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Financial Participation

There is no explicit legislation on employee financial participation. Most employee financial participation schemes result from company-level agreements between privatized companies and their employees.1

There is no legislation in Malta on employee share ownership or stock options. If a company’s articles of association provide for employee financial participation, the employer can introduce one of the schemes, either as individual agreements or as part of a wage settlement.

The 1995 Companies Act prohibits companies from acquiring its own shares or those of its parent company or financially supporting any such acquisitions. There are however exceptions for employee purchases; Company Act, §106.2 permits the issuing of shares to a company’s own employees. The only condition is that company equity must not sink below the legally defined minimum.

Basic requirements are that the size of any discount must be stated in the articles of association, the discount must not exceed 10% of the issue price or must correspond to that stated in the articles of association, and the discounted share value must not be under the share’s par value. The Law on Income Tax (Legal Notice 125, 2001) states that the difference between the option price at granting and its market value on exercise is liable to tax.

The legal background for cooperatives is to be found in the “Co-operative Societies Act” (Co-op Act, 2001). Article 21 stipulates that cooperatives must be voluntary and independent associations fulfilling the economic, social and cultural needs of members in a democratically governed cooperative. Article 31 states that registered cooperatives are “corporate bodies with limited liability” independent of their members’ legal entities. Any member can be involved in the cooperative’s management and has voting rights, unless stated otherwise in the articles of association.

A minimum of 20% of any profit must be transferred to reserves at the end of a financial period for the sole purpose of covering any future losses. At the same time, 5% of any profit must be paid into a central cooperative fund for supporting education, training and research, and the development of the cooperative movement in Malta. Remaining profit is shared out between members. All payments are subject to income tax.2

Wilke, Maack and Partner (2014) Country reports on Financial Participation in Europe. Prepared for www.worker-participation.eu. Reports first published in 2007 and fully updated in 2014.