On the 3rd of March 2020, Act V of 2020 was published, providing for amendments to several laws, including in particular the Companies Act, Chapter 386 of the laws of Malta (the “Companies Act”). One such amendment relates to the possibility of companies operating in the shipping and, or aviation sectors to convert into cell companies. This has been catered for by virtue of the inclusion of a new Article 84E in the Companies Act which effectively allows the Minister responsible to regulate and provide for the formation and conversion of such companies into cell companies.
The Companies Act defines a cell company as one which creates ‘within itself one or more cells for the purpose of segregating and protecting the cellular assets of the company in such manner as may be prescribed’. Accordingly, the cell is treated as a separate legal entity which allows for the segregation of assets and liabilities pertaining to the individual cell, from the assets and liabilities of the non-cellular part (the core). A cell company may have more than one cell and each cell is treated independently of, as well as protected from, any other cells forming part of the same cell company.
Prior to the publication of Act V of 2020, the creation and, or conversion of cell companies was only considered in the context of insurance and securitisation. The new Article 84E is an enabling provision which allows the Minister to extend this possibility to companies ‘engaged in shipping or aviation business’. For the purposes of this article, the term ‘shipping or aviation business’ includes the ownership, operation, administration and management of any ship, aircraft or aircraft engine as well the execution of any ancillary financial, security, commercial and other activities in connection therewith. This definition also applies to the parent company and, or the company which holds shares or other equity interests in an undertaking (whether incorporated in Malta or otherwise) established solely or mainly for the carrying out of the activities listed above. Moreover, the term ‘engaged in shipping or aviation business’ also extends to the raising of capital through loans, the issue of guarantees and, or securities for the purpose of achieving any of the abovementioned objects or activities, whether for itself or for another group company.
Any reference to the term ‘company’ is not simply limited to companies in the strict sense but is deemed to include the partnership en commandite or any similar equivalent body corporate insofar as its capital is divided into shares.
The possibility of shipping and aviation companies to benefit from this cell company structure, necessitates the fulfilment of certain legislative requirements as detailed in Article 84E. However, if and when this possibility is appropriately extended, we envisage that the structuring and ring-fencing of the cell company will prove to be an innovative further plus-point for Malta’s already market-leading stature in shipping and ever-growing position in aviation. If the success of the Protected Cell Company (PCC) model in the business of insurance is anything to go by, then this development augurs well for the aviation and shipping industries.
For more information, please contact Malcom Falzon at firstname.lastname@example.org or Steve Decesare at email@example.com.
 As a result of Legal Notice 59 of 2020, Article 23 of Act V of 2020, which caters for the inclusion of Article 84E in the Companies Act, came into force on the 4th of March 2020.
 The Minister has not, to date, promulgated such regulations.