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The Malta Financial Services Authority has published guidelines for companies on how to convert share capital from Malta Lira into Euro when the latter becomes the sole legal tender in Malta. The guidelines have been endorsed by the National Euro Changeover Committee.
The conversion exercise is applicable to all limited liability companies as well as the en commandite partnerships, while companies listed on the stock exchange must follow any additional guidelines issued by the listing authority.
The guidelines should serve for a smooth transition to euro conversion using the irrevocably fixed conversion rate. There will not be the need for companies to take a decision or pass a resolution to convert from Malta Lira into Euro since the legal tender shall be the Euro and so the nominal value of shares must reflect this change automatically. Both the authorized and issued share capital will have to be denominated into the equivalent Euro value. A “bottom up” exercise has to be used whereby one has to divide the Malta lira by the fixed conversion rate and rounded up to six decimal places for the least negligible difference.
The guidelines also give various examples of the exercise to be undertaken. The first step is to know the irrevocable conversion rate, which will be published officially once Malta gets the go ahead from the Commission and the European Central Bank.
If a company has its shares at Lm1 each it has to re-denominate its value to Euro. For the sake of a practical example if the irrevocable fixed Malta lira to Euro conversion is 0.429300, the Lm1 is divided by 0.429300 and its equivalent in Euro becomes 2.329373.
This amount is then multiplied with the number of authorised and issued share capital. The amount paid up should have no relevance to the re-denomination exercise and the first annual return of the company following the Euro day has to reflect Euro denomination. Also if there shall be any changes in the memorandum and articles of association before the submission of the annual return this must reflect the Euro change.
If a company decides that it wants to round up to two decimal places, this needs a specific shareholders’ resolution as this is considered to be altering the share capital. |
