Understanding the Companies Act (Agricultural Companies) Regulations, subsidiary legislation 386.30.

This newly introduced legislation a landmark regulatory framework designed to formalize and support the growth of agricultural businesses in Malta. These regulations aim to ensure that entities registered as agricultural companies are truly dedicated to the sector, promoting transparency and sustainability through rigorous governance standards.

Core Qualifications: The 51% Revenue Rule

The defining characteristic of an agricultural company under these regulations is its revenue stream. To qualify, an organization must derive at least 51% of its revenue from primary agricultural activities. The remaining revenue must come from ancillary agricultural activities.

Notably, income generated from renewable energy initiatives is excluded from these calculations if those initiatives hinder agricultural output. This ensures the primary focus remains on land and produce rather than industrial energy generation.

Ownership and Leadership Requirements

The regulations set strict prerequisites for those who own and manage these companies to ensure sector-specific expertise:

1. Shareholders: At least 51% of the voting shares must be held by individuals or beneficial owners registered as farmers with the Directorate.
2. Directors: The board must include at least one director who is a registered farmer in accordance with the Nitrates Action Programme Regulations (S.L. 549.66).

Formation and Registration Process

Setting up an agricultural company requires more than standard corporate filings. Key requirements include:

• Written approval from the Directorate is mandatory before the Registrar can proceed with registration. The Directorate has a two-month window to review and issue a decision on such requests.
• The company’s objects must be strictly limited to agricultural activities, though they may include ancillary or conducive activities.
• While the general Companies Act applies, there is a specific requirement for a 15% minimum paid-up share capital.
• Applicants must provide evidence of the farmers’ registration status for both shareholders and directors.

Ongoing Compliance and Reporting

Once established, agricultural companies must adhere to enhanced reporting obligations. In addition to standard annual accounts and returns, they must submit an annual declaration (Form AC(2)). This declaration confirms that the company continues to meet the 51% agricultural revenue threshold.

Enforcement and Inspection Powers

The Directorate holds broad authority to verify that companies remain compliant. This includes:

• On-site Inspections: The power to visit premises to verify the accuracy of shareholder lists and beneficial ownership.
• Financial Audits: The right to access documentation to confirm revenue sources.
• Striking Off: If a company fails to meet the revenue criteria, the Directorate may order it to be struck off the register after providing a one-month notice period for the company to remedy the situation.

Transition for Existing Companies

Entities already registered under the Companies Act before these regulations came into force are not excluded. They may elect to be governed by this new framework by filing Form AC(1), provided they meet the necessary qualifications.

To explore how this regulation may apply to your operations, feel free to reach out to us for an initial consultation at info@dingli.com.mt.

Disclaimer: The above is not intended as legal advice. Anyone requiring assistance is encouraged to contact us directly.