Malta · Accounting records, annual accounts, reports and distributions

Pay a dividend or make any other distribution lawfully

the Companies Act, Chapter 386 · articles 192, 197 and 202 to 204, articles 193 and 194, articles 198 and 199, article 200, and First Schedule, Part I, paragraphs 76, 79, 81, 82 and 83

A distribution is lawful or unlawful at the moment it is made, and the test is applied against a defined set of accounts. If the last annual accounts will not support the distribution, interim accounts or initial accounts have to be prepared and, for a public company, delivered to the Registrar before the distribution is made.

The second trap is the public company test. A public company may make a distribution only if the amount condition in article 193(1) is met, and uncalled issued share capital may not be included as an asset. A member who knows or has reasonable grounds to believe that a distribution is unlawful is liable to repay it under article 204.

A company may not make a distribution except out of profits available for the purpose (article 192(1)), and profits available for distribution are defined by article 192(3). A company may not apply an unrealised profit in paying up debentures or in the other ways prohibited by article 192(4). The amount of a distribution which may be made is determined by reference to the relevant accounts (article 197(2)), and the relevant article is treated as contravened in the case described in article 197(4). A provision of any kind mentioned in article 202 is treated as that article provides. Where a company makes a distribution of a non-cash asset, article 203 applies. A member who receives a distribution made in contravention is liable as article 204 provides.

A public company may only make a distribution if the amount condition in article 193(1) is satisfied, and may not include any uncalled issued share capital as an asset (article 193(4)). An investment company with fixed share capital is subject to article 194(1), may not include uncalled issued share capital as an asset under article 194(3), and may not make a distribution in the case described in article 194(4).

If the company's last annual accounts constitute the only accounts relevant, article 198(1) applies. The accounts must have been properly prepared in accordance with the Act (article 198(2)), subject to article 198(3). The auditors must have made their report on the accounts (article 198(4)) and must have stated what article 198(5) requires.

Where interim accounts are relevant, article 199(1) sets the requirements. The accounts must have been properly prepared (article 199(2)), properly prepared having the meaning in article 199(3) and subject to article 199(4). A copy of the accounts must have been delivered to the Registrar for registration (article 199(5)), and if the accounts are in a language other than English or Maltese, a translation is required by article 199(6).

Where a public company makes a distribution in its first accounting period, initial accounts are required by article 200(1), properly prepared under article 200(2) with the meaning carried across by article 200(3). The auditors must have made the report required by article 200(4) and stated what article 200(5) requires. A copy of the accounts and of the auditors' report must have been delivered to the Registrar under article 200(6), with the translation requirement in article 200(7).

Under the model regulations, dividends are declared subject to the rights of persons entitled to shares with special rights as First Schedule, Part I, paragraph 76 provides, and the directors may set aside reserves under paragraph 79. Notices are given as paragraphs 81 and 82 provide, and paragraph 83 applies to every managing director and other executive officer.

Working files 40 to 43 and Working file 75 of the MT-COMPANY agent toolkit test a distribution before it is made rather than after. Working file 40 asks for the figure of accumulated realised profits and losses and applies article 192, then walks any distribution of a non-cash asset and any repayment obligation under articles 203 and 204. Working file 41 applies the additional public company and fixed capital investment company tests in articles 193 and 194. Working files 42 and 43 ask which accounts you are relying on, the last annual accounts, interim accounts or initial accounts, and check the auditors' statements and, where required, the delivery to the Registrar. Working file 75 applies the model regulations on dividends and reserves where your articles have not displaced them.

• Working file 40 · Distributions: the general rule, profits available and unlawful distributions
• Working file 41 · Distributions by a public company and by an investment company with fixed share capital
• Working file 42 · Relevant accounts for a distribution: the last annual accounts and interim accounts
• Working file 43 · Initial accounts for a distribution by a public company in its first accounting period
• Working file 75 · Model regulations: dividends, reserves and notices

ComplianceSME tracks the Companies Act, Chapter 386, and updates the toolkit on your account through the Compliance Complete account, so that you are never working from a superseded version. Compliance Complete

• Keep the accounting records and prepare the annual accounts
• Prepare the directors' report, lay the accounts and file the annual return
• Report payments to governments or publish the report on income tax information

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