Capital Markets Equity/Debt
Malta has been developing rapidly in the Financial Markets sector, with its recognition for its pro-business attitude, excellent regulation and competitive cost of doing business. Malta has become the go-to finance centre for both start-ups and larger companies alike. Particular reference should be made to the fund sector which is constantly maturing.
Additionally, since becoming an EU member in 2004, Malta has definitely experienced accelerated growth in all sectors of the financial services industry, especially through the Single EU Passport, allowing companies to establish branches or provide services in any other EU country. Therefore setting up a business in Malta, allows instant access to the EU’s internal market. Also, Malta is quick in transposing EU Directives related to the financial services sector into local law.
Maltese regulation is recognised for its consumer protection possibilities, market surveillance, prevention of money laundering and a secure and stable framework, with the Malta Financial Services Authority (“MFSA”) as the single regulator for all financial services in the country.
The Zerafa Advocates team can help you out in various ways in any trading ventures within the Maltese Capital Market in terms of advising and structuring equity and debt security offerings. Until now, we have assisted both local and international clients. We understand that efficiency and precision are essential and we strive to provide you with the best service. As a firm, we offer our services with relating to:
Advice to the issuer on any matters;
Liasing with the MFSA;
Dematerialisation of securities;
Application for ISIN numbers;
Consultation on and drafting of the prospectus;
Collective Investment Scheme listing on the Malta Stock Exchange;
Due diligence and vetting.
Equity securities are issued by companies and the return on investment for the company or investor investing in the company issuing the stock depends on the amount of control and influence the investor has over the issuing company. The equity security represents ownership interest held in the entity issuing the securities, which are usually in the form of shares of capital stock. Holders of these securities are entitled to profit from capital gains when they sell the securities, subject to their increase in value.
Listing Rules issued by the Listing Authority provide the basic conditions required for the Admissibility to Listing of a security. These include that:
Securities for which authorisation for Admissibility to listing is sought must be freely transferable;
Except where equity securities of the same class have already been Admitted to Listing, the expected aggregate market value of all equity securities not being preference shares, which are the subject of the application for admissibility must be at least one million euro (€1,000,000). If such market value cannot be assessed, the applicant’s capital and reserves, including profit or loss, from the last financial year, must be at least one million euro (€1,000,000). Notwithstanding this, the MSE may admit securities of a lower value if it is satisfied that there will be an adequate market for the securities concerned;
In the case of an application for the Admissibility to Listing of shares, the applicant must have fully paid-up capital of at least one million euro (€1,000,000) including preference shares other than redeemable preference shares;
In the case of an application for the Admissibility to Listing of Debt Securities, the applicant must have fully paid-up capital of at least two hundred and fifty thousand euro (€250,000);
The issuer of the certificates must be a suitably authorised and regulated financial institution acceptable to the MSE;
Additionally, the application for Admissibility to Listing must be signed by the sponsor and the directors of the applicant and must be submitted by the sponsor together with the offering memorandum, certified copies of the board resolutions authorising the issue of the financial instruments for which application is being made, a copy of any notice of meeting as according to the offering memorandum as well as a Prospectus and any supplements.
The essential purpose of a Prospectus is to convey factual information about a business in words and figures as a formal basis on which to obtain certain information about the issuer and its proposed activities. Such document cannot be published unless it is formally approved by the Listing Authority.
The MSE shall only approve an application for Admissibility to Listing if it is satisfied that all the requirements included in the Listing Rules have been satisfied.
As for the directors and senior management of the company issuing the securities, they must demonstrate appropriate expertise and experience for the management of the group’s businesses. The directors of the company must be free of conflicts between duties to the company itself and private interests as well as other duties. Also, except in the case of a rights issue, no director of an issuer may participate directly or indirectly in an issue of equity securities or other securities with rights of conversion to equity securities unless the issuer’s shareholders in the general meeting have approved the specific allotment to be made.
These represent money that is borrowed and then repaid. Such securities include government bonds, corporate bonds and collateralised securities amongst others. They entitle the holder of these securities to regular payments of interest and repayment of principal, regardless of the performance of the entity issuing the debt securities. They are usually issued for a fixed term and at the end the issuer can redeem them.
Our expertise in the local capital markets enables us to act for issuers of debt instruments, traded on the Malta Stock Exchange on time and with the available budgets. Apart from the MSE, there are two other markets in Malta that admit debt securities to listing and trading. The MSE is Malta’s main market where both equity and debt securities can be listed. The International Financial Securities Market (“IFSM”) is designed for institutional investors where applications for listing can be made also for debt securities. Finally, Prospects, a new market operated by the MSE allows a more flexible and less costly listing option for SME issuers, both local and foreign.
A similar procedure to equity securities is used where the conditions for Admissibility to Listing must be satisfied. As soon as the issuers are granted Admissibility to Listing, their instruments can be traded on the MSE platform as well as anywhere within the EU. However, in this case for the Admissibility to Listing of debt securities, the applicant must have fully paid-up capital of at least EUR 250,000.