Remote Work – Benefits and Legal Framework

Remote Work – Benefits and Legal Framework

These are by no means ordinary times, and being optimistic in such times is somewhat absurd, how can one be optimistic when everything seems to be collapsing? When it seems like the issue will only get worse before it gets better? Well, it is not easy, and maybe typing it is easier than saying it out loud, but, yes, things will eventually get better.

We have all been leading busy lives, we had a routine and we followed it, we followed it so rigorously that it resembled a ritual, it defined who we are. Yet suddenly, everything came to a halt, and we have time on our hands, time to think, time to reflect, time to grow and better ourselves.

This brings me to my point: whether we liked it or not, we all had to adjust, and companies had to enact a business continuity plan. A great number of companies, together with government authorities (we thought we would never see the day here!) resorted to remote working.

The restrictions imposed within many European Countries meant we had to adjust quickly, even if we did not like the idea of remote working, in some instances this was the only way to keep a business going. This rapid adjustment helped us learn, amongst other things, the following:

  • Having a meeting through video conferencing works just as fine as it does in person;
  • Working from home is doable and has many benefits that we never actually thought of or explored before;
  • We can trust each other at work, because we are a team and we have each other’s backs.

The benefits of remote working

One might ask, “are the benefits of remote working only advantageous for employees?” The answer to this is a straight NO. So, let’s delve into the benefits that employers may reap through remote working:

PRODUCTIVITY

A study conducted by Harvard Business School found that Employees who work from home are more productive than those working in an office environment. This could be attributed to several matters, such as the fact that, usually, working from home means that you are working in a quieter environment. Increase in productivity is also attributable to shorter breaks and less break room conversations about what happened on Love Island or, in Malta’s case, on Xarabank!

RESULTS

Employees working from home tend to produce better results than those working at an office. This may be due to the fact that the productivity level is higher and that there is less office disturbance. Asking all employees to adapt to the same working regime that an office environment brings about will not produce the best results from each employee. Therefore, giving employees more autonomy would suggest that such employees produce better results.

RETENTION

Flexibility seems to be the number one factor on the list of employees to consider another job offer, therefore, giving your employees flexibility means you might have a higher retention percentage of employees. Various studies have shown that employees would take up another job if it offers more flexibility.

TALENT POOL

Remote working enables employers to choose the best candidate since this way the employer will not be restricted from choosing a candidate who lives in a different country. This might also be helpful for companies who require native speakers of languages other than that of the country wherein the company is established.

COST REDUCTION

Office space is EXPENSIVE and having employees work remotely means that you can either opt for a smaller office or that you can rent out office space which is not being used up by your employees. One must also consider other expenses in an office such as water and electricity, wi-fi and office furniture.

Remote Work - benefits for employers

Is remote working for everyone?

Remote working may not work for every given business, and, in the same way it may not work for every employee. There are individuals who are more productive in an office environment, or others who have too many distractions to work from home.

Offering remote working as an option would be the ideal solution, the employer will benefit from the above-mentioned points, and employees will have the option to choose to work remotely if they think this will work for them too.

Legal Framework of Telework in Malta

Now that I have convinced you that remote working is the way forward for many businesses, I shall be taking you through the legal framework related to teleworking in Malta, namely the Telework National Standard Order.

S.L. 452.104 defines telework as a means of organising and / or performing work, using IT in the context of an employment contract wherein the work which could be carried out at the employer’s premises, is instead performed away from such premises on a regular basis.

The Legislation lists down conditions which must be adhered to in the case of teleworking and provides clauses which offer comfort to both the employer and the employee in cases of teleworking.

Listed on the contract of employment or in a separate agreement 

If a contract of employment stipulates that telework is a condition of employment, the employee would not be in a position to reject a request of teleworking.

On the other hand, the situation is different when the need of teleworking arises during the course of employment and teleworking is not listed as a condition of employment in the employment contract.

In the latter case, an employee would have the right to refuse an offer of telework and the law makes it very clear that this shall not constitute a good and sufficient cause for terminating the employment. A refusal to an offer of telework by an employee does not create any right for the employer to change the conditions of employment of the employee concerned.

A request for telework may come from the employer or the employee, however, in the case of an employee requesting telework, the law gives the employer the discretion to accept or refuse such request.

Employees’ Status

When an employee starts performing telework, whether this has been referred to as a condition in his contract of employment or whether it came about through a separate arrangement between the employer and the employee at a later stage, such employee shall not be subject to a change in his employment status or his right to revert back to his previous post.

Right to terminate

Both the employer and the employee have the right to terminate a telework agreement and, in such case, the employee would have the right to return back to his previous post. Just as in the case of refusing an offer of telework, if an employee terminates a telework agreement, such termination would not constitute a good and sufficient cause for the termination of the contract of employment or for changes in the conditions of employment of such employee.

What should an agreement of telework include?

The Law stipulates that an agreement of telework shall, first and foremost, be in writing. The agreement shall include:

    1. information on the location where the telework should be carried out;
    2. clauses related to the equipment which will be used for telework, including the ownership, liability, maintenance and costs;
    3. the amount of time to be spent at the workplace and at the place of telework – if an employee will be interchanging between telework and work from the employers’ premises;
    4. a schedule which should be followed by the employee in the performance of his duties, if applicable;
    5. a description of the work to be performed by the employee;
    6. the department to which the teleworker is attached and the teleworker’s superior;
    7. if there will be any monitoring carried out by the employer, there should be clauses regulating such monitoring*;
    8. notice of termination of the agreement of telework.

In cases where telework is not mentioned in the contract of employment as a condition of work, and hence, it is undertaken during the course of employment, there should be included in the agreement of telework a reference to the right of reversibility by either party which includes the right of the teleworker to be able to return to his previous post.

*where monitoring is to be carried out by the employer, both the employee and the employer must agree to such monitoring which should be listed in the agreement on telework. The employer must make sure that the monitoring system is in proportion to the objective whilst also keeping in mind that monitoring is to be introduced in accordance with the Council Directive on the minimum safety and health requirements for work with display screen equipment.

No discrimination between employees

Employees who undertake telework will continue to enjoy all the rights mentioned in the Employment and Industrial Relations Act, any regulation issued thereunder, in any individual agreement or any applicable collective agreement as the other employees enjoy at the premises of the employer.

When it comes to training and development, a teleworker shall have the same rights of access to be involved in any training and career development courses which are provided by the employer.

The legislator stipulates that  there shall be no differentiation between the workload and performance standards of employees working at the premises of the employer and the teleworker.

Therefore, this portrays the legislators’ effort to make sure that there is no discrimination whatsoever between a teleworker and an employee working at the employer’s premises.

Equipment

More often than not, the Employer is the one providing, installing and maintaining the equipment required for the telework to be duly performed. However, the employer and the employee can agree, in the agreement of telework, that such equipment is to be supplied by the employee himself. If the agreement of telework is silent in this regard, then the presumption of the law applies, i.e. that the equipment is to be supplied by the employer.

Remote work

Conclusion

Remote working is increasing in popularity each year, however, I believe that after this year, the number of remote based employees will increase drastically.

One should note that teleworking should be undertaken for the benefit of both the employer and the employee. With this in mind, the employer will not abuse of his powers to differentiate between employees and in turn, the employee will do his utmost to be productive and deliver the expected results.

Hang in there and stay safe!

 

Have you invested in technology to enable your employees to undertake telework between the 1st and 30th of March 2020? Kindly contact us if you require any assistance with the grant application process.  

 

Disclaimer*

The above-mentioned article is simply based on independent research carried out by Dr. Werner and Partner and cannot constitute any form of legal advice. If you would like to meet with up with any of our representatives to seek further information, please contact us for an appointment.

Government Aid in relation to Covid-19 – Malta

Government Aid in relation to Covid-19 - Malta

The Prime Minister of Malta just addressed a Press Conference in which he announced a new financial aid package for those sectors hit by the Coronavirus outbreak. These measures shall be added to the previous measures announced by the Government.

Watch the video, in which I explain the government aid in relation to Covid-19 in Malta:

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In the past few days we have received many requests from various enterprises regarding economic support measures in relation to covid-19.

In this post, I will break down each measure into different categories and briefly explain what each measure entails, thereby, making it easier for you to understand whether you are eligible for such measures or not.

I am going to go ahead and start with what is probably the most significant measure:

The wage supplement measure

This measure is aimed at ensuring that each employee is provided with, at least, a basic wage. We can split this measure into three different categories:

Category number 1 deals with those employees working in industries which have:

  1. Either been drastically impacted; or
  2. Had to suspend their operations due to the covid-19 outbreak

Such employees are entitled to up to 5 days’ salary per week based on a monthly wage of €800 per month.

Whilst part time employees are entitled to €500 per month.

Self-employed persons are included in this measure, and, therefore, are also eligible for up to 5 days’ salary per week.

The second category deals with those industries which although did not need to suspend operations, were still adversely affected, such as the manufacturing and wholesale sectors.

This section is category is further divided into another two sections: Malta based enterprises and Gozo based enterprises:

  • Employees working in such industries, in Malta, are eligible for 1 days’ salary per week, which is equivalent to €160 per month.
  • Part time employees who also work in such industries are also eligible for 1 days’ salary per week, which in their case is equivalent to €100 per month.
  • On the other hand, employees working at a Gozo based enterprise are eligible for 2 days’ salary per week, which is equivalent to €320 per month, whilst part time employees are eligible for €200 per month.

The third category is linked to the second one, since it also deals with those industries which have been adversely affected by covid-19.

  • Self-employed persons who have employees and have been adversely hit by covid-19 shall be entitled to 2 days’ salary per week, equivalent to €320 per month.
  • The Government has also made a distinction between those self-employed based in Malta and those self-employed based in Gozo:
    • Gozo based self-employed persons who have employees shall be entitled to €480 per month and if they do not have employees, they shall be entitled to €320 per month.
  • Therefore, by way of comparison, apart from the fact that Gozo based enterprises are given higher supplements, in this case, adversely affected self-employed persons based in Malta, shall not be eligible for any supplement if they do not have employees, whilst Gozo based self-employed persons who have employees, shall still be eligible for €320 per month.

In each given case under the wage supplement measure, the funds shall be forwarded to the Employers who are then obliged to distribute such supplements to their Employees accordingly.

The second corona measure is the Deferral of Payment of Taxes

Through this measure, payments of Provisional Tax, VAT and National Insurance Contribution on Salaries shall be deferred by two months for enterprises and self-employed persons.

Up to now, this measure shall apply for taxes owed until the end of April, however, the Government will be studying further extensions to such period depending on how the situation will evolve.

It is important to note that deadlines for submission of forms should stll be adhered to.

To be eligible, companies and self-employed persons must prove a downturn in their turnover as a result of economic constraints arising from the pandemic.

Therefore, for example, a drop in sales of around 25% or over would render a company or self-employed person eligible for such measure.

The third covid-19 measure is further liquidity initiatives

Liquidity is probably one of the main concerns of various enterprises. We cannot stress enough how important it is for an enterprise to remain liquid, especially in these unparalleled times.

Therefore, for those enterprises requesting operation loans, the Government announced that there shall be allocated €900 million in bank guarantees with low interest rates and longer repayment periods.

In order to ease the burden of bank loans, there shall be a three month moratorium from banks for both business and personal loans.

The fourth initiative relates to social measures

There are four social measures which have been announced by the Government:

The first measure relates to cases in which parents had to stay at home to take care of their children.

In such cases, where both parents work in the private sector, the parent staying at home shall receive a direct payment of around €166 per week.

If the parent works part time, he or she shall receive approximately €103 per week.

Single parent families having school-aged children are also included under this measure.

It is important to note that this measure applies for those who cannot carry on with their work through remote working.

The second measure regards persons with disabilities who work in the private sector and opt to stay home for health and safety reasons. Such persons shall be receiving around €166 per week if they work full time and €103 per week if they work part time.

Through the third measure, those employees who had their job terminated as of the 9th of March, shall be receiving around €166 per week if they were working full time or €103 per week if they were working part time and Self-employed persons are also included under this measure.

The fourth measure is an increase in rent subsidies for those persons who became unemployed.

Quarantine Leave is the fifth measure of Maltese government

Quarantine must be one of the most trending words on social media right now.

So, employers are entitled to a one time grant of €350 for members of their staff who have been on mandatory quarantine leave.

This measure also includes those instances wherein members of staff had to quarantine themselves due to contact tracing.

One must note that this measure is only applicable in relation to full time employees.

The sixth measure is assistance in relation to teleworking activities.

Many enterprises who are able to work remotely have been investing in technology to enable them to carry on with their business.

All those enterprises who opted to invest in technology enabling teleworking, shall be entitled to a grant of up to €500 for each teleworking agreement, and up to €4,000 for each undertaking.

The costs of such investments shall be incurred between the 15th of February 2020 and the 8th of May 2020 and the grant shall cover 45% of such costs.

If an employee had a teleworking agreement prior to the 15th February 2020, such agreement shall not be considered as part of the investment eligible for a grant under this measure.

Should you require any further information or assistance on the Government Aid in relation to the outbreak of the Coronavirus, you can send us an email on or call our offices on 21377700

 

Government Recovery Plan – COVID-19

covid-19 recovery plan malta

The Maltese Government has announced a €900 million recovery plan in view of the Covid-19 impact, a plan which is aimed at restoring the Maltese economy through a reduction of expenses for businesses, the issuing of more financing packages, boosting domestic demand and providing direct support to industries whilst also promoting work.

The following is a brief overview of the measures announced during yesterday’s conference:

Covid Wage Supplement

The Covid Wage Supplement which was introduced in March and issued to those business and enterprises which were impacted by Covid-19, will be retained up to the end of September 2020. The same rate of €800 and €500 for full timers and part-timers, respectively, is being retained for the tourism industry while for other industries which will remain on Annex A, the rate of €600 and €375 for full timers and part-timers, respectively, shall apply. Some of the industries which were previously listed on Annex A, will now be considered to be eligible for a supplement under Annex B.

Furthermore, the Government announced that students and pensioners who work part-time, will now be eligible for the wage supplement.

Electricity Subsidy for Businesses

For the months of July, August and September, the Government will be subsidising electricity bills of business by 50%, up to a maximum of €1,500 per applicant. This will apply to all those industries which were included in Annex A and Annex B.

Fuel Price Reduction

The Government announced that the prices of petrol and diesel will be reduced by €0.07 per litre. This means that from Monday 15th June, the price of petrol will be at €1.34 per litre and that of diesel will be at €1.21 per litre.

Tax Cut on Property Transfers

As part of the recovery plan, the Government is also aiming to boost the property market. For this matter, both buyers and sellers will benefit from reduced stamp duty on property transfers.

Buyers will now be paying 1.5% in tax and sellers 5% on property transfers. Therefore, a reduction of 3.5% and 3% applies for buyers and sellers, respectively.

The rates are applicable for residential properties only and are capped at a maximum of €400,000. This measure shall remain in place until end of March 2021.

First Time Buyers

Furthermore, in relation to boosting the property market, the Government announced that the current law regulating the First Time Buyers Scheme will be amended accordingly to allow for those who had previously bought a property which is not residential, to be able to benefit from the scheme as First Time Buyers when buying their first residential property.

Construction Industry

The Government stated that the budget for the modernisation of the construction equipment shall be increased to €4 million.

Rent Subsidy for Businesses

There shall be a grant, capped at a maximum of €2,500 per applicant, to help companies cover their commercial rental fees. This grant will be applicable to those entities listed on both Annex A and Annex B.

Tax Deferrals

Companies will continue to benefit from the tax deferral scheme which was announced in March. Such tax deferrals will be extended until June 2020. The deferred tax shall be paid by May 2021 and no interest shall be charged on such deferred tax.

As for National Insurance, Maternity Contributions and Income Tax, the Government announced that these will start being paid again from the 1st July 2020.

Tax Credits

The tax credits issued in relation to the micro invest scheme will be adjusted in order to have 30% of such credits issued in grants. Maltese Business will be eligible for grants of up to €2,000 whilst Businesses located in Gozo will be eligible for grants of up to €2,500.

Tax Refunds (Individuals)

€11.5 million will be used to cater for the refund of individual income tax. This measure had already been in place, however, the Government announced that it will be issued once more in the coming days.

In-house Employee Training

The budget of the current scheme administered by Malta Enterprise, which aids companies to cater for in-house training, will be increased by a further €5 million.

Vouchers

All those aged 16 and over shall be receiving €100 in vouchers which are meant to be spent in hotels, bars and restaurants. One of the vouchers may be spent at retail outlets which were closed during the past months due to the pandemic.

Wedding Expense Compensation

For all the couples that incurred extra expenses due to having to postpone their wedding for a later date, the Government will be refunding a portion of such expenses. The refund is capped at €2,000 based on the additional expenses incurred by such couples.

Fairs Refund

Up to 80% of expenses incurred by business who were participating in international fairs which were cancelled due to the pandemic shall be refunded by the Government.

Improved in-work benefits

All families who currently receive the in-work benefit will now be receiving a one time grant of €250. The current thresholds will be amended to include more families whilst the current grant will also be increased.

Licences fees waived

As a measure to help businesses within the tourism industry, the Government announced that all business who paid their commercial licences to the Malta Tourism Authority will have next years’ licence fee waived. For those business who still have not paid their commercial licence, the licence fee for this year shall be waived.

Business Fund and Advertising

Malta Enterprise shall be managing a fund aimed at aiding businesses who wish to re-model their business in order to meet the necessities of the current circumstances. The grants from this fund shall be capped at €5,000 per company.

There shall also be allocated €5 million to be used by companies who want to advertise their products both locally and abroad.

Refund of Port Charges, Export Promotion and Credit Guarantee

The Government shall be refunding 33% of port charges and 10% of container discharge fees. Transhipment activities are excluded from both schemes.

There shall also be allocated €400,000 to Trade Malta which will be used to refund companies for up to 50% of expenses in relation to digital marketing.

Furthermore, an export credit guarantee will be provided to companies by the Malta Development Bank. This guarantee shall be capped at €10,000,000 and is aimed for those businesses who seek to export their products in new markets.

The Government revealed other investments which may not be directly related to the Pandemic, such as an investment of €400 million in industrial facilities and infrastructure aimed at attracting foreign investment.

The above-mentioned measures will help to enhance Malta’s economy whilst adjusting to the new circumstances. The Prime Minister stated that this is a strategic plan with a vision for a better tomorrow.

You may contact us on or +356 213 777 00 should you require any further information on the above or any information regarding Government Aid in relation to COVID-19 measures.

New Public Health Announcements in light of the outbreak of Coronavirus

During a press conference held yesterday, the Minister for Health, Dr. Chris Fearne, together with the Superintendent of Public Health Profs. Charmaine Gauci, announced new public health measures which will come into force on Saturday 28th March 2020.

In an effort to control the outbreak of the Coronavirus and protect the persons most vulnerable, the Minister ordered a lockdown for all those persons aged over 65, pregnant women and others who suffer from medical conditions.

Those under 65 years of age who are:

  • Insulin dependent diabetics;
  • Taking any Biologic medicine;
  • Cancer patients who have undergone chemotherapy in the last 6 months;
  • Immunosuppressed patients;
  • Patients undergoing dialysis;
  • Pregnant women;
  • Patients with respiratory problems (who have been hospitalised for such problems during the last year);
  • Patients with Cardiac problems (who have been hospitalised for such problems during the last 6 months);
  • Patients who have attended the Heart Failure Clinic;
  • Patients on Oral Steroids.

The Minister informed the public that those who fall under the above-mentioned category shall be receiving a notification by post informing them of such measures.

Those who are still in employment and fall under the above-mentioned category shall no go to work and be given quarantine leave.

There are few exceptions to the aforementioned lockdown, such as that the elderly and pregnant women will still be allowed to attend to their medical appointments. However, all those persons living with persons falling under the category of lockdown shall either put themselves in isolation or else find elsewhere to live for the time being.

During the Press Conference, the Minister also noted that there were people who, amidst the ban on organised public activities, were still gathering in public. He said that even though this was not as such an organised public activity, such people were still posing a risk of spreading the disease. Consequently, Dr. Fearne announced that the Police shall be dispersing groups of five people or more.

Profs. Charmaine Gauci is empowered to issue exemptions to the above wherever she deems necessary. Therefore, if any of the abovementioned persons need to leave their home, they must inform and obtain the permission of the Superintendent for Public Health.

 

You may contact us on or 21377700 should you require any further information on the above or any information regarding Government Aid related to COVID-19

The Extraordinary General Meeting

Every company duly registered under the Companies Act shall convene an Annual General Meeting (AGM) once per year. We have already dealt with the requirement of calling an AGM and the formalities that are required for the calling and holding of such meeting, however, what does a company do if it holds its AGM and then later during the year has other business to discuss?

The Companies Act, Chapter 386 of the Laws of Malta (the Act) does not include a definition of the term “Extraordinary General Meeting” (EGM), however, Article 128(2) states that: “Every general meeting other than an annual general meeting shall be an extraordinary general meeting”.

This means that the Act itself is stating that companies may have other meetings throughout the year over and above the AGM. The legislator does not include any list of matters which may be transacted at an EGM and, therefore, it is at the discretion of the company to decide which matters are to be transacted at an EGM, with regard being taken to those matters that are specifically to be transacted at an AGM.

The similarity between the AGM and the EGM

One might notice that the legislator mentions two instances which are to be transacted at an EGM, however, the legislator does not in any way stipulate that such matters cannot be transacted at an AGM. The reason for the legislator not stating that such matters need to be explicitly transacted at an EGM is the fact that there is no intrinsic difference between the AGM and the EGM.

Amongst the matters that require a decision to be taken at an AGM or an EGM are the following:

  1. Alterations to the Memorandum and Articles of Association;
  2. Dissolution of the company;
  3. The company recovery application;
  4. The merge, division or conversion of the company.

The EGM is in several ways similar to the AGM. For example, sufficient notice must be given to the parties who are entitled to attend, and such notice should include details of the meeting such as the time, location and detail on the business to be transacted.

Convening of EGM

Whilst the AGM can only be convened by the Directors of a company, the EGM may be convened, either by the directors themselves, by the Court, at the request of the resigning auditor and on requisition by the members of the company.

Although the above-mentioned persons may convene or requisition an EGM, there are both limitations and obligations that may be imposed on the persons who may convene or requisition an EGM.

EGM convened by the Directors

To start with, the directors of a company may convene an EGM on their own volition, this may be limited through clauses in the Articles of Association stipulating that the directors may only convene an EGM for specific matters.

Having said this, the directors are obliged under the Act to convene an EGM if the company becomes unable to pay its debts or is likely to become unable to pay its debts. The Act stipulates that the directors must convene an EGM by not later than thirty days from the day that they became aware of such fact. The legislator goes on to state that the directors must convene the meeting for a date which is not later than forty days from the date of the notice calling the EGM.

The legislator also imposes an obligation on the directors of public companies to convene an EGM in cases where the company’s net assets become half or less than half of its’ called-up issued share capital.

More often than not, one finds a clause in the Articles of Association stating that the directors have the power to convene an EGM. It must also be noted that it is an inherent right of the directors to duly call an EGM which emanates from the wide-ranging powers conferred on the directors.

EGM convened by the Court

The Court may convene an EGM either on its own motion or through a request by a director or a member of a company in cases where for any reason it is impracticable to:

  1. Call a meeting of a company in any manner in which meetings of the company may be called; or
  2. Conduct the meetings of the company in the manner prescribed by the Articles or by the Act.

EGM requisitioned by a resigning auditor

The Act states that when a resigning auditor considers that the circumstances of his resignation should be brought to the attention of the members and / or creditors of the company, the resigning auditor has the right to requisition an EGM.

The resigning auditor must deposit, together with the notice of his resignation, a signed requisition. The purpose of such requisition should be that of receiving and considering the explanation of the circumstances linked with the resignation of the auditor. The Act states that the resigning auditor may also request that the company circulates to its members a statement of the circumstances linked with his resignation.

Once again, the legislator imposes an obligation on the directors to convene an EGM within twenty-one days from the deposit of the request by the resigning auditor, for a date which is not later than twenty-eight days from the date of the notice calling such EGM.

EGM requisitioned by members of the company

Any member of the company holding not less than one-tenth of the paid-up share capital of the company may requisition an EGM.

The legislator states the formalities that members must follow when requisitioning an EGM, such as:

  1. As stated above, the requisitioning member/s must be a holder/s of at least one tenth of he paid up share capital of the company carrying voting rights.
  2. In the requisition, the member/s must state the objects of the meeting and the requisition must be signed by the member/s.

The legislator also laid down the obligations of the directors for when a requisition is deposited by members of the company:

  1. The directors are obliged, upon the deposit of a requisition, to proceed with convening an EGM within twenty-one days from the date of the deposit of the requisition;
  2. If the directors do not convene an EGM within the prescribed period, the legislator shifts the power to the members to convene the EGM themselves;
  3. The members then have three months from the date of the deposit to convene the meeting;
  4. Although the Act prescribes a twenty-one-day period within which the directors should call the EGM, there is nothing in the Act precluding the directors from calling a meeting within the twenty-one-day period and convening it for a date in the distant future.

Conclusion

The Extraordinary General Meeting

As explained afore, there is no intrinsic difference between the AGM and the EGM, however, whilst the AGM is mandatory, the EGM is only convened for specific purposes.

Therefore, if a company needs to discuss, approve or transact any kind of business which requires the consent of the members of the company, and the company had already held its AGM for that year, it may convene an EGM to transact the necessary business.

It is of utmost importance that when an EGM is convened, all the necessary formalities and requirements are duly followed by both the person/s requisitioning the EGM and the directors who ultimately convene the EGM accordingly.

Disclaimer*

The above-mentioned article is simply based on independent research carried out by Dr. Werner and Partner and cannot constitute any form of legal advice. If you would like to meet with up with any of our representatives to seek further information, please contact us for an appointment.

 

The Annual General Meeting

Introduction

The Companies Act imposes on every company the obligation to hold a general meeting yearly, but what does a general meeting really entail?

The general meeting of a company must be conducted once every year, hence why it is called the Annual General Meeting (“AGM”). While a company may call other meetings during the year, it must still hold an AGM because the law distinguishes between the AGM and other meetings.

Powers of the Board of Directors and of the AGM

While the Board of Directors may manage the company through the powers vested in them, there are some other powers which are reserved for the shareholders. The Annual General Meeting allows the shareholders to be more involved in the decisions of the Company.

In fact, there are certain matters which the Companies Act reserve to be exercised in the Annual General Meeting. Given the fact that the Companies Act reserves only a few powers for the AGM, the memorandum and articles of association may assign other powers to an AGM. Having said this, it is usually the case that the memorandum and articles of association do not list a lot more powers which are exclusively reserved for an AGM.

But then again, is it necessary to hold an AGM? Well, apart from the fact that the Companies Act holds every officer of the company liable to a penalty for not holding an AGM, one will also be able to understand better from this article why an AGM is essential for a company to function properly.

Delving deeper into the notion of an AGM

To start with, when scheduling an AGM, one must keep in mind that not more than fifteen months shall elapse between the date of one AGM and that of the next AGM. However, for a company that has just been incorporated, the law provides that such a company, if it holds its first AGM within eighteen months from the date of its registration, it will not need to hold another AGM in the year of its registration or in the following year.

The Directors of a Company are responsible to call the AGM and follow all the necessary formalities as per both the Companies Act and the Memorandum and Articles of the Company.

Business that may or may not be transacted at an AGM

While the Companies Act does not provide a list of business that shall be transacted at an AGM, the First Schedule of the Companies Act provides an indication of what business should be transacted at an AGM, by stating that all business that is transacted at an AGM shall be deemed ‘special’, except for the following:

  1. Declaring dividends;
  2. Elect or remove directors;
  3. Determine the remuneration of auditors; and
  4. Consider the accounts, balance sheets and the reports of the directors and the auditors.

One might immediately realise that through the above-mentioned powers, which are generally reserved for the AGM, the company is practically controlled by the Annual General Meeting. The shareholders, through the AGM, are given the opportunity to scrutinise the financial performance and the business of the company.

The Listing Rules issued in respect of listed companies cater for what business must be transacted at the AGM. This goes without saying that the regulations for listed companies are much more stringent.

It must be noted that a copy of the annual accounts must be provided to the parties eligible to attend for the AGM, at least, fourteen days before the scheduled AGM.

Notice

When the Directors call an AGM, they do so by issuing a Notice in writing to all the members of the company, the company’s auditors and the directors, and it must be issued at least fourteen days prior to the date of the meeting. The Notice must contain the date, time and place of the AGM which are determined by the Directors of the company.

Given that in this day and age everything revolves around the use of technology, certain companies are including a clause in the Articles of Association which states that the Notice can be sent by email rather than by mail. If a Company that is already incorporated wants to start issuing the Notice through email, and its’ Articles of Association do not provide for such issuing, the Company may introduce this method through a resolution of all the Shareholders of the Company.

It is of utmost importance that the Notice of an AGM defines the meeting as an AGM. This is due to the fact that, as aforesaid, a Company may hold other meetings throughout the year. Any other meeting held apart from the AGM is an Extraordinary General Meeting, we shall be dealing with Extraordinary General Meetings in another Article.

Ordinary and Extraordinary Business

Whenever there is the need to transact any business during the AGM which is not considered to be ‘ordinary business’ – as listed in the First Schedule of the Companies Act and/or the Articles of Association of the Company – such business shall be defined on the Notice of the AGM as ‘special business’.

In cases where the AGM will deal with special business, the Notice must also include the general nature of such special business and set out in verbatim the proposed extraordinary resolution. When only ordinary business will be transacted at an AGM, there is no need for details on the kind of ordinary business that is to be transacted. However, in practice, it is the norm that the Notice would include what kind of business is going to be transacted.

Members will be given time to discuss the resolution and once there is an understanding of such resolution, the meeting will resolve to bring the discussion to an end and take a vote on the proposed resolution.

Proxies

The Notice must also advise the members of their right to appoint a Proxy. A member may appoint a Proxy if unavailable to attend the meeting in person. A proxy is a person who will attend the meeting and vote instead of the member who appoint him/her as the proxy.

Directors failing to convene an AGM

Up to this day, if the Directors fail to convene an AGM, it seems that the members of the company are unable to convene an AGM themselves. However, the Companies Act provides that any member may file a request to the Court to order the AGM to be held.

Quorum

Two members present in person at an AGM shall form a quorum, however, the articles of association may prescribe a higher or lower number of persons that form a quorum. A quorum of members must be present at an AGM for the meeting to proceed to business.

Chairman

The Model Articles which are found in the Companies Act state that the Chairman of the Board of Directors shall also preside as Chairman for the general meetings. However, the Directors may elect one of their numbers to act as Chairman of the meeting.

Voting

Voting at an AGM may take place through a show of hands, however, this means that each member is given one vote, and, therefore, if a vote is taken it would be, for example ‘2’ against ‘3’. Another possible way in which votes are taken is through a poll. A poll will reflect better the number of shares which are in favour and which are against. This is why after a vote through a show of hands is declared or even before the result of such vote is declared, any member who is present at the meeting in person and any proxy may demand that a poll be taken.

Conclusion

Holding an AGM is not only done to abide by the law, but, as can be understood better from the above sections, holding an AGM enables a company to function properly. It is through an AGM that any disputes that may arise with regards to the management or business of the company may be resolved through discussions.

Therefore, one must commit to holding a proper AGM which will help the company and not merely holding an AGM to get it over and done with. A proper AGM will enable the shareholders to have a wider participation within the company and the decision making and will, undoubtedly, improve the company’s foundations.

Disclaimer*

The above-mentioned article is simply based on independent research carried out by Dr. Werner and Partner and cannot constitute any form of legal advice. If you would like to meet with up with any of our representatives to seek further information, please contact us for an appointment.

 

 

 

Essential Duties and Responsibilities of a Director

Introduction

As many of you are aware, companies are formed and founded by shareholders, however, this does not mean that the company is managed and administered by its shareholders.

On the contrary, each company has its officers, each having different roles, responsibilities and powers for the management and administration of the company.

The first directors of a company are appointed by the subscribers to the memorandum of association (MaAs).

The subsequent directors are then appointed as per the clauses in the articles of association, or, where there are no articles of association or such articles of association are silent on the matter, they shall be appointed through an ordinary resolution of the company in a general meeting.

In the majority of cases, companies have individuals as Directors, however, the Companies Act provides for the possibility of a “corporate director”.

Who can be appointed Director?

You might ask “what are the requirements for one to be appointed a Director?”, Legally speaking, there are no specific requirements for one to be appointed a Director of a Company. However, one must keep in mind that the scenario is different when it comes to listed companies.

In the case of listed companies, a director must be knowledgeable in the industry through qualifications or previous experience.

The Companies Act does not provide a definition of the term ‘director’, however, it does state what the term includes, and it also provides under Article 136A what the general duties of directors are.

Furthermore, the law does not provide an exhaustive list of duties and indirectly states that the memorandum or articles of association as well as the Act itself and any other law may assign other duties to directors.

Powers of Directors

Some might argue that the wide-ranging discretionary powers afforded to Directors are advantageous to a Company since such powers provide efficiency and effortless management. However, some might look at the powers of Directors from a different perspective, that is, such wide-ranging discretionary powers may give rise to abuse of power.

Apart from being the ones administering the running of the company, directors also have the power to appoint a managing director or committees consisting of one or more of the existing directors to administer certain transactions.

Let’s break down the duties and responsibilities of a director in a few points:

  • One of the primary duties of directors is to act in bona fide in the best interest of the company, this duty is of utmost importance since directors owe no duties to the shareholders, but to the company itself, they are bound to their companies by fiduciary duties. This duty to act in bona fide can never be stressed enough. Their personal interests must never be included in the administration and management of the company.
    • The only exception to this rule is when a company is in a state of insolvency where the directors would owe their duties to the creditors and not the company.
  • The responsibility of the directors lies mainly with the management and proper administration and general supervision of the company. Directors are empowered, through the Companies Act itself, to manage all the affairs of the company, save anything that requires a shareholders’ resolution at a general meeting, through the Companies Act or through any provisions in the memorandum and articles of association.
  • A Director shall not make a profit from his/her position and must always place their personal interests aside so not to conflict with those of the company.
  • Directors are held accountable for any act or omission that results from their actions or actions of any of their delegates and are liable, jointly and severally, for any inappropriate performance or any breach of a duty assigned to them.
  • The Companies Act imposes an obligation on Directors to perform their duties with a degree of care, diligence and skill.
  • Certain specific duties of Directors include, but are not limited to:
    • Calling Board Meetings and General Meetings;
    • Filing returns and other documents;
    • Record keeping

Fraudulent vs Wrongful Trading

Well, we have established that directors are held liable for any act or omission carried out by them or their delegates, but how does one determine if directors are essentially in the wrong or not?

For this matter, The Companies Act distinguishes between fraudulent and wrongful trading. Wrongful trading comes about through negligence and lack of experience and skills; however, fraudulent trading comes about through intent to defraud the creditors of the company or any other creditors.

If one had to look at Maltese Case Law to understand better the responsibility and liability of the directors, the perfect example would be the Price Club Case which was the first time the Courts of Malta resorted to the provisions of fraudulent trading, even though the directors tried to plead lack of experience.

Conclusion

Even though it might seem that all the business of the company is mainly administered and managed by the directors, there are still limitations as to the powers of directors.

The directors must make sure they always keep within their powers whether such powers emanate from the Companies Act or from the memorandum and articles of association, or from any other law.

Disclaimer*

The above-mentioned article is simply based on independent research carried out by Dr. Werner and Partner and cannot constitute any form of legal advice. If you would like to meet with up with any of our representatives to seek further information, please contact us for an appointment.