Author: Lucy Beard

This article was published on 22 July 2020 in Corriere di Malta newspaper

Grants for businesses to provide training

Enabling business training processes means investing in its people to increase the skills of both the individual employee and the work group. The result is not only the professional development of people, but also the growth of the business. In addition, by motivating and rewarding human resources, training has the advantage of acquiring knowledge and new skills filling some internal gaps, enhancing and discovering talents.

But training has a cost that needs to be assessed before setting up a plan. And it must be absolutely checked whether there are grants or incentives, even non repayable investments, that can facilitate this path and in some way reduce programming costs.

In Malta, entrepreneurs and public authorities are fully aware of the important value of human resources and employee training is a priority for both manufacturing companies and service providers. For this reason, the Government takes this issue in high regard and has studied some measures that help the entrepreneur to reduce the costs.

One of these measures provides a specific incentive for small and medium-sized enterprises, but also for large ones, those outside the European definition, and also for self-employed people.

The assumption is that they are carrying out an economic activity.

The incentive is directed to training and knowledge transfer initiatives that will support employees to acquire skills, know how and knowledge, provided that these skills are not mandatory for the exercise of a given activity.

In principle, the grant is made in the form of the tax credit, but the competent authority may also decide to grant the relief in the form of a non repayable contribution and a mix can also be decided, a part non refundable and the rest in the form of the tax credit.

The amount of the aid varies depending on the size of the applicant. This ranges from a maximum of 70% in the case of small business to a percentage of 50% in the case of large enterprises.

Contributions provided by this measure are directed to the support of the training provided to one or more employees of the company through:

(a) other employees of the company itself (e.g. a senior who trains junior staff);

(b) employees of companies linked to the beneficiary company;

(c) external experts;

(d) private training companies (with an NCFHE license).

The costs eligible for training projects are as follows:

(a) consulting costs for the development of the training programme;

(b) wage costs of those involved in the training activity, calculated on the basis of the actual hours of training;

(c) wage of trainers, covering the hours directly devoted to the provision of training;

(d) hourly costs covering direct hours of training service providers engaged to deliver training;

(e) air travel expenses incurred for participation in training courses abroad, if the training is not available locally and it is more economically feasible than holding the training locally;

(f) air travel expenses incurred to bring trainers to Malta;

(g) costs of renting training rooms, tools and equipment, to the extent that they are used exclusively for the training project.

It is necessary to apply for the grant before 30 November 2022 and a cost plan must be prepared for a training programme which can only start after the application for the grant is submitted.

If you need advice to understand what expenses to bring in, in which category your company is classified and you need to be assisted in the preparation of the application, remember that we can assist you.

Just contact us at the email provided below.

Stefano De Stalis
European Affairs and State Aid Manager
Sheltons Malta
S.Destalis@SheltonsGroup.com

This article was published on 05 July 2020 in Corriere di Malta newspaper

Grants for diversification and internationalisation of companies

At this delicate stage of the economy, companies need to strengthen their business by opening in new markets or by activating new services or product lines. Besides, they can also become more competitive through enhancing innovation or by diversifying internal productions or organisational processes.

The Government of Malta provides some measures that allow small and medium-sized enterprises to grow and internationalise thanks to the support of some grants. Let us analyse how.

Participation in international trade fairs, for example, is a traditional but always good way to allow your products or services to be known and to be able to increase orders, especially if you can present in the stands something innovative with respect to the existing products or services.

One of the incentive still available this year, with several deadlines for submissions in the coming months, is the incentive that provides for a maximum grant of EUR 10,000 to cover 50% of the costs of participation at fairs held abroad, aimed at introducing new products and services in new markets with the aim of strengthening the presence of the company at international level.

This measure also supports the participation to trade fairs abroad as part of trade missions abroad.

In this case, the costs which could be reimbursed refer to:

  • Participation fee.
  • Rental of hexibition space/stand.
  • Expenses for services related to the construction and installation of the stand.
  • Travel expenses for up to 2 employees/administrators representing the company.
  • Per Diem allowance for up to 2 employees/administrators representing the company up to a maximum of 8 nights according to the rates set by the Ministry of Finance.
  • Costs related to the design and printing of advertising material within the limits of the guidelines.
  • Shipping costs of the products that will be displayed in the stand.

All the costs described above must be incurred from external sources to the beneficiary company.

Moreover, another way to achieve new goals and lead the company towards new development and real growth paths is via innovation and diversification projects. Also for this, there are support measures.

Especially in this period companies have been looking for and are still thinking about new paths, For example, we are assisting a company active in the manufacturing sector and that manufactures products destined for the tourism sector. The company has suffered a drop in turnover and its aware that tourism will start again in a year time or two. Still, the entrepreneurs who lead this company have decided to move towards innovation so to strengthen their product and, at the same time, develop a new type of service. Such service will operate in a completely different field and can be activated right away. So, this is what innovation is all about: is the ability to get back into the game in other areas while continuing the existing path.

But let us go back to the analysis of the aids available.

There is one which deadline for submitting applications is at the end of this month. This tool aims to specifically support companies in developing investment strategies for their diversification, for the implementation of substantial change or for bringing significantly improved and innovative products/services to the market, compared to those already offered by the company.

In this case, it will be necessary to develop a business plan with the aim of better defining the specific activities. For example, activities which can be supported by this measure are:

  • production diversification in an existing plant of different products or services;
  • implementation of a substantial change in the production process of an existing plant;
  • adoption of solutions for the development of a significantly improved product service.

To be eligible for such aid measures, companies must operate in certain sectors, such as:

  • The production, manufacture, improvement, assembly, preservation, processing of goods, materials, commodities, equipment, plant machinery.
  • Biotechnology, pharmaceuticals, and life sciences.
  • Research and technological innovation.
  • The repair, overhaul or maintenance of pleasure boats, yachts, aircraft.
  • Development of information and communication technologies (ICT), software development.
  • Eco-innovations and environmental solutions.
  • Developments of tourism products and/or services because of networks created between traditional tour operators and craft companies.
  • Development and supply of tourism products and/or services related to emerging niche markets.
  • Development and supply of tourist products and/or services related to social tourism with a focus on the elderly.
  • Development and provision of childcare-related services and products.
  • Development and creation of artisanal products.

While the costs covered by this measure are as follows:

  • Leasing and rental costs of premises required for the operation of the enterprise activity for the duration of the project. Such costs must not exceed 10% of the project’s total eligible expenditure.
  • Costs of building and improving the premises for the operation of the business activity. Such costs must not exceed 10% of the project’s total eligible expenditure.
  • Costs for the purchase of equipment, machinery and/or plant. Machinery and equipment can also be used, refurbished, or reconstituted, but only under certain conditions set out in the guidelines.
  • Costs related to patents or licenses essential for the effective implementation of the project. Such costs must not exceed 10% of the total eligible expenses of the project.
  • Costs of the full-time salary of a “Change Manager” who has the ability to drive the necessary change within the company through diversification or a substantial change initiative, for the duration of the project, i.e. for a period of no more than 24 months.

In addition to the typical documentation to be provided in such cases, to benefit of this aid measure a project must be supported by a solid business plan that must be attached to the application. Such business plan must include some minimum requirements, defined by the guidelines, requirements normally provided in any standard business plan.

If you need help developing a new project, or developing a good business plan, or evaluating which type of state aid or financial support measure is best suited to your initiative, be aware that we can help. Simply send us an email at the address below.

Stefano De Stalis
European Affairs and State Aid Manager
Sheltons Malta
S.Destalis@SheltonsGroup.com

This article was published on 28 June 2020 in Corriere di Malta newspaper

How to finance the cost of a business plan

In one of the previous articles we have analysed how important it is to implement a business plan that, on the one hand, can be a useful tool for entrepreneurs and managers who want to develop a project or start a start-up and, on the other hand, can also constitute a credible document to convince investors, banks and public authorities.

It is normal for companies to seek the assistance of a professional, experienced in the drafting of business plans. The Government of Malta provides for the possibility of recovering part of the professional’s cost through a reimbursement procedure up to 80% of the cost, equal to the amount of EUR 4,000 out of a maximum expenditure of EUR 5,000.

However, when filling out the application, be careful to follow the rules defined by the Government’s guidelines. For example, there are some aspects of importance we would like to highlight for you to avoid making mistakes.

First, it is necessary to check deadlines: applications are to be submitted, through an online platform, by certain dates (open calls), the next one is 17 July 2020. But don’t panic, there are also other further deadlines and the last one is scheduled for 30 November 2020.

In addition, it should be verified that your business can actually be defined as micro, small or medium-sized enterprise and that it is included in the list of eligible sectors. For example, steel processing companies, transport companies or those that provide insurance financial services, or which produce advertising material, are excluded.

Besides, it is not possible to include among the costs those relating to ongoing services such as tax advice services provided routinely, or legal or advertising advice services that are provided regularly.

Another very important aspect relates to the professional advising on the drafting of the business plan. The professional consultant or consultancy company must external and anyhow independent from the company who intends to apply for the grant, in the sense that there must be no business relationship between the two. In addition, the professional providing you with his/her consultancy should be listed in a special registry before the Ministry which manages these funds. So do check on your consultant to verify he/she is duly registered.

Among the various declarations and certificates to be attached to the application, there is a very important statement relating to so-called “de minimis aid”, which is now well known by companies that are used to submit applications for grants.

The so called “de minimis aid” is a measure that has all the characteristics of a State Aid, but does not distort competition nor has an impact on trade since such aid does not exceed a preset amount and it is granted to a company in a given period of time. Therefore, such aid is not considered as State Aid in strict sense and does not follow the notification procedure which otherwise would involve complications and long times.

The rule is that a company can receive “de minimis” subsidies from a Member State within three years, within the maximum of EUR 200,000.

Moreover, if various companies, formally separated, act on the market as a single entity, by virtue of the links between them, through forms of control or connection with the company applying for the grant, in this case it is necessary to consider them all as a single company and must declare those positions in the application, also including the relevant balance sheets.

The approval procedure is not normally very long and in the event that the Evaluation Committee does not approve the application, it sends a letter describing the reasons why the application was not approved with the possibility of appeal within 10 days from the notification date and in this case a board will re-evaluate the application on the basis of the reasons given in the appeal procedure.

Following the approval of the application, an agreement is reached between the public authority that manages the funds and the contact person identified by the company that applied for the contribution.

At this point the consultancy service covered by the application, in this case the business plan, can be developed and once finished, transmitted in the final version along with the request for reimbursement.

As this measure is co-financed by the European Union, the beneficiary has an obligation to give visibility to the intervention following the guidelines rules.

If you are about to start a new business or develop a new project, you will surely need a good business plan. Please consider seeking our assistance for developing such a business plan as we can provide you with any information and support you need to identify the scheme that best suits your specific project and submit its application.

You can easily contact us by sending an email at the address below.

Stefano De Stalis
European Affairs and State Aid Manager
Sheltons Malta
S.Destalis@SheltonsGroup.com

This article was published on 21 June 2020 in Corriere di Malta newspaper

Inside the new measures to support businesses

In the last article we anticipated the content of the package of new measures that the Maltese Government announced a few days ago to support the recovery of the economy following the COVID-19.

Today we can provide more detail in our analysis and, in this article, we intend to summarise the main incentives that are made available for business support. Such financial aids include the drafting of business plans, the investments in machinery, equipment, materials, assistance to open new markets and for the training of employees.

Businesses are facing a new reality now that the COVID-19 emergency is behind them and will therefore have to redesign their business plans so that they can tackle the new challenges with determination. For this purpose, an aid measure of up to EUR 5,000 has been introduced for the development of business plans by external consultants. The budget allocated for this measure is EUR 2.5 million and will allow you to use more technology in your business by guiding the country more and more towards a digital economy.

In the construction sector, EUR 4 million has been allocated to enable companies to purchase modern, more efficient machinery that reduces environmental impact as well as reduces costs. The maximum incentive each company can get is EUR 200,000.

Those companies that in 2019 obtained a tax credit through Microinvest, the development support measure managed by Malta Enterprise, the operational arm of the Government, will now be able to obtain the conversion of 30% of the tax credit into a corresponding contribution to the cost of restructuring and improving offices and factories, investments in machinery and other equipment. This measure was designed to support those at a disadvantage having made investments last year, just before the outbreak of the pandemic. The maximum grant is EUR 2,000 for all companies, while it reaches EUR 2,500 for companies located in Gozo, family-run businesses and those run by women entrepreneurs.

As Malta’s traditional business markets may be in a weak position at the moment, opening up to new markets such as the African continent, the Middle East and Latin America can strengthen the capacity for economic recovery even if there is an element of risk that hinders access to these markets. To encourage this new opening and help companies to address this risk, EUR 10 million has been put in place to activate an export credit guarantee system to be managed by Malta Enterprise with the help of Malta Development Bank.

In addition, Malta Enterprise will define a cash grant in the maximum limit of 80% of eligible costs to support companies in the implementation of projects that increase or start the production of products being relevant to COVID-19 or that involve the diversification of existing production towards products connected with COVID-19.

Investments must be completed within 6 months from the start of work and eligible costs must be incurred after 1 February 2020. These include material and intangible goods, the cost of personnel developing tools for collecting and processing data (including Artificial Intelligence solutions) to support the medical profession and public issues associated with COVID-19. Also included are the costs for testing new plants and the material costs required for such tests and the data sets acquired to the test the processing and data collection processes. The measure will be available until 31 December 2020.

Finally, Malta Enterprise will strengthen an existing skills development measure, called the Skills Development Scheme. This measure will enable more beneficiaries to be reached through an additional EUR 5 million to be allocated to small businesses, those with no more than 50 employees. The aim is to support employee training, especially internal training by focusing on sharing skills between the most experienced and the youngest.

As you can see the measures activated by the government are numerous, you only have to wait for the enactment of the operational criteria and then activate in the preparation of any business plans and applications for access to the different facilitative opportunities.

Please do remember that if you need assistance in this regard you can contact us by writing to the email address below. We will be happy to help you.

Stefano De Stalis
European Affairs and State Aid Manager
Sheltons Malta
S.Destalis@SheltonsGroup.com

This article was published on 11 June 2020 in Corriere di Malta newspaper

‘A Better Tomorrow.’ The Government’s new measures to boost the economy

A couple of months ago we anticipated that new governmental measures would be launched to support the restart of the economy. Such new measures complement those already approved in recent months and are all in response of the crisis caused by COVID-19.

The Prime Minister has in fact just announced a series of new measures to enable the economy to recover rapidly in the wake of the crisis caused by COVID-19 by putting in place a EUR 900 million package partly designed to support and develop businesses.

The relaunch plan under the name “A Better Tomorrow” is based on three main pillars:

  1. Reduce costs for companies and support them with new funding.
  2. Promote domestic demand by encouraging consumption.
  3. Provide direct support to companies by encouraging work.

In this article we will examine in detail why these measures are relevant for businesses. Please notice that our analysis is based on the first official information released by the Government. It will take a few more days for the Government to announce further application provisions.

In any case, at present, the relevant measures are as follows:

  • The wage supplement already provided by the first COVID-19 measures will remain unchanged until September 2020 and tourism companies will continue to receive the allowance of 800 euros per month for each employee in the case of full-time work and 500 euros for part-time employees. The sectors concerned are tourist accommodation, travel agencies, language schools, event organisation and air transport. Other companies that do not belong to the tourism sector, which are already included in Annex A, will receive a total of 600 euros for each full-time employee and 375 for part-time employees from July to September 2020;
  • Reimbursement of 50% of electricity bills paid by companies for three months (July, August and September) up to a maximum of 1,500 euros per applicant;
  • Companies listed in Annex A and B may benefit from a concession of up to 2,500 euros for the cost of renting commercial space for July, August and September;
  • The deferral regime for the payment of taxes will be maintained until September 2020, with deferred payments to be settled for a period of 12 months. From 1 July, no deferral will be allowed for the payment of tax and social security contributions established by the “Final Settlement System tax and social security” withheld from wages;
  • Those who have invested in their activities will be helped by converting up to 30% of tax credits through the Microinvest programme into cash grant. A total of 5 million euros will be distributed. Businesses in Malta will receive a maximum of 2,000 euros, while companies in Gozo and those run by women will receive up to 2,500 euros;
  • Financing of 5,000 euros per company, especially small ones, to develop new business plans an re-engineering their business;
  • Funding for employee training for companies employing less than 50 people with an endowment of EUR 5 million for the current Skills Development Scheme run by Malta Enterprise;
  • A refund of 33% will be granted in port taxes for a period of 6 months for those ships carrying goods to Malta excluding transfer operations;
  • A 10% refund will be granted for a period of 6 months in container discharge fees on import and export of goods, but not for transhipment operations;
  • Up to 10,000 euros will be granted aid to companies investing in digital promotion campaigns for new foreign markets, while up to 80% of the costs incurred by companies for participation in international trade fairs that have been cancelled will be reimbursed;
  • Aid, coordinated by the Malta Development Bank, is planned for those companies looking to new markets with an endowment of EUR 10 million to establish an export credit guarantee system;
  • 4 million has been allocated to enable the construction industry to modernise its machinery in order to make them more efficient and environmentally friendly. Contributions of up to 200,000 euros will be made available.

This set of measure is the largest injection of funds the Government has ever made in Malta’s history. In the coming days we shall keep you updated on any relevant news and on the implementation procedures of the measures described above.

Please do not hesitate to contact us should you require any assistance.

Stefano De Stalis
European Affairs and State Aid Manager
Sheltons Malta
S.Destalis@SheltonsGroup.com

This article was published on 3 May 2020 in Corriere di Malta newspaper

Malta: COVID-19. The new funds for research and development – opening of the tender

Last April, the European Commission approved an amount of € 5.3 million funds destined for Malta to offer grants to public and private companies for research and development (R&D) projects. Such projects must focus on activities related to the current pandemic but can also be directed towards the prevention of future infectious diseases, as well as the control and containment of their spreads, and other antiviral research projects, by developing methodologies for the future on the basis, so quotes the legislation, of “the lessons learned during the current pandemic”.

The maximum amount of the contribution varies depending on whether the project can be classified as a Fundamental Research (100%), Industrial Research (80%) and Experimental Development (80%).
In the case of Industrial Research and Experimental Development projects, the amount of the contribution can be increased by a further 15% if it is conducted in collaboration with research organisations or other companies from other European countries. In this regard, it is necessary to distinguish the concept of fundamental or basic research that is conducted by scientists, researchers and scholars to acquire new knowledge on the fundamentals of phenomena, from industrial research and experimental development which are instead conducted by production companies, for example also in collaboration with laboratories, research centres and universities. The funds allocated under this scheme therefore represent an opportunity also for companies, not only for research centres or universities, which can access such contributions if they carry out industrial research and experimental development activities as defined by European research and development legislation; for example, researches aimed at acquiring new knowledge, to be used to develop new products, processes or services or to allow an improvement of existing products, processes or services. Besides, funds are also available for those companies carrying out experimental development activities that allow the acquisition, combination, structuring and use of existing knowledge and skills of a scientific, technological, commercial and other nature, in order to produce plans, projects or designs for new, modified or improved products, processes or services.

This scheme covers all projects focused on COVID-19 including those that have received the ‘Seal of Excellence’ (European Union seal of excellence through Horizon 2020) that started on 1 February 2020 and subsequently but not after 31 December 2020. The duration of the projects must be a maximum of 18 months.

The program is managed by the Malta Council for Science and Technology and Malta Enterprise, the government’s operating arm.

To participate in tender, a specific application form has been prepared.

The aim of the tender is to support the development of innovative solutions so to face the current health problems related to coronavirus, such as: new medicines and treatments, medical instruments, medical and hospital equipment, disinfectants, collection and transformation methods of data and applications that allow better dissemination of information by government authorities.

The costs that can be included in the project concern:

  • The salaries of researchers, technicians and other staff directly involved in the project.
  • Specific research equipment including digital tools, computers for diagnosing, collecting and transforming data.
  • Other operating expenses such as consumables, patents, conformity assessment, medical instruments, disinfectants and person protections.

Applications for contributions must be submitted electronically by 30 November 2020.

Should you wish to have further information or assistance with the preparation and presentation of the application to this tender do send us an email at the address below.

Stefano De Stalis
European Affairs and State Aid Manager
Sheltons Malta
S.Destalis@SheltonsGroup.com

This article was published on 16 April 2020 on Corriere di Malta newspaper

First step to start the project you always wished for

Public funds available for consultancy and website development costs

In last week’s article, we highlighted the importance of taking advantage of this period in which economic activities are stuck or are suffering, to reflect and prepare well for the restart that could already occur in a few months.

We have underlined how it can be useful to rethink your business and maybe reinvent yourself since the world has suddenly changed.

New needs are emerging, consumers’ needs are different, habits are changing, perhaps we will use other suppliers, we will have to look for new reference countries, change the ways we relate and do business.

In all this, however, opportunities for new products and services may arise.

Today we will focus on some government funds co-financed by the European Union that can partially reimburse the expenses for the preparation of a solid business plan or for the creation of a new website or for implementation of the existing one.

Because liquidity is fundamental for any company, bank loans at a very low rate and backed up by public guarantee have already been made available. But this is not enough. It could help any company even more to take advantage of non-refundable benefits, but in order to obtain them it is necessary to wait for months and therefore it is advisable to anticipate the need well in advance.

The Government of Malta, for example, provides funds co-financed by the European Union to cover consultancy expenses for an amount equal to 80% of the related cost corresponding to a contribution of 4,000 euros Such funds could be used for the following activities:

  • The development of a business plan;
  • The realisation of a feasibility study;
  • The corporate reorganisation; or
  • The review of internal processes and systems.

To obtain the reimbursement of such expenses, it is necessary to submit and sign a contribution application by accessing an online platform and by attaching the required documentation. The business plan must be developed by an external consultancy company included in the list of authorised intermediaries. Sheltons Malta, the company through which we operate, is one of them.

Another investment that could not have a major financial impact on a company is the creation or implementation of an e-commerce site.

At this point, in time when companies are faced with a fast changing reality, with new ways of selling, delivering products/services and making payments, a powerful e-commerce site becomes really important to serve consumers who are getting more and more used to shopping online and want to have everything delivered at home.

In this case too, the Government intervenes with public funds to partially cover costs.

This is not a new measure, it was created a few years ago with the aim of supporting companies in developing their presence on existing and new markets.

Today more than ever this financial tool can be useful to allow a company to operate anew in now closed or obsolete markets, due to the current deadlock, and therefore allow to seize opportunities that were not previously considered at all.

In this case, the costs can be covered up to 50% and up to an amount of 5,000 euros. The contribution bears the costs of creating, developing and implementing an e-commerce site and/or mobile applications. Besides it also finances the cost of implementing an existing website or creating applications capable of managing online sales and bookings. Costs for the creation of online payment systems are also included.

If you wish to have further information or assistance to prepare a plan or submit a contribution application, we are available to help you.

Stefano De Stalis
European Affairs and State Aid Manager
Sheltons Malta
S.Destalis@SheltonsGroup.com

This article was published on 9 April 2020 on Corriere di Malta newspaper

Expert opinion: restart your business in the post-epidemic through the use of public funds

“Don’t wait for something to happen, use the public funds already available and prepare a business plan to be ready to start afresh” writes Stefano De Stalis.

Coronavirus has stopped the economy; the sharp slowdown has not left Malta unscathed. The situation is not as serious as in other European countries, but we are unable to predict its evolution.

What we can surely do is to reflect on what the future will be like when the emergency will be over.

Let’s try to understand how to prepare ourselves and how to start planning in order to be ready when the time comes.

We will certainly face a completely different reality.

This is not an easy period because the attack that we suffered took us by surprise, some sectors of activity cannot operate, schools have been closed and businesses that still work probably act in a disorganized way because they did not have time to plan.

In short, something has happened that forces us to a sudden and epochal change, we are standing still but we cannot sleep, instead we have to rethink our way of living and working.

We have been bitten hard, but let’s not just see the negative aspects of this economic crisis, we must look at the great opportunities that lie ahead. Now we finally have the time to redefine our business objectives by trying to set new goals and by planning ahead to be ready to face the new challenges that the market poses.

Some companies have completely stopped their activities, some have suffered a collapse in turnover and profits, others can no longer pay their bills. On the other hand, some companies are managing an unexpected growth which, if not managed properly, could disrupt their business.

It is almost a chaotic situation.

Do we have to just wait for the tunnel to end?

The answer is definitely not.

Our recommendation, and the advice of the take force that we set up on purpose, is to act immediately and use the time we have, let’s say three months, to analyse new needs and plan new strategies.

Perhaps it will be necessary to diversify the production or convert the business, to decide to import from other countries, or find new sales channels: for example, it may be necessary to reshape your website, make it more aggressive, more engaging, different, turn it into an instrument of greater communication, a platform for selling and paying online.

It will be necessary to study new ways of connecting to others. Perhaps it will be necessary to reconvert some productions, or replace current services with others, rethink your shop, replace some products, introduce home delivery services, adopt new sales strategies, change sectors. Inventing in new courses to train your employees to be able to sell via Skype, or to choose materials via the Internet.

But planning takes time and cannot be done in three months, it will be too late, you must start now, immediately.

It is necessary to make financial plans, define budgets, estimate costs, predict how many future revenues and profits or even losses could arise in the first months.

This must be done now, more than ever, not in a day or two, right now.

And we can help you, by discussing with you, small or large entrepreneurs, artisans, shopkeepers, listening to your needs, trying together to identify new objectives, to define the alternatives that we have before us, by making hypothesis of the investments to be faced but also of the facilities and incentives that can be obtained thanks to the increased availability of public, national and European funds.

And therefore, we can assist you to define a solid business plan that can guide you towards a new success in a world that will surely be different.

This is also the right time to come up with new business ideas which, in order to be transformed into products or services, absolutely need a robust Business Plan.

Yes, but how much does a Business Plan cost, many people ask us?

You don’t have to worry about this because the consultant’s cost, if the application is approved, will be reimbursed up to 80%, through public funds, made available by the Government of Malta and the European Union.

Funds that finance start-ups, micro-enterprises, self-employed workers, small and medium-sized enterprises.

For example, in July or August we will go on vacation but probably we will not be able to go abroad. Hotels in Malta will have to rewrite new rules of the games, maybe focus on a new form of local tourism, perhaps by organising events or competitions, games, weeks in Gozo and so on. We will have to think about new needs that did not exist before because the world was different. We will have to come up with new ideas and turn them into a winning plan.

Instead of waiting, we recommend that you contact us as soon as possible in order to start planning new goals immediately to be ready in two, three months; so that eventually in July, or whenever the new start will come, you will have geared up with clear ideas on what to do avoiding unnecessary cash outlays. We will suggest which are the most suitable public incentives for you.

We should take advantage of this period with a positive approach; let’s create a solid business plan.

A business plan that may include several possibilities for action, such as:

  • realisation of new business ideas
  • expansion of production or service capacity
  • diversification of the business
  • diversification of production processes or services
  • adoption of new sales policies
  • development of new products / services or processes
  • corporate reorganisation
  • process innovation
  • internationalisation of products or services
  • entry into new markets
  • remaking of website
  • introduction, updating or integration of e-commerce solutions, online sales, online payments, home delivery

A well-made business plan is the fundamental requirement for the success of a restart, growth or development project. But it is also the indispensable tool, the fundamental requirement, to obtain loans from banks, funds from the European Union. The costs that can be included concern all company functions, from salaries, to the purchase of equipment and software, to materials, to consultancy expenses.

Incentives, whether for capital or interest, are a great advantage especially for small businesses that do not have an adequate structure to support innovation and growth projects.

If you are worries, if you are afraid, if you do not know what to do, call us and we can face the situation together and evaluate the most suitable public funding. This is the right time to reflect, to think about the future. In normal everyday life it is difficult to stop and decide to question everything, today we can do it.

Let’s view this moment as a great opportunity.

Let’s face it together and we will achieve success.

Stefano De Stalis
European Affairs and State Aid Manager
Sheltons Malta
S.Destalis@SheltonsGroup.com

Our thoughts on corporate governance during the Covid-19 pandemic

By Dr Adrian Vella

NB. The views expressed in this article are those of the author and do not necessarily reflect the views of any other person or institution. The author may be contacted at A.Vella@SheltonsGroup.com. 

The response to the Covid-19 pandemic, has been, initially at least, a medical one. For weeks, we have been exposed to ever grimmer reports on infections, incidence, and unfortunately, mortality rates. As weeks pass by however, with the pandemic progressing unabated, there has been a decoupling in the reporting, with the focus percolating gradually, but inevitably, from the medical to the economic – the two being inextricably interwoven. Countries, multi-nationals, airline carriers, internationals chains and small businesses all assess the economic costs of the pandemic, in terms of economic contraction, deficits, debt restricting, redundancies and unemployment rates, rescue packages etc.

As businesses start to settle into the new reality, it is important to encourage a policy of governance that reflects the new ways of doing business under this pandemic. Here are our thoughts on some essential considerations that will need to be made by business owners and managers alike.

Irrespective of Covid-19, the role of directors remains a fiduciary one 

The Companies Act prescribes that the directors are entrusted to the promotion of the well-being of the company, in which they serve office,  and are bound to act honestly and in good faith in the best interests of the company. Directors are bound to exercise a degree of care, diligence and skill in over-seeing the operations of the company.

Where the board of directors are required to supervise the management of the business, the board should ensure it has sufficiently updated information to perform their supervisory function effectively. The board should be able to intervene when they believe management are making material decisions. This should be so not only in spite of the current situation, but should be especially so because of it.

Are the Articles of Association of the Company Covid-19 compliant?

Decision of the board of directors can be resolved by meetings or resolutions in writing. With the current restrictions to travel and movements caused by the Covid-19 pandemic, even such mundane requirements may prove daunting. The circulation of notices for the convening of a board meeting – a task typically delegated to the company secretary – can be a challenging process, underscored by inevitable delays.

Directors are bound within the remits of the Companies Act and the Memorandum and Articles of Association of the Company. Directors cannot act beyond the parameters of law and the company statutes. Where no such restrictions apply, directors may however, seek to mitigate the logistic challenges brought by the Covid-19 pandemic through the implementation of the following measures:

(i) Agree to significantly reduce the notice period for the calling of a meeting of the board of directors; and

(ii) Where no such meeting can be convened due to travel restrictions, or delays in the receipt and transmission of notices by post, the directors can agree to resolve matters by the execution of documents in separate counterparts, whereby each instrument shall be executed by different directors individually, with each copy considered to be an original, and all of which together shall constitute one and the the same instrument.

Overcoming logistical challenges caused by Covid-19 whilst ensuring continuity

Directors cannot, because of the limitations set forth in the Memorandum and Articles, by which they are bound, derogate from the logistic and time constraints which is hampering their ability to discharge their duties. They may however, still take a pro-active role, by requesting the general meeting to consider propositions which may alleviate such hinderances, even if such remedial measures be of a temporary nature. Changes to the Memorandum and Articles of Association, is the privilege of the general meeting. However, the directors are entitled, and indeed this is a matter incumbent in their fiduciary obligations, to flag any impediment to their ability to undertake their office. Such propositions may include:

(i) A reduction of the aforesaid minimum notice period for the calling of board meetings, if any;

(ii) Amendments to the notice period allowing for notice to be served by electronic means of facsimile, in lieu of notices in hardcopy; and

(iii) Crucially, the insertion of clauses within the Articles of Association that allow for the rightful convening of board meetings via telephone and video-conferencing means in lieu of hardcopies.

Furthermore, where even these measures are deemed insufficient, the general meeting may consider alternative measures such as:

(i) Consider amendments to the legal and judicial clauses by readjusting the necessary quorum;

(ii) Review the instances, or thresholds, set forth in reserved matter clauses, which require a joint resolution to be passed by both the board of directors and the general meeting;

(iii) Implement bespoke clauses governing the swift and orderly appointment of directors in case of casual vacancies caused by death, removal or incapacity of the same; and

(iv) Delineate clear clauses regulating the transfer of shares causa mortis in the event of the demise of the shareholders.

Such measures however, must be considered wisely and thoroughly. Whilst the company should, through its organs, the board of directors and the general meeting, ensure that logistic hurdles stifling its operability are overcome, changes should not be undertaken in such a manner as to dilute or, even worse, disrupt the checks and balances of correct corporate governance.

This is particularly relevant in the context of companies with multiple share classes. Likewise, statutory underpinnings relating to the protection of minority shareholders rights, must be preserved and safeguarded at all times.

Personal liabilities and duties of the directors

It would be restrictive to assess the duties of the directors solely with the remit of the company statutes, howsoever revised or reworded. Directors are also entrusted to the company’s proper administration and management. Such administration inevitably translates to overseeing compliance to their contractual duties, timely settlement of fiscal dues and filing of statutory forms and instruments within prescribed time-frames. The board of directors would, therefore, be well advised to evaluate, assess and resolve on the following matters:

(i) Extend the logistical remedies to include banking instruments and channels. Directors should take pre-emptive or remedial measures seeking to curtail the issuance of cheques with settlements by electronic means. They should ensure that the company has unfettered access to its bank account via internet banking or remote channels, evaluate the issuance of a corporate debit card to facilitate settlement and assess the composition of its authorised bank signatories.

(ii) Seek legal and professional advice, as to any statutory deadlines which the authorities, may, due to the Covid-19 pandemic have extended to companies. The Government of Malta has, by way of illustration, authorised the deferral of VAT filings and the Malta Business Registry has waived penalties for the late filings of annual returns and audited financial statements for a grace period.

(iii) Consider legal advice on contractual obligations entered into, or about to be entered into by the company, in the context of whether the Covid-19 pandemic may be deemed as constituting ‘force majeure’, and the costs, in terms of remedies, legal fees and disruption of operations that such invocation would trigger.

(iv) Assess the scope through which certain instruments may be executed validly through the use of electronic signature and validation therefore in line with Regulation No 810/2014 on electronic identification and trust services for electronic transactions in the internal market (“the Regulation”). Some instruments, for example, may only be executed by public deed. Others may require the deposit or serving of judicial acts in Court, a matter that may be significantly curtailed due to restriction by access due to the pandemic. Knowledge of the form and restrictions to the rule, would allow the Company to take pre-emptive measures.

(v) Seek assistance in terms of any wage supplements or other grants to which the company may apply if adversely affected by the pandemic. A restriction or slowdown in the Company’s operations may require the board of directors to consider and implement redundancies. The rules applicable to redundancies are in turn subject to strict legal guidance, regard being had to any collective agreements, specific wage regulation ordinances, as well as over-arching principles governing the protection of vulnerable workers. The directors should be well minded to seek professional advice on labour and employment law.

(vi) Mitigate the losses of the company by taking pre-emptive or corrective remedies. This is linked to the liabilities attaching to the board of directors for wrongful trading. Directors need to ensure that they minimise company losses through the re-negotiation of contractual agreements, as well as ensuring that the liquidity reserves of the company are sufficient and commensurate to its operations. Directors are therefore well advised to request management accounts on a significantly more frequent basis, thereby ensuring that the company remains a going concern and that their actions are not leading the company towards the path of insolvency to the detriment of creditors.

(vii) Assess internal company remedies. These may include a request for shareholders’ loans, the liquidation of assets for the creation of reserves or a call up of shares. Inversely, if the company is over-capitalised, it may be fruitful to consider also the reduction of share capital to off-set trading losses. Other corrective remedies may include debt restructuring in agreement with creditors, or the use of securitisation vehicles;

(viii) Consider the creation of contingencies and company reserves to mitigate the adverse effects of an economic contraction for the company. Directors need to act honest and prudently to circumvent personal responsibilities emanating from wrongful trading and be always guided by fairness and probity. It is strongly advisable for the directors, in parallel to the aforesaid steps, to also seek the guidance of their respective auditors. Specific focus should be placed on any impairments on the assets of the company and the recoverability of trade receivables. This may allow the company to implement remedial actions as necessary to circumvent or minimise the impact of a qualified opinion by  their respective auditors. This is particularly relevant in the context of listed companies, which directors are also guided to act prudently and diligently in terms of the issuance of profit warnings and other mandatory disclosures.

(ix) Undertake a thorough risk management exercise with an in-depth review to the company’s procedures, particularly in the fields of cyber-security risk, liquidity risk, disclosure controls, internal audits and management risks. Mitigating factors to lessen or stave off the impact or probability of adverse incidence, should be resolved and closely monitored for further tweaking.

The discharging of duties by a director is always onerous and never one to be taken lightly. The burden cannot be compounded when one is asked to resolve matters against a backdrop exacerbated by incertitude and instability.

Reach out to our team of professionals for assistance and advice, by writing to us at MT@SheltonsGroup.com. We are at your fullest disposal.

NB. The views expressed in this article are those of the author and do not necessarily reflect the views of any other person or institution. The author can be contacted at I.Zammit@SheltonsGroup.com. 

Allow me to share with you some tax considerations on the current situation having an impact on the international setup of both individuals and companies; based on the most common questions received from our clients in the past few days:

1. Forced to face the risk of death, many individuals may need to reconsider their existing structures from an inheritance law and tax perspective but also from a corporate practical viewpoint.

As a consequence, for example, one aspect which could become critical is the practical implication of a transfer of assets causa mortis; more often than not, transfers of shares would require heirs to be registered as shareholders in a foreign country. Without the necessary arrangements in place, this process may take several months and could have a significant negative impact on the running of a business. This would especially be so if the owner of the business is also acting as director and needs to be replaced urgently.

Planning is therefore not only an inheritance and tax question, but also a practical, commercial and corporate one.

2. With the current ban on travelling, many expats who normally have several residences and travel across various countries for the most part of the year could now happen to be stuck in a particular country, not necessarily by choice; or simply lose track of the number of days they spend somewhere other than their country of residence.

Consequently, for example, this unexpected physical presence could have important implications on the nexus de facto created by such individual with that third country.

Different countries have different rules in terms of what constitutes enough nexus to become a resident. Many countries have a minimum number of days rule (e.g. 30 days in UK in some cases), other countries will also factor in some other conditions and evaluate overall the ties a person has with that country (e.g. Italy’s domicile concept, i.e. main centre of interest).

One may wonder if spending time in a hospital in that country could constitute a strong enough tie to that country and combined with other factors, this may easily tip the scale to an unfavourable situation.

Often, structures are planned around the place of residence of the owner. If the owner unwillingly becomes a resident of another country, it will undoubtedly jeopardise the balance of the structure. Moreover, as from this year, consultants need to report on a pan-European platform under the DAC6 reporting whenever a client becomes a non-resident anywhere, and possibly even if the client becomes a dual resident. Such reporting may trigger unwanted investigations and would preferably be avoided.

3. Due to the current pandemic, employment is negatively affected everywhere also in ways which could surprisingly have unexpected tax consequences.

An employee may be stuck in a foreign country and luckily is able to work remotely. Unfortunately, though, many countries have very strict tax rules that apply in these situations.

For instance, Danish employment tax rules only allow foreign workers to work remotely from Denmark for a maximum of 10 days before becoming subject to tax on their employment income in Denmark and possibly even creating a taxable presence of their employer in Denmark (i.e. permanent establishment rules through so-called home-office).

Even if tax may well not be significant, the administrative burden of employing a person in another country or registering a permanent establishment can sometimes cost a small fortune, and this is especially true for smaller companies.

Besides, it may also be the case that employees working on a project across border are no longer able to carry out their work.

It is normally the case that a company would be obliged to provide benefits to these employees in line with the employment law of the country where the work is taking place. Although differences are typically small between EU member states, there are situations where the benefits are significant and may result in significant additional costs for the employer.

In the case of construction or installation projects for example, tax treaties between countries determine that the country where the work is performed is typically only able to tax the profit of that project if works exceeds several months as determined by the tax treaty.

For instance, the treaty between Malta and Italy determines that Malta can only tax a construction project when carried out by an Italian company if that project exceeds 12 months: an Italian company carrying out a project expected to take 10 months, may now have to consider whether the project will exceed the 12 month threshold and as such would need to register a permanent establishment in Malta and pay the 35% tax in Malta on the profit from that contract.

As a result of the creation of a permanent establishment, employees may have to pay tax in Malta on their income (which is very often ultimately borne by the company). This coupled with the increase in the tax payable by the company may well result in an unexpected loss for the Italian company on that project.

4. International group tax policies are being negatively affected too. Many of these policies are planned with a positive economic situation in mind and rarely cater for loss making scenarios.

Many structures are set up in a way to place specific risks, including the risk of an economic downturn in a different company than the operating company: this is typically visible through the group’s transfer pricing policies resulting in higher profits being allocated to the risk bearing entity.

It should be expected as a result of the downturn, that losses within the group will be higher in high risks bearing entities than low risk entities. It may even be the case that low risk entities still register a profit despite the downturn, in which case, the group may well still need to pay significant amounts of tax despite a loss at group level.

5. Due to the newly introduced lockdown rules, many countries are passing emergency legislations and economic incentives measures.

Businesses are expecting governments to step in even more by offering comprehensive economic packages to compensate all businesses for their losses and kick-start the economy.

Whatever European governments come up with will clearly need to remain within the workings of the EU State Aid rules. These rules limit government grants to private companies only in certain specific situations.

Earlier this week, it was announced that member states will be allowed to take whatever measures necessary to handle this crisis, as long as such aid program is notified to the commission and is within certain limitations. One of these limitations the EUR 800,000 over a three year period of total aid a company may receive.

Considering many have already received EUR 200,000 (current de minimis rules), the remaining balance of aid is not particularly high.

An important feature of the state aid rules is that whenever a company is considered to have received illegal state aid, the commission can force the member state concerned to request that the aid received be returned, plus interest. Interestingly, aid received directly from European funds are excluded automatically from the State Aid rules.

Although we assume the governments would not grant aid which may be considered illegal, it is ultimately the companies receiving the aid that may well end up suffering the consequences.