Malta Company Service Providers Regime 2021
Amendments to the Company Services Providers Act
The Malta Company Service Providers (Amendment) Act 2020 came into force on 16 March 2021 through Legal Notice 96 of 2021. This reformed Act also brought with it an overhauled Corporate Services Provider (“CSP”) Rulebook .
Malta CSPs must apply for their licences under the impending deadline of 16 May 2021. CSPs who were already listed with the Malta Financial Services Authority (“MFSA”) before this reform need also ensure full compliance with the new amended rules with a deadline expiring on 16 September 2021. Both groups of CSPs must look intensively at their new obligations under the new Rulebook.
As part of a larger restructuring exercise undertaken by the MFSA to raise the bar for the financial services industry and improve regulation of CSP conduct to safeguard Malta’s standing as a reliable financial services centre, these changes establish a classification system, assigning CSPs to a particular category by reference to the services provided. The Authority is in control of the authorisation and supervision of CSPs, who are entities or individuals providing corporate services, as a business activity, including company formation, directorship/company secretary services and registered office, business or correspondence address provision for businesses.
Before the publication of the Act and the corresponding Rulebook, the Maltese financial services community had hoped for a more clear delineation of the applicability of the rules or otherwise. It was thought that this conclusion would be reached through a clear application of the new CSP classification. However even a cursory look at the new Rulebook discloses no hard and fast demarcation of this kind. A couple of main, central responsibilities do assist in differentiating between classes of different service providers, namely rules relating to capital and insurance requirements. However, regarding other obligations, the Authority has emphasized that the rules are principle-based and should be observed in a manner that is proportionate to the size, risk, and business model of the provider in question.
Even though the Rulebook is infused with mentions on how it may be applied by CSPs who are individuals, yet there is no clear outline nor breakdown of the obligations for each class. The Authority also adopts a risk-based approach concerning the supervision of CSPs. A risk monitoring system is utilised whereby the data collated through the offsite supervision and any other intelligence available is inputted and a risk score is allocated to each CSP. This risk score will determine the nature and frequency of supervision carried out by the Authority.
The new rules also present a paradigm shift from a process of registration of CSPs to an application for authorization with the MFSA. Also previously exempted professions such as warranted advocates or accountants are now required to also apply for authorisation. On the other hand, trustees and VFA agents are exempt from the process.
In a nutshell, the result of these amendments has been the casting of a much wider net when it comes to the regulation of Malta corporate services. Now the new law catches all types of legal persons and not just companies, has removed earlier relevant exemptions and de minimis rules and has imposed broader reaching continuing obligations and heavier fines for non-compliance in a bid to raise standards within the industry.