between the State and Public Undertakings Regulations, 2005

L.N. 45 of 2005

FINANCIAL ADMINISTRATION AND AUDIT ACT

(CAP. 174)

Transparency of Financial Relations

between the State and Public Undertakings Regulations, 2005

IN exercise of the powers conferred by article 4 of the Financial

Administration and Audit Act, the Prime Minister and Minister of

Finance has made the following regulations>-

The title of these regulations is the Transparency of Financial Title.

Relations between the State and Public Undertakings Regulations, 2005.

In these regulations, unless the context otherwise requires>

Interpretation.

“the Commission” means the Commission of the European

Union as established in the Treaty as subsequently amended<

“different activities” means, on the one hand, all products or

services in respect of which a special or exclusive right is granted

to an undertaking or all services of general economic interest with

which an undertaking is entrusted and, on the other hand, each

other separate product or service in respect of which the undertaking

is active<

“the Directive” means Commission Directive 80#723#EEC of

25 June 1980 on the transparency of financial relations between

Member States and public undertakings as well as on financial

transparency within certain undertakings as amended by Directive

85#413#EEC of 24 July, 1985, Directive 93#84#EEC of 30

September, 1993 and Directive 2000#52#EEC of 26 July, 2000<

“dominant influence” means -

(a) the holding of the major part of the undertaking’s

subscribed capital< or

(b) control over the majority of the votes attaching to

shares issued by the undertaking< or

(c) the capacity to appoint more than half of the

members of the undertaking’s administrative, managerial, or

supervisory body<

“exclusive right” means the right that is granted by the

Government of Malta to one undertaking through any legislative,

regulatory, or administrative instrument, reserving it the right to

provide a service or undertake an activity<

“Member States” means a member state of the European

Union<

“public undertakings” means any undertaking or entity over

which the Government of Malta may exercise directly or indirectly

a dominant influence by virtue of its ownership in it, financial

participation therein, or rules which govern it<

“public undertakings in the manufacturing sector’ means all

undertakings whose principal area of activity, defined as being at

least 50% of the total annual turnover, is in manufacturing. These

undertakings are those whose operations fall to be included in

Section D - Manufacturing (being subsection DA up to and

including subsection DN) of the NACE (Rev 1) classification<

“special right” means the right that is granted by the

Government of Malta to a limited number of undertakings, through

any legislative, regulatory, or administrative instrument, which>

(a) limits to two or more the number of such

undertakings, authorised to provide a service or undertake an

activity, otherwise than according to objective, proportional

and non-discriminatory criteria, or

(b) designates, otherwise than according to such

criteria, several competing undertakings, as being authorised

to provide a service or undertake an activity, or

(c) confers on any undertaking or undertakings,

otherwise than according to such criteria, any legal or

regulatory advantages which substantially affect the ability

of any other undertaking to provide the same service or to

operate the same activity under substantially equivalent

conditions<

“Treaty” has the same meaning as in Article 2 of the European

Union Act.

(1) Any financial relations between the Government of Malta

and public undertakings shall be transparent as provided in the Directive.

(2) In such financial relations, therefore, the following shall

emerge clearly>

(a) public funds made available by the Government of Malta

to the public undertakings concerned<

(b) public funds made available by the Government of Malta

through the intermediary of public undertakings or financial

institutions<

(c)

the use to which these public funds are actually put.

(3) The transparency referred to in this regulation shall apply

in particular to the following aspects of financial relations between the

Government of Malta and public undertakings>

(a)

the setting-off of operating losses<

(b) the provision of capital<

(c)

non-refundable grants, or loans on privileged terms<

(d) the granting of financial advantages by forgoing profits

or the recovery of sums due<

(e) compensation for financial burdens imposed by the

Government of Malta.

(f)

the forgoing of a normal return on public funds used.

The transparency requirements referred to in regulation 3 of Public

undertakings to

these regulations shall not apply to financial relations between the which

Government of Malta and>

transparency

requirements do

not apply.

(a) public undertakings, as regards services the supply of

which is not liable to affect trade between Member States to an

appreciable extent<

(b) the Central Bank of Malta<

(c) public credit institutions, as regards deposits of public

funds placed with them by the Government of Malta on normal

commercial terms<

(d) public undertakings whose total annual net turnover over

the period of the two financial years preceding that in which the

funds referred to in regulation 3 of these regulations are made

available or used has been less than Euro 40 million except for

public credit institutions where the corresponding threshold shall

be a balance sheet total of Euro 800 million.

(1) A public undertaking that enjoys a special or exclusive

right granted by the Government of Malta pursuant to Article 86(1) of

the Treaty, or that is entrusted with the operation of a service of general

economic interest pursuant to Article 86(2) of the Treaty, and receives

State aid in any form whatsoever, including any grant, support or

compensation in relation to such service and which carries on other

activities, is required to maintain separate accounts that reflect clearly

its financial and organisational structure in>

(a) the costs and revenues associated with different

activities<

(b) the full details of the methods by which costs and

revenues are assigned or allocated to different activities.

(2) For the purpose of sub-regulation (1) of this regulation,

an undertaking that is required to maintain separate accounts shall take

the following measures>

(a) the internal accounts corresponding to different activities

shall be kept separate<

(b) all costs and revenues shall be correctly assigned or

allocated on the basis of consistently applied and objectively

justifiable cost accounting principles<

(c) the cost accounting principles according to which

separate accounts are maintained shall be clearly established>

Provided that the requirements in this regulation shall not

apply to>

(i) undertakings, as regards services the supply of

which is not liable to affect trade between Member States to

an appreciable extent<

(ii) undertakings whose total annual net turnover over

the period of the two financial years preceding any given year

in which they enjoy a special or exclusive right granted by

the Government of Malta pursuant to Article 86(1) of the

Treaty, or in which they are entrusted with the operation of a

service of general economic interest pursuant to Article 86(2)

of the Treaty is less than Euro 40 million, except for public

credit institutions where the corresponding threshold shall be

a balance sheet total of Euro 800million<

(iii) undertakings which have been entrusted with the

operation of services of general economic interest pursuant

to Article 86(2) of the Treaty if the State aid in any form

whatsoever, including any grant, support or compensation they

receive was fixed for an appropriate period following an open,

transparent and non-discriminatory procedure.

(1) Public undertakings shall ensure that information Public

undertakings

concerning the financial relations referred to in regulation 3 of these required to provide

regulations shall be kept at the disposal of the Government of Malta for information.

five years from the end of the financial year in which public funds were

made available to them. However, where the same funds are used during

a later financial year, the five-year limit shall run from the end of that

financial year.

(2) Public undertakings shall ensure that information

concerning the financial and organisational structure referred to in

regulation 5 of these regulations shall be kept at the disposal of the

Government of Malta for five years from the end of the financial year

to which the information refers.

(3) Wherever the Government of Malta considers it

necessary so to request, such public undertakings shall supply to the

Ministry responsible for finance the information referred to in sub-

regulations (1) and (2) of this regulation, together with any necessary

background information, notably the objectives pursued.

Provided, that the financial information as regards public

undertakings operating in the manufacturing sector shall be supplied

by the public undertakings to the Ministry responsible for finance on an

annual basis>

Provided further that such information shall be provided by

all public undertakings whose turnover for the most recent financial

year was more than Euro 250 million.

(4) The information given in pursuance of this regulation

shall be the following>

(a) the annual accounts and annual report in accordance with

Council Directive 76#660#EEC. These annual accounts and annual

report shall include the balance sheet and profit and loss account,

explanatory notes, together with accounting policies, statements

by directors, and segmental and activity reports. Moreover, notice

of shareholders’ meetings and any other pertinent information shall

be provided< and

(b) the following details, in so far as not disclosed in the

annual accounts and annual report of the public undertaking, shall

also be provided>

(i) the provision of any share capital or quasi-capital

funds similar in nature to equity, specifying the terms of the

relative provision (whether ordinary, preference, deferred, or

convertible shares, and interest rates, the dividend or

conversion rights attaching thereto)<

(ii) non-refundable grants, or grants which are only

refundable in certain circumstances<

(iii) the award to the undertaking of any loans,

including overdrafts and advances on capital injections, with

a specification of interest rates and the terms of the loan and

its security, if any, given to the lender by the undertaking

receiving the loan<

(iv) guarantees given to the undertaking by the

Government of Malta in respect of loan finance (specifying

terms and any charges paid by the undertaking for these

guarantees)<

(v) dividends paid out and profits retained<

(vi) Any other form of State intervention, in particular,

the forgoing of sums due to the Government of Malta by a

public undertaking, including inter alia the repayment of loans,

grants, payment of corporate or social taxes or any similar

charges.

The information required in regulation 6 of these regulations

shall be provided within ten working days from the date of the

publication of the annual report of the public undertaking concerned.

In any case, specifically for undertakings that do not publish an annual

report, the required information shall be submitted not later than six

months following the end of such undertaking’s financial year.

Mitbug[ fl-Istamperija tal-Gvern — Printed at the Government Printing Press