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Framework for European Economic Interest

Regulatory Framework for European Economic Interest Group Enacted

One of the cornerstone freedoms of the single European Union is the freedom of establishment. However, this principle is often at odds or at least hindered by the corporate law exigencies of single member states within the European Union. Investors must often wade through a labyrinthine series of different economic and legislative framework, often a hinderance to the small and medium size enterprise, which forms the backbone of the EU economy.

The enactment of a pan-European regulatory framework has been enacted in the form of the European Economic Interest Grouping (EEIG), by means of Council Regulation (EEC) No. 2137/85 (“the Regulations”) which have since been transposed in the Maltese Companies Act.

An EEIG allows the creation of a legal entity, which has a separate legal personality from its founders, and which can operate in any EU Member State. An EEIG is formed by means of a contract of formation and registration at the responsible Authority in the desired member state. The EEIG may be formed either by natural or legal persons or a mixture of both, insofar that the members of the EEIG consist of legal persons whose central administration is in different Member States (the rationale behind the EEIG remains after all the consolidation of a pan-European rather than a purely domestic framework).

Members of the EEIG may, just as they have chosen a designated jurisdiction of choice, may just as swiftly, elect, in the face of changing fiscal circumstances, to move the EEIG elsewhere. This is expedited via a transfer request to the competent authority in which the EEIG has been formed, conditional to the elapse of a two month window.

The enactment of an EEIG framework shall render the proposal of a Maltese registered EEIG ever more attractive, regard being had to its simplicity, low fiscal burden (effective tax leakage of trading companies can be as low as 5%) as well as flexibility. Malta remains well placed to reap full benefits of such EEIG framework by offering a comprehensive and attractive jurisdiction of choice to the savvy investor.

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