The Vendor’s Game Plan: Prepping Your Maltese Business for Sale

Selling your business is one of the most significant decisions you will ever make. To maximise its value and ensure a smooth transaction, preparation is key. Vendor due diligence (VDD) is the process of the seller proactively identifying and resolving issues that a potential buyer would uncover during their own due diligence. A clean, well-documented business is a more attractive target. This is your 12-month game plan.

Financial Housekeeping

Your financial records are the bedrock of any due diligence process. Buyers and their advisors will scrutinise your accounts to understand the company's performance and verify its financial health. Inconsistent or poorly maintained records are a major red flag.

• Ensure your annual accounts are filed on time with the Malta Business Registry (MBR). Late filings incur penalties and suggest poor internal controls.
• Reconcile all bank accounts, intercompany balances, and key control accounts. Unexplained discrepancies will be questioned.
• Review your accounting policies. Ensure they are consistently applied and in line with GAPSME or IFRS, as applicable to your company size and status.
• Prepare a clean, detailed management accounts pack for the last 12-24 months. This should include a profit and loss statement, balance sheet, and cash flow statement, with variances explained.

Corporate Governance & Structure

A buyer is not just acquiring your assets and operations; they are taking over a legal entity. Its corporate structure and governance history must be spotless. Any ambiguities can create legal hurdles and potentially derail a deal.

Your company’s statutory records must be complete and up-to-date. This includes the register of members, register of directors, and minutes of all board and shareholder meetings. Check that all company changes (e.g., share transfers, director appointments) have been correctly documented and filed with the MBR. If you have a more complex group structure, ensure the ownership of each entity is clearly documented and that inter-group transactions are conducted at arm's length.

Tax & VAT Compliance

Tax is one of the most significant areas of risk for a buyer. Any unresolved tax issues, from corporate income tax to VAT and employee taxes, will become their liability post-acquisition. A thorough review of your tax compliance is non-negotiable.

• Confirm that all corporate income tax returns have been filed and all tax payments are up to date.
• Review your VAT returns and reconciliations. Ensure you have correctly accounted for VAT on all sales and reclaimed input VAT where entitled.
• Verify compliance with FSS (Final Settlement System) rules for payroll taxes. Ensure all employee and director emoluments have been correctly reported.
• Address any pending tax inquiries or assessments from the Malta Tax and Customs Administration (MTCA). It is far better to resolve these before a buyer discovers them.

Contracts & Legal

Your company's legal obligations and rights are defined by its contracts. A buyer will want to understand these commitments and identify any potential liabilities.

Collate all key contracts, including customer agreements, supplier contracts, employment contracts, and lease agreements. Ensure they are signed and properly archived. Review key terms, especially any change of control clauses that could be triggered by the sale. Tidy up any informal arrangements and document them in writing. This includes any loans to or from directors or related parties. Ensure your intellectual property (e.g., trademarks, brand names) is legally owned by the company being sold, not by a related party or founder.