is aware of his duties and responsibilities as director. Locally, however, shareholders' interest is low. In fact, in the case of listed companies, most often companies end up having the same directors being nominated year after year. The study also concludes that attending board meetings for directors is not enough and this should be given its due importance at appointment stage. Locally, the practice is to accept directorships without hesitation. Nonetheless, although regulations require multiple directorships to be disclosed, there is still the possibility of conflicts of interest.