It has long been recognised that family businesses are an indispensable asset for Malta and Europe‘s economic prosperity. Family businesses generate economic growth, employment and provide lasting stability. At the same time it has equally been recognised around the world that family businesses face unique qualities and challenges that require the full attention of the legislator and policy makers.
Family business succession is the most challenging process that family businesses must undergo, since if not properly undertaken, might result in the end of the family business. Financial issues and lack of proper governance structures are the main reasons why family businesses fail this succession process and why the European Commission has long been calling upon member states to address this legislative and functional void by policy makers.
The main recommendation that this new legislation proposes is to allow businesses to structure and register themselves and acquire the status of family businesses with the opportunity to benefit from such structure and identity. The legislation is established along the principles and vision of both the European Commission as well as the necessities of local family businesses in Malta. The legislation clearly defines a ‘family business’ and how family businesses can be structured to acquire the same label and remove the ambiguity that presently exists around this sector.
Furthermore the legislation also seeks to regulate and establish parameters within which family businesses are to govern and operate the family businesses to help them pursue succession and an effective transfer of the family business. The legislation is intended to establish operational benchmarks so that family businesses can further achieve their aims. The Family Business Act will give due recognition to this sector and will further facilitate and support their unity in their endeavors to work collectively to ensure their survival. Finally the legislation proposes an initial set of incentives to be immediately made available to family businesses to assist them throughout their transition process.
Historically family businesses have been the drive and backbone behind any countries financial system and have proven to be some of the most robust dynamic sectors of the economy. They are the backbone to the economy generating millions of turnover and their existence provides stability to the economy in a way that no other enterprise can. Unfortunately at the same time they are exposed to their vulnerabilities and it has been these same vulnerabilities that have served as the common factor into the decline or death of family businesses. One of the key factors is that after years in operation and practise, when it comes to facilitating the transfer many businesses were faced with either a legislative vacuum or else legislation that would render it not feasible to continue with the transfer. The scope of this legislation is to tackle these difficulties and find sound, practical and responsible ways in paving a way ahead.
With this innovative legislation and new support system being established by the Family Business Unit we hope and intend to bring recognition and support to this vital economic sector. The role of the Regulator is intended to assist family businesses in their endeavours of transfering their family businesses by benefitting from the incentives made available to those registered and receive all due support in the process. Furthermore the Family Business Unit will serve as a support to family business in the regulation of their business, their governance and enhancement of their internal organisation and structure with the aim of helping them to effectively operate their business and work towards a successful succession of the family business.
We welcome and invite all types of family businesses and professionals who assist and operate in this sector to make inquiries at our offices so that together we can help this sector and family businesses evolve and continue in successfully passing on their wealth of knowledge and industry to the next generation.