Listing of community SMEs
on the Malta Stock Exchange
Corporate Advisor Service for SMEs at the Malta Stock Exchange
As Corporate Advisor of the Malta Stock Exchange – Prospects M.T.F. (Multi Trade Facility), our firm assists EU SMEs in all the steps necessary to obtain the listing on the Malta Stock Exchange to be able to access the capital market.
We have been present in Malta since 2016 and our staff includes Italian lawyers with over 20 years of experience in the Corporate Governance sector who are able to analyse in depth the financial structure of small and medium sized Italian companies so to assess their potential to seek funding also on European markets.
Following the introduction of the ministerial decree implementing the provisions of the 2018 Italian Budget Act, Art.1 par. 89, SMEs can apply for a tax credit on 50% of the consulting costs incurred for the listing in a regulated market or in multilateral trading systems of a EU member state or of a state belonging to the European economic area.
In particular, the tax credit up to an amount of 500.000 € incurred for consultancy costs related to the listing process includes all costs for this purpose from January 1, 2018 to December 31, 2020.
As a result, the Malta Stock Exchange – Prospects M.T.F. represents an excellent opportunity for all financially outstanding SMEs that can enter the international stock markets benefiting from extremely short procedures in terms of time and costs which are much lower than those incurred in other regulated markets.
Finally, thanks to the enactment of the PIRs (Individual Savings Plans) included in the 2017 Budget Act, today it is essential for any SME seeking to raise funds on the capital market to be listed on a EU stock exchange such as the Malta Stock Exchange – Prospects M.T.F. dedicated to small and medium size enterprises since Malta can be an ideal hub for setting up OICR PIR compliant with the laws and regulations regarding the issue of financial instruments to be included in the PIRs.
PIRs allow natural persons residing in Italy to invest in SMEs and obtain significant tax advantages through a relationship with:
- Qualified intermediaries (banks, asset management companies).
- Insurance companies.
These must be:
- Resident in Italy.
- Non-residents but operating in the territory of the State with Pes.
- Operating under the freedom to provide services with appointment of a tax representative in Italy chosen among the aforementioned subjects.
Investments must be qualified, namely:
- Shares of companies resident in Italy, EU and EEA.
- Shares of collective investment undertakings (UCIs) residing in Italy, the EU and the EEA investing mainly in shares indicated in the previous paragraph.
To ensure that the investment is qualified as PIR it is required that the following constraints are respected for at least 2/3 of each year (or fraction of a year) of the PIR duration:
1- At least 70% of the total value of the PIR must be invested in financial instruments issued by companies (non-real estate) resident in Italy/EU/EEA with a permanent establishment in Italy.
2- At least 30% (i.e. 21% of the total) must be invested in financial instruments of companies other than those included in the FTSE MIB index of the Italian stock exchange (AIM, MTA-Star, MIV) or equivalent indices of other regulated markets (max 49% in FTSE MIB).
3- The remaining 30% (or less) can be invested in any financial instrument (with the exception of those issued by subjects resident in countries not included in the White List: they do not allow the exchange of information).
4- The amounts or values allocated to the plan cannot be invested for more than 10% of the total in financial instruments of the same issuer or entered into with the same counterparty or with another company belonging to the same issuing group or counterparty or in bank deposits and current accounts.
PIRs are constituted with the allocation of sums or values to qualified investments indicated by law, for a maximum amount, for each calendar year, of 30,000 euros and within a total limit not exceeding 150,000 euros.
- There is an obligation to hold the financial instruments in which the PIR is invested for at least 5 years, but their correct time horizon is long-term (8-10 years). Each amount invested must be held for 5 years.
- In case of transfer within 5 years, the income generated through the sale and that received during the minimum investment period are subject to normal taxation, together with interest, without the application of penalties.
- In case of repayment or maturity of the investment securities before the five-year period, the amounts received must be reinvested in similar financial instruments within 30 days of repayment.
- Transfer of PIRs between intermediaries is not taken into consideration with respect to natural persons for the purposes of calculating the 5 years of possession of the financial instruments.
- If Italian tax residence is lost, the PIR lapses.
PIRs allow Italian families to provide liquidity to SMEs.
- Tax exemption for investment income and capital gains generated by the financial instruments included in the PIRs and carried out by natural persons, outside the commercial business. The rate of 26% is therefore set to zero in the case of capital gains and the coupons are distributed gross.
- PIR’s are not subject to inheritance tax on transfers of funds due to death (in the event of death in the first 5 years, you can benefit of the exemption).
THE FOLLOWING ARE EXCLUDED FROM BENEFITS:
- Capital gains on the sale for consideration of qualified investments.
- Stamp duty.
- Gift tax.
Furthermore, even if the profits of the PIRs are untaxed, the investor must pay the tax authorities 0.2% per year on the value of the portfolio underwritten.
Of the over 5 billion raised in the first six months since the start of the plans, approximately 2.65 billion went to Italian shares, of which 930 million in mid-small caps.
- Very high demand growth: there are 12 new SMEs listed in 2017, compared to 5 in 2016.
- PIRs are gradually bringing institutional investors back to AIM (a Multilateral Trading Facility for SMEs regulated by the Italian Stock Exchange), where the average size of placements has increased from 33 million in 2015 and 57 million in 2016 to 103 million in 2017.
New incentives are needed to bring more companies to the stock market. The PIR mechanism will only become virtuous if a growing number of companies, even medium-sized ones, enter the stock market to raise capital. However, this will only be possible if the critical issues connected to the “size” of issuers are overcome: it is in fact necessary to allow small virtuous companies to issue financial instruments and negotiate them at low costs, going beyond the traditional methods of access to financing sources.
If the UCI is “PIR compliant”, the investment shares in this UCI are “qualified investments”.
Malta can be an ideal hub for setting up PIR compliant UCIs for the issuance of financial instruments that Italian banks can include within PIRs.
There is the possibility of quoting virtuous SMEs at a much lower cost than what is seen on AIM Italia.
The MSE segment devoted to SMEs is a MTF (multilateral trading facility) and is called “Sme Prospects". Launched in February 2016, it has a flexible regulation and reduces bureaucracy thanks to the provision of templates that guarantee information transparency.
Prospects is fully compliant with Directive 2004/39/EC on financial instrument markets (MiFID: Markets in Financial Instruments Directive).
Advantages of Prospects:
- Transactions in financial instruments issued by companies listed on Prospects are exempt from transfer fees.
- Capital gains from companies listed on Prospects are exempt from taxation.
- Listed companies have tax advantages (tax credit, accelerated amortisation of listing costs).
- In several European countries, there are benefits and tax incentives for private investors who choose to invest their savings in financial instruments issued by SMEs and traded on Prospects (in Italy the PIRs).
1- There is no need or obligation of collateral security.
2- No history is required (start-ups can also be listed).
3- There is no minimum value for the IPO, but only a maximum value of the float of the financial instrument listed of 5 million (MSE recommends a value between 1 and 5 million).
- È permessa la quotazione anche senza flottante ai soli fini di visibilità e conoscenza del business, di determinazione di un valore di mercato in previsione di potenziali dismissioni di quote cadute in successione o di disinvestimento da parte di soci di minoranza.
4- Tempistica di quotazione breve:
- In media, 6 settimane per preparare la documentazione e presentare la richiesta di quotazione.
- Circa altre 6 settimane per completare il processo e giungere alla quotazione.
5- Costo di quotazione estremamente ridotto.
In order to start listing, the company must have:
1- Approval from the MSE.
2- The legal form of a joint stock company with a minimum share capital of 46,588 euros fully paid up.
3- A corporate advisor among those registered and accredited by the Malta Financial Services Authority (MFSA), through MSE.
4- A business plan.
5- Audited financial statements.
6- A structured corporate governance.
7- The articles of association or articles of incorporation of the company drawn up in compliance with Regulation 4.01.01 of the Prospect Regulations (“Prospects Rules”).
8- Financial solvency for at least 12 months from the date of admission to listing.
9- A constantly updated website of all information, as required by the Prospects Regulation.
The task of the Corporate Advisor, accredited to MFSA, is to certify in the pre-listing period and for the entire duration of the security’s permanence in the list:
1- The health of the company.
2- The transparency of the procedures.
3- The effectiveness of the corporate governance of the listed company (on an annual basis, it will have to attend MSE courses on compliance with the principles of corporate governance).
4- The reliability and correct construction of the reference business plan.
5- Continuous monitoring of the listed company.
6- Management training regarding the responsibilities and obligations that companies listed on Prospects have.
7- On its website: the expertise of the team assigned to the company, the list of companies listed on Prospect that shows the extraordinary operations of the latter over the last 5 years.
- On the business situation.
- On shareholders.
- On management.
- On the goodness of corporate governance.