The Maltese bond market has grown steadily over the past two decades, becoming a key source of financing for local businesses and a popular investment channel for Maltese investors. Characterised by a strong retail investor base, the market is largely composed of corporate bonds issued by companies seeking to diversify their funding beyond traditional bank facilities. These bonds are typically listed on the Official List of the Malta Stock Exchange, offering investors accessibility, transparency, and regular trading opportunities.
In a retail-driven market such as Malta’s, bondholder protection and market integrity depend not only on the regulatory framework itself, but also on those entrusted with giving effect to it, namely, the board of directors.
In terms of Appendix 5.1 of the Maltese Capital Markets Rules, the Code of Principles of Good Corporate Governance, every listed Company should be headed by an effective board, which should lead and control the company. The board should be composed of executive and non-executive directors, including independent non-executives. Non-executive directors sitting on the board are pertinent to ensure a balance such that no individual or small group of individuals can dominate the board’s decision making.
The board of directors of an issuer with listed bonds, comprising of executive and non-executive members, holds responsibility not solely towards the company and its shareholders, but also towards the bondholders who have invested, or are considering investing, in the company.
This responsibility to safeguard bondholder interests begins at inception, upon the publication of the prospectus and the subsequent issuance of the bonds. The prospectus is designed to provide the prospective investors with sufficient information to allow the reader to assess whether to invest. Once a potential investor becomes a bondholder, however, the issuer’s disclosure obligations evolve from a static, pre-issuance duty into a dynamic, ongoing responsibility.
A company with listed bonds must remain forthcoming with information throughout the lifetime of the bond. In fact, the Capital Markets Rules provide a non-exhaustive list of matters that must be disclosed by way of a company announcement. Ultimately, it is the responsibility of the board of directors to assess and determine what information requires timely communication to the market. To this end, the Malta Financial Services Authority (MFSA) encourages issuers to provide more frequent and comprehensive updates to the market aligned with the purpose of company announcements[1]. This places directors firmly at the centre of both market integrity and bondholder protection.
Directors of issuers with listed bonds must, therefore, possess a strong understanding of capital markets regulation and of the heightened obligations that accompany a listing. A well-informed board reduces the risk of delaying critical information or under-disclosing material events, ensuring bondholders have access to the information necessary to make informed decisions regarding their investment. This applies not only in times of financial strain, but equally during periods of positive performance, which can enhance market liquidity and boost investor confidence in the Maltese capital markets.
Although the Capital Markets Rules impose mandatory disclosure obligations, through company announcements, it is often the information that falls outside these mandatory requirements where directors must exercise discretion. Their judgement in deciding what to disclose underscores the importance of appointing competent, well-informed directors who can ensure transparency and, in turn, protect investors.
The directors’ role in bondholder protection extends beyond disclosure to encompass the overall oversight of the company. At the heart of bondholder protection lies the duty to ensure that the bondholders receive their interest payments when due and full repayment upon maturity. Consequently, a fundamental responsibility of the board of directors is to ensure that the company – and, where applicable, the wider group of which it forms part – operates in a manner which does not prejudice its ability to meet bond payment obligations.
The board must strike a careful balance between, on the one hand, commercial ambitions and shareholder interests and, on the other hand, safeguarding the company’s capacity to meet its payment obligations to bondholders. To achieve this, directors must possess the competence and financial acumen to continuously scrutinise and monitor the financial position of the company. Qualified and knowledgeable directors are essential in maintaining informed oversight of the issuer’s financial health, ensuring its ongoing ability to meet interest payments and, ultimately, redeem the principal on maturity.
This responsibility becomes particularly significant when early signs of financial difficulty emerge. The ability of directors to recognise such situations and act promptly can prove decisive in preventing financial stress from escalating into default. Engaged and financially literate directors are better equipped to guide the company effectively and ensure that all actions taken consider bondholder interests. This further emphasises the importance of quality and competence in board appointments for companies with listed bonds.
Given the central role directors play in safeguarding investor interests, it is necessary that the regulatory framework places emphasis on the suitability and competence of those appointed to serve on the boards of issuers with listed bonds. While the selection of directors remains the prerogative of the company and its shareholders, existing fit-and-proper requirements and corporate governance standards already serve to promote sound appointments. Continued attention by the regulator to the effectiveness of these mechanisms can support stronger governance outcomes. Such an approach helps reinforce investor confidence by ensuring that boards are appropriately equipped to discharge their responsibilities and to oversee the issuer’s financial health in a manner consistent with the expectations of Malta’s capital markets. Under the Maltese Companies Act (Chapter 386 of the laws of Malta), directors are bound to act honestly and in good faith in the best interests of the company, exercising the degree of care, diligence and skill that would be exercised by a reasonably diligent person in their position. These statutory duties are complemented by the fiduciary obligations found in the Civil Code (Chapter 16 of the laws of Malta), which require any person entrusted with the management of another’s property to act with loyalty, prudence, and in the utmost good faith. In the corporate context, this reinforces the principle that directors must avoid conflicts of interest, safeguard the company’s assets, and conduct its affairs with the integrity expected of fiduciaries.
For issuers with listed bonds, however, this responsibility necessarily extends beyond the traditional focus on shareholders. While the company remains the primary beneficiary of the directors’ duties, the presence of publicly held debt instruments means that decisions affecting the company’s financial position, risk profile, governance structures, and transparency also affect bondholders. The Capital Markets Rules explicitly frame this broader responsibility by requiring boards to ensure high standards of corporate governance, effective internal controls, and timely, comprehensive disclosure, each of which directly safeguards investor interests.
Also relevant to the discussion at hand is the role of the audit committee which is required to be set up by listed entities, which committee must be composed entirely of non-executive directors, the majority of whom are to be independent of the issuer entity. The interplay between the board of directors and the audit committee is central to maintaining strong governance and safeguarding bondholder interests. While the board retains ultimate responsibility for oversight, the audit committee acts as a specialised sub-structure that strengthens financial reporting integrity, internal control frameworks, and risk management processes. An effective audit committee provides the board with independent scrutiny of the issuer’s financial position, ensuring that accounting practices, related-party transactions, and internal audit findings are rigorously reviewed. This collaborative relationship is intended to enhance the board’s ability to identify emerging risks early, assess the company’s capacity to meet bond obligations, and ensure timely and accurate disclosures to the market. In the context of Malta’s bond-driven capital markets, a well-functioning audit committee, therefore, serves not only as an extension of the board’s oversight duties, but as a critical mechanism through which investor protection and market confidence are upheld. A governance structure led by a board that is informed, engaged and financially astute not only strengthens corporate decision-making but also reinforces confidence in Malta’s capital markets. Ultimately directors who fully appreciate their statutory and fiduciary duties and their dual responsibility serve as the first and most effective line of defence for investor protection and market integrity.
[1] Malta Financial Services Authority, Dear CEO Letter: Thematic Review on the Company Announcements of Public Listed Companies (July 2025) https://www.mfsa.mt/wp-content/uploads/2025/07/Dear-CEO-Letter-Thematic-Review-on-the-Company-Announcements-of-Public-Listed-Companies.pdf
By: Emma Blake
