Trusts and Foundations
In 2005, Trust Law in Malta was overhauled by the effect of the Malta Trust and Trustee Act 2004 which has come into force. The principal reform was to extend principals of Trust Law applicable around the world to residents in Malta allowing Maltese residents and firms to use trusts in Malta, whilst also furthering Malta’s international obligations on non-discrimination, transparency and the prevention of money laundering
This legislation, which creates a more streamlined and simplified trust regime, makes Malta much more attractive to both international and domestic clients, by offering greater flexibility and certainty.
The new Act eliminates the nominee company regime, and introduces a licensing regime for professional trustees. International Trust Limited is authorised by the Malta Financial Services Authority ("MFSA") to act as Trustee and given the qualifications of all its Directors and Executives we are able to provide a comprehensive professional service in the formation and administration of trusts on behalf our clients.
Under the 2004 Act, a registered trust must have a Malta Trustee as one of its trustees, which files an annual declaration of conformity with the law; no accounts or tax returns need be filed
Some of the main features of the Trust law in Malta are as follows:
- The settlor may be a beneficiary under the trust
- Powers of the trustee are wide and flexible
- The office of Protector is allowed for
- Forced heirship provisions are excluded
Malta trust law establishes the confidentiality of trust documents and dealings and the actions of the trustee. The Professional Secrecy Act 1994 imposes strict confidentiality rules on all professionals, officials and other individuals who receive privileged information in the course of their duties
In 2007 introduced an addition to the Maltese Civil Code was introduced whereby the law governing foundations, formerly marked by its absence in the legislative framework despite being recognized in Maltese Court judgements dating back to the early nineteenth century, was elaborated and laid down in such a manner as to clarify the legal position governing these institutions. Since 2007 Malta boasts of sophisticated legislation governing foundations in the same manner as it has laid down a detailed framework regulating trusts way back in 2004
Both trusts and foundations are regulated in a similar manner in many respects, but they are not one and the same. Each plays a particular role in the Maltese legal system, and they offer innumerable advantages to clients/ investors seeking to find the best way to provide for their private needs
In terms of Maltese law, foundations can be of two types, namely, 'private foundations' and 'purpose foundations'.
A foundation is defined as an organization which consists of a patrimony that is constituted by the founder with the assets being destined to fulfil a purpose that can be either for the benefit of a named person or class of persons (in the case of private foundations) or for the fulfilment of a specified purpose (charitable, philanthropic, or other social purpose or a non-profit scope).
The scope of the foundation cannot, however, be of a commercial nature, that is, the foundation is not an institution that can trade or carry out commercial activities. The Maltese foundation thus varies from the commercial foundation as it exists under other jurisdictions but there are exceptions so that that it is possible for a foundation to conduct any of the following:
i. The foundation may be the passive owner of commercial property or a shareholding in a profit making enterprise, a franchise, a trademark or an income-producing asset, as well as a ship;
ii. The foundation may operate as a collective investment vehicle and issue units to investors therein for the passive holding of a common pool of assets;
iii. The foundation may be employed as a vehicle for securitization purposes.
Maltese law requires the foundation to be established in writing, by public deed in the case of inter vivos setting up of foundations, or else by a will published according to Maltese law requirements whenever the founder intends the foundation to operate causa mortis.
Legislation establishes the requirements that are to be included in the deed of foundation.
As a juridical tool, the foundation differs from the trust concept insofar as, once the legal requirements for its valid constitution are satisfied and it is registered according to law with the Registrar of Legal Persons, it is imbued with separate juridical personality, benefitting also from the limited liability concept which is often associated with corporate legislation.
The founder who establishes the foundation, must appoint an administrator/s empowered with the management and safeguarding of trust property and compliance with the statute of the organization. In terms of the Maltese legislation governing foundations, the founder may opt to establish a supervisory council which is empowered to supervise the actions of administrators, thereby overseeing the conduct of administrators in the management of foundation patrimony.