The Creation of Cell Companies by Companies carrying on or engaged in Shipping or Aviation Business

By virtue of Legal Notice 248 of 2020, new regulations were issued under the Companies Act entitled Companies Act (Shipping and Aviation Cell Companies) Regulations (the “Regulations”). These Regulations were introduced to complement the recently introduced enabling provision under article 84E of the Companies Act (Chapter 386 of the Laws of Malta) (the “Companies Act”). The Regulations and article 84E extend the possibility of the creation of, or the conversion into, cell companies by companies carrying on or engaged in shipping or aviation business, which benefit could previously only be availed of by insurance companies, securitisation vehicles, investment companies with variable share capital and more recently by foundations and associations. These Regulations and article 84E of the Companies Act shall be read in conjunction with each other.

A cell company is defined as “a company formed or constituted as such or converted into a cell company and creating within itself one or more cells for the purpose of segregating and protecting the cellular assets of the company” in accordance with the Regulations and article 84E of the Companies Act. A cell has the same meaning as that assigned to it under the Companies Act, namely a cell is “a cell created by a cell company for the purpose of segregating and protecting the cellular assets of the company in such a manner as may be prescribed”. It also includes a reference to segregated accounts, compartments or units within a company having multiple accounts, compartments or units.

Interestingly, the Regulations introduce the definition of “cell shares” and “cell share capital”. Cell shares means shares created and issued by a cell company in respect of one of its cells, the proceeds of the issue of which (the “cell share capital”) shall be comprised in the cellular assets attributable to that cell.

For the purposes of these Regulations, the term “company” is extended to include partnerships en commandite or similar or equivalent body corporates, the capital of which is divided into shares. In order for a company to be so formed or converted, it shall be required to obtain a licence and, or authorisation in order to carry on any relevant activities or to be formed or constituted as a cell company and to carry out specific acts whilst being a cell company.

Within the ambit of these Regulations, the definition of shipping or aviation business is wide ranging, which definition stems from article 84E of the Companies Act. Firstly, it includes the ownership, operation by charter, lease or otherwise, administration and management of any ship together with the carrying on of all ancillary financial security, commercial and other activities connected therewith. In this respect, administration and management includes personnel engagement, as well as employment and management both onboard or otherwise. Additionally, such “business” extends to the holding of shares or other equity interest in any undertaking, whether such undertaking is established in or outside of Malta, provided that such undertaking is solely established or mainly established for the purpose of carrying on or out any one of the activities listed within this definition together with the carrying on of all ancillary financial, security, commercial and other activities connected therewith. The aforementioned activities also extend to the activities of the parent company which holds shares or other equity interest in undertakings, whether Maltese or otherwise, established solely or mainly for the carrying on or carrying out of any of the aforementioned activities. Furthermore, such activities also include the raising of capital through loans, the issue of guarantees or the issue of securities by an undertaking where the intention of the activity is to achieve the objects or activities cited in this article.

Cell companies shall be distinguished from other companies through the inclusion of the words “Mobile Assets Protected Cell Company” or “MAPCC” by their name and through the specific reference to the fact that it is a cell company in its memorandum and articles of association. Furthermore, each cell must be distinguished from one another by each cell being assigned its own distinct name.

In terms of these Regulations, a cell company is bestowed with single legal personality and such cell company may create numerous cells. However, the creation of a cell does not create a legal person separate from the cell company.

Any interest of an owner of a ship or aircraft shall be noted, provided that any registered mortgagee or registered security interest holder has provided its consent. It should be noted that such attribution shall not prejudice any rights of any creditor of the company existing prior to the conversion to a cell company or that of a registered mortgagee or security interest holder.

The cell company is allowed to pay a cellular dividend in respect of cell shares, which cellular dividends may only be paid with respect to the cellular assets and liabilities or profits attributable to the respective cell. Furthermore, if the cell company is obliged to make a payment from cellular assets attributable to a particular cell which are insufficient, the company shall make up for the deficiency from its non-cellular assets.

The Regulations require that separate records, accounts, statements and other documents are kept in order to show the assets and liabilities of each cell as distinct and separate from the asset and liabilities of other cells in the same company. The creditors of a particular cell should only be able to avail themselves of the assets of that particular cell and should not reach to other cells to cater for the debts due by that particular cell. In default of which, the Regulations provide for rules through which the affected cell may be reimbursed for its losses suffered.

The broadening of the law to accommodate cell companies in the shipping and aviation industries should prove to yield diverse opportunities within these sectors which would surely be attractive to the players within the industries. In view of the above, it is evident that owing to the fact that Malta has long appreciated the maritime industry as one of its economic pillars, efforts are continuously being made in order to ensure the industry remains competitive and robust whilst also attracting further business in the aviation industry.

Do you know your passenger rights?

GMX puts you in the picture

 

Short-haul or long-haul, boarding a plane to go on holiday or a business trip has become so common that we rarely think of the legal issues that may arise beyond cancellation, delays and luggage lost or damaged in transit. Same for sea-travel.

Even those who are sticklers for insurance cover rarely flit through all the details involved especially if they are long-standing customers of a specific insurance firm. They are happy with the comfort of knowing that they are protected from the moment they have clinched their booking to the moment they return home. Others take the risk and travel without any coverage whatsoever. And a risk this certainly is for no amount of problem-free trips can guarantee the outcome of subsequent travelling.

 

Basic travel insurance usually offers the following covers and standard benefits:

  • Loss of baggage and money
  • The cost of purchasing emergency essential replacement items if your baggage is temporarily lost
  • Personal Accident Cover
  • Cancellation of your trip (normally a higher premium must be paid if due to extreme weather conditions or natural disasters)
  • Curtailment of your trip
  • Costs for emergency medical and associated expenses (These could include a cash contribution towards hospital expenses if you end up in a hospital overseas).
  • Personal Liability
  • Delayed and/or Missed Departure
  • Loss of Passport

Additional benefits such as rental vehicle insurance excess cover, music equipment cover, winter sports equipment related to a skiing holiday or pet cover may also be offered at a premium. Opting for a Personal Accident Insurance policy will yield even more comprehensive benefits while frequent flyers have the opportunity to go for a much more customized Annual Travel Insurance.

There is also the concept of ‘excess waiver’ to consider. As in all types of insurance policies, travel insurance requires a traveler to take part in the claims by paying the excess, specifically, the first part of the claim. This is the fraction that you pay towards each claim’s costs, subject to the maximum limits stated under each benefit. Take a case of lost baggage amounting to €600 where the maximum limit is set at €1,000 and the excess at €100.

 

As a result, you will have to pay the first €100 while the insurance company reimburses the remaining €500. Had the lost baggage exceeded €1,000, you will only get €900. Significantly, excess waiver may not be permissible for benefits which cover high risk sport or adventure travel. Millennials setting the trend for gung-ho adventurous travel please note.

Excess waiver further means that you do not have to pay an amount every time there is a claim against the travel insurance policy. The excess waiver would mean that you have to pay an additional premium amount as this really constitutes additional cover under your travel insurance policy. If you would like to lower your premium for the travel insurance, you can also have the excess increased.

 

 

Another useful tip is to check if your insurance company allows you to choose a medical excess level, or to change the excess into an amount you would like. As EU citizens, it is also a good idea to verify whether the European Health Insurance Card (EHIC) can be used against the excess amount.

Taking out a travel insurance policy in Malta is subject to three conditions, namely:

  • Passengers must residents in the Maltese Islands.
  • The trip is a conventional vacation or business one.
  • Travel plans are based on a round trip beginning and ending in Malta during the period of insurance.

By default this means that a non-Maltese resident who has travelled to Malta without any travel insurance cover cannot purchase any insurance policy to cover his/her outbound flight or sea ticket irrespective of whether the home country is the destination. So imagine such a traveler who while in Malta spontaneously decided to buy something valuable to take home, he/she would have to take the risk of travelling without insurance protection.

Apart from what may be considered to be run-of-the-mill hitches, there are other possible (if rare) problems. These include: overbooking, food poisoning and food intolerance in cases of inadequately labelled meals or snacks offered during flights/voyaging at sea; or purchased at airports/sea terminals. Airlines and shipping companies have to shoulder the responsibility of food poisoning for inflight/at sea meals, whereas liability for food intolerance will depend on correct and adequate labelling of relevant ingredients as well as how careful and attentive the passenger would have been.

Despite the increased awareness of food intolerance and the now much banded lactose/gluten free advertising we need to keep in mind that rules and regulations regarding food products are not internationally standardized. And though well-established airline carriers and shipping companies are bound to take precautions, nothing should be taken for granted.

Falling victim to overbooking is another matter. In 2004 the European Parliament and the Council of the European Union passed EU Regulation 261/2004 (a.k.a. EC261). The Regulation sets common grounds for compensation and care for passengers in the event of being denied boarding when the passenger is not at fault. Air passengers can claim between €250 and €600 depending on the journey. There are however, a number of caveats which only legal advice can ensure that adequate compensation is paid out. Happily, airlines usually effect compensation there and then at the airport. But there have been exceptions and missing connection flights ups the complications

Yet another possibility is suffering preventable injury due to company negligence or certain conditions such as tightly squeezed seating or, faulty locks in the hand luggage compartments that may knock you down by an assortment of heavy bags. Nor should survivors (or surviving relatives) automatically assume recompense when plane crashes or accidents at sea lead to grievous injury or death.

Finally, it is vital for passengers to retain all documents related to their travelling (ticket, boarding pass, etc) as well as refrain from succumbing to subtle or thinly veiled coercion tactics to drop compensation claims. Once again, legal advice will save the day since seeking legal action against an airline is a costly and daunting task.

As islanders we probably rank as some of the world’s most frequent flyers. Cruising is also trending. So it makes sense to be in the know.

 

For further information contact Gauci-Maistre Xynou Legal | Assurance