Malta: Challenges, Success And Succession Of Family Businesses In Malta

Family businesses unquestionably form the backbone of the Maltese economy. From small family-owned retail outlets to larger family-established companies or groups of companies operating high-tech industrial facilities for the manufacture and export of sophisticated consumer goods, world-class breweries and beverage bottling facilities, five-star hotels, and large real estate developments, the family unit has always been of critical importance- not only to the development of Malta's social fabric but also to its economic development over the past two centuries. And this importance is only increased by the consideration that employment in the private sector is largely accounted for by family-owned businesses.

Like any other businesses, the dynamics at shareholder level have a significant influence on the way the business operates. Thus, for example, a private-equity owned company seeking maximisation of profits as its primary goal is bound to be run quite differently to a family-owned business passed down three generations which will be more intimately connected to the very market that it services. This connection typically brings a stronger social and ethical dimension to the conduct of that business, whereby the pursuit of profits are generally not the sole objective and other social considerations are brought to the fore. One typical example from Italy, which is close enough to home, would be FIAT which has had a significant impact on both the social and economic development of Torino over the years.

It is also true, however, that shareholder dynamics within a family business are often complicated by the fact that shareholders are not only participants in a collective business venture, but also members of the same family unit, with all the associated dysfunctions and idiosyncrasies which such relationships bring. The family unit involves emotions and behaviour that would rarely be found between unrelated business partners- emotions and behaviour created on a personal and family level and which are inevitably brought into the business and very often hinder the proper running of that business. Common examples would be the hitherto prevailing practice of excluding female family members from family businesses ostensibly due to their home-making commitments, and key leadership functions being occupied by family members on the basis of their gender, age or line of descent, rather than on the basis of objective assessments of merit, suitability and skill.

As legal advisors to several local family businesses, both large and small, our firm is regularly involved in succession-related issues which must be addressed on an on-going basis. The passing down of ownership and control from one generation to another is always a highly sensitive affair. The careful handling of such situations necessitates the involvement of experienced external advisors to facilitate the succession process, through the creation of appropriate structures, mechanisms and protections intended to safeguard not only the interests of the shareholders and family members, but most importantly the preservation of the long-term interests of the family business in question.

In many cases options such as buy-outs and consolidation of shareholding should also be carefully considered as possible routes to ensure that every family member's interests can be addressed to the fullest extent possible.

Typical considerations faced by external advisors when handling a family business succession plan include the following:

  • Preservation of the financial benefit derived from the business by older members of the family to preserve their post-retirement quality of life;
  • Sensitivities of older family members relating to the relevance of their knowledge and experience in a modern business environment somewhat far-removed from the prevailing environment at the peak of their careers;
  • Conservative outlook on the part of older generation family members which impairs the undertaking of new investments, distribution channels or business methods;
  • Fragmentation of shareholding created by the multiple divisions of shares amongst siblings or family members, creating the risk of regular divergences in the objectives of the business in question;
  • Raising of finance from external sources for capital expenditure or working capital requirements;
  • "Power struggles" between family members to occupy key executive roles within the business;
  • Methodical handover of key external business relationships from one generation to the next;
  • Family members who lack commitment to the family business or do not contribute to the same extent as other family members expecting equal financial reward for their work;
  • Rigid remuneration structures which are based more on seniority within the family unit rather than on skill, capability, commitment and/or effort;
  • Unsophisticated corporate governance practices, including irregularity and/or informality of board meetings, absence of non-executive directors and lax internal controls;
  • The cost of reorganising shareholding due to capital gains and duty on documents liabilities due upon the transfer of shares from one family member to another.

The list goes on.

Whilst several of these considerations can be managed effectively through the involvement of the appropriate legal, accounting and tax professionals, it is clear that the commitment of older family generations is critical for the success of any transition of ownership and control of a family business. In cases where older generations pay lip service to a succession plan "in principle" but fail to follow through with action to implement the required changes, real risks of material and irreversible damage to the family business are created as internal dysfunctions distract the family members from their business.

The Maltese Government's recent initiative of introducing various incentives through the Family Business Act has been favourably received by the local business community. A significant number of local family business have availed themselves of the benefits introduced by the Act, particularly the reduction in the duty on documents and transfers applying to transfers of shares by existing owners to their descendant family members. Indeed, the original deadline of the 31st March 2018 was extended to the 30th September 2018 to accommodate the large influx of families that have taken up this opportunity to reorganise themselves. Many of the families that we have advised through this process have applied a mechanism of donating the shares in the family business to their children (next-generation), whilst retaining a right of usufruct so that the benefits of dividends and voting rights remain vested in the donor for a period of time, typically vita durante.

Families that have not yet considered the benefit of availing themselves of the benefit within the time-window of the 30th September 2018 are strongly advised to speak to an advisor of their confidence to understand the benefits, mechanisms and implications of the process. At the time of going to print it is still unclear as to whether or not a further extension to the 30th September deadline will be applied. Whilst this procedure will not serve to address wider governance and organisational issues, it certainly helps families empower the next generation through the vesting of ownership of the family business (albeit subject to the usufruct) and pass on the proverbial baton.

The complexity of managing a succession process carefully and correctly cannot be overstated. Families looking to rethink their internal ownership, governance and organisational structures would be advised to seek professional guidance at an early stage from advisors enjoying the confidence of all family members so that the interests of all involved can be managed as smoothly as possible. The alternative of having divisions and factions created within the family unit very often threaten the integrity of the family business not only economically but also on a familial level.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions