“Should my board of directors, following the introduction of the euro, require to propose a resolution to the annual general meeting to convert the company share capital into euro? If so, when, and how, should companies go about translating Maltese lira-denominated shares into euro?”

The changeover from the national currency to the euro will certainly have a number of practical implications upon companies’ share capital. Companies will be legally obliged to ensure that share capital is converted from Maltese lira into euro, and this should be done in a consistent and correct manner.

First and foremost, it is important to point out that a decision by shareholders is not strictly necessary for the conversion to take place, as the translation of both authorised and issued share capital from Maltese lira to euro is a legal requirement, and not subject to the approval of shareholders. The National Euro Changeover Committee has therefore published guidelines detailing the way in which this exercise is to be carried out.

The conversion exercise itself should be carried out using the “bottom-up” approach, whereby the nominal share value is converted to its euro equivalent by dividing it by the irrevocably-fixed conversion rate. The resulting amount should be rounded to six decimal places in order to ensure that there is only an insignificant difference in the resulting value of the share capital following the conversion.

The second step is to calculate the euro equivalent of both authorised and issued share capital.

This is merely a case of multiplying the nominal share capital, now denominated in euro, by the number of authorised and issued share capital respectively. In this case, the resulting amounts may be rounded to the nearest cent, in accordance with rounding and smoothing guidelines published by the National Euro Changeover Committee.

The share capital, denominated in euro, is to be indicated in the first annual return form submitted to the Registrar of Companies, following e-day.

This will enable the registrar to update records pertaining to the company in question.

If, for practical reasons, a company wishes to amend its nominal share capital to a round euro figure, such a move would require a shareholders’ resolution to adjust the capital. Such measures are however, not a requirement and are therefore up to the discretion of each individual company.

The relevant guidelines, along with other related information, may be downloaded from the NECC website at www.euro.gov.mt.

Clarifications may also be had from the NECC information line, Linja Ewro, on telephone 154.

Furthermore, any specific queries relating to the effect of the euro on company share capital can be posted to [email protected] for an immediate reply.

Claire Azzopardi is an Information Officer with the NECC