Family businesses in Malta : a legal perspective

Abstract

The aim of this thesis is to provide a legal perspective of family businesses in Malta, explaining the need for their legal recognition and for a special legal framework aimed at ensuring for their regulation, and for the provision of incentives, thus ensuring a successful succession planning process of these businesses, leading to their survival through generations. Across the globe, one will find the persistent presence of family businesses, which more often than not, offer indispensable benefits to the economy of each country within which they are found. After establishing the importance of family businesses to the Maltese economy, the author points out that unfortunately, they remain in a limbo when it comes to Maltese legislation. The regulation of these businesses is very important to ensure their continued survival. The thesis delves into the definition of the term ‘family business’ which will be the first step towards a proper regulation of this sector. Family businesses face unique challenges that require the full attention of the legislator and policy makers. Family business succession is the most challenging process that family businesses must undergo since, if not properly undertaken, might result in the end of the family business. Tax issues and lack of proper governance structures are the main reasons why family businesses fail this succession process. The thesis will delve into the legal issues that arise during family business transfers including tax implications. Since 2013, an initiative commenced for the drafting of a Family Business Act (FBA) , having as its main objective the easing of family business transfers from one generation to the next, through the provision of incentives. The thesis provides an in depth analyses of the Draft Bill entitled A FBA, as available at the time of writing of this thesis, and concludes by proposing a number of incentives to increase the percentage of successful family business transfers.