[WATCH] New Family Businesses act to make company transfers easier

New Family Businesses act to make company transfers easier • Video by Ray Attard

Economy minister Chris Cardona said that the white paper on family businesses sought to provide this important sector with a necessary legal framework to allow company owners to pass their businesses on to the next generations.

Cardona said that the act was a recognition of the indispensable nature of family businesses to Europe’s economic prosperity as they generate growth and employment as well as stability.

“Over 70% of Maltese businesses are family owned and they employ about 40,000 people,” he said stressing that they resisted economic turmoil better than bigger companies.

He added however that a mere 30% of these business managed a successful transition to the second generation and less than 10% to the third generation.

Cardona said that the legislation  aimed to reduce the risks of such transfers and that it would also provide better access to finance for family businesses.

“Members of family businesses can receive legal guidance  and assistance from regulators to plan adequately and affect a successful transfer of their businesses when the time comes,” Cardona said, adding that the regulator would act as a middle man between the ministry and the businesses.

"The legislation aims to encourage companies to make the necessary plans for succession of companies, and to even make such plans at the very beginning of their business."

He added that dependence on its owner and nepotism were among the main issues for such businesses and that the act dealt with many of these issues in the consultation.

He further explained that the act was not trying to ignore emotions but to priortise business practices.

He added that the absence of succession plans could be a result of owner thinking that they might never retire, but that the best course of action to ensure long term success was always planning.

“The act should be an enabler not restrictive, he said stressing that there is enough bureaucracy as it is.

“This act is part of the agenda to reduce bureaucratic processes,” he said adding that the legislation was also the first of its kind around the world.

He added that the act had been a long time in the making, and that the white paper endorsed this long research and consultation process to provide a legal framework to family businesses.

Nadine Sant, legal advisor for the act said that the law is not just accessible to local family businesses and that it aimed to encourage foreign family businesses to set up in Malta.

Sant said that a number of businesses were not even registered and that the law aimed to give these small companies a more legal backing.

She added that the European Commission was encouraging other EU member states to follow in Malta’s example and build a strong economy like our own.

She added that the consultation had shown that close to 90% of family businesses wanted to transfer their businesses to the next generation and that there was a potential of 4,000 family businesses to take this legislation on board.

Sant added that the act also took companies with shared ownership into account, while at the same time defining what constitutes family owned businesses.

Sant added that the law encouraged owners to complete transition to other generations during their lifetime, without being restrictive or binding.

Director of the strategic and entrepreneurial management department in Italy, Paolo Morosetti praised the act’s attempt to define what family businesses actually are and its emphasis on giving businesses the necessary freedom to operate.

Morosetti added that the legislation showed that ownership identity matters and that it was important o instill stability.

“Malta is the first country trying to imply discussions in many EU countries,” he said. :we are setting the standards.”