On the 5th August 2022, the Malta Financial Services Authority (MFSA) promulgated the Corporate Governance Code (the ‘Code’) which shall widely apply to all MFSA authorised entities in order to ensure the transparent, equitable, efficient and effective operation thereof.
In the course of trade, the said entities are expected to act in their stakeholders’ best interests and to continue safeguarding the integrity and reputation of Malta’ financial services sector.
In light of the Code’s wide application and scope, the principle of proportionality is at the cornerstone thereof, and the MFSA authorised entities being subject thereto are also expected to operate themselves in a manner that is commensurate with their nature, size and complexity, and on a ‘base-effort basis’. It is crucial to note that this Code is without prejudice to any other applicable statutory requirements.
The four (4) salient principles emerging from the Code are listed and summarized hereunder;
1. The Effective Board
The Board of Directors (the ‘Board’) is vested with the overall powers pertaining to good corporate governance, and should thus be an entity’s first port of call in executing the key duties emerging therefrom, notably risk management, policy-making and compliance (as detailed hereinafter).
2. Internal Controls
The Board should ensure that appropriate internal control mechanisms are up and running to identify, understand, mitigate, and where necessary, disclose any risks.
3. Stakeholders Engagement
The Board should serve and enhance the legitimate interests of the entity’s stakeholders, and in doing so, should engage and cooperate with the same by virtue of general meetings.
4. Corporate Culture, CSR and ESG.
The Board should cultivate a robust corporate culture, whilst simultaneously striving to embrace Environmental, Social and Governance (ESG) standards and Corporate Social Responsibility (CSR) principles in the entity’s strategy, thereby leading to an enhanced focus on sustainable finance activities, and long-term value creation for all stakeholders.
For more information on the Code, one may refer to the MFSA’s notice.
Should you have any questions in understanding and in ensuring compliance with the Code and any other complementing legislative frameworks regulating corporate governance, please do not hesitate to contact us.