Collective Investment Schemes

Being a full member of the European Union and Euro Zone, Malta offers a flexible and practical approach to the setting up of a collective investment scheme. Furthermore, Malta offers a robust and comprehensive legal framework to establish various collective investment schemes, such as:

  • retail Funds (including Undertakings for the Collective Investment in Transferable Securities (“UCITS”) and retail Alternative Investment Funds (“AIFs”)); and
  • non-retail Funds (including AIFs and Professional Investor Funds (PIFs) which, given that they are not available to the general public, are allowed more flexibility and are subject to a relatively “lighter” regulatory regime.

A Maltese Collective Investment Scheme must be established as a scheme or arrangement which has, as its object, the collective investment of capital acquired by means of an offer of units for subscription, sale or exchange and which, additionally, also possesses any one of the following characteristics:

  • the scheme or arrangement operates according to the principle of risk spreading, with the exception of AIFs marketed to professional investors and PIFs; and either:
  • the contributions of the participants and the profits or income out of which payments are to be made to them are pooled; or
  • at the request of the holders, units are repurchased or redeemed out of the assets of the scheme or arrangement, continuously or in blocks at short intervals; or
  • units are, or have been, or will be issued continuously or in blocks at short intervals.

Taxation

Malta offers a highly efficient tax regime, which adopts double taxation rules (including double taxation treaties with all EU Member States and the United States of America) on a taxed company profits distributed as dividends. Malta companies are taxed at a rate of 35%, however, a full imputation system applies to the taxation of dividends whereby the tax paid by the company is imputed as a credit to the shareholder receiving the dividend to as low as 5%.

Furthermore, as a general rule, Malta funds are exempt from Maltese income and capital gains tax as long as such funds are classified as non-prescribed Funds.

UCITS

Structure

A UCITS can be structured as an investment company with variable share capital (SICAV), a contractual fund, unit trust or as a limited partnership.

The most popular vehicle is the SICAV, usually established as an open-ended umbrella fund, therefore having a UCITS comprising of two or more sub-funds, each with different features.

Investment company

UCITS may be set up as limited liability companies and may be established as open-ended SICAVs, which may be formed as a public or private company with variable share capital. However, it must be noted that a UCITS set up as a private company is restricted to the extent to which it can transfer shares and is prohibited from issuing any invitation to the public to subscribe to any of the shares or debentures of the company whilst a public company may offer its shares or debentures to the public.

The most popular vehicle is the SICAV, usually established as an open-ended umbrella fund, therefore having a UCITS comprising of two or more sub-funds, each with different features.

Contractual funds

Contractual funds are established by means of a deed of constitution entered into for such purpose by the UCITS Management Company and the depositary of the UCITS and are not deemed to be a separate legal entity since they are established through a contractual obligation and can be licensed as a multi-fund or multi-class UCITS. A contractual fund may set up one or more special purpose vehicle, which would be a company and through which the UCITS may gain access to double taxation treaties.

The most popular vehicle is the SICAV, usually established as an open-ended umbrella fund, therefore having a UCITS comprising of two or more sub-funds, each with different features.

Unit trusts

UCITS can also be constituted by a trust deed between a management company and a trustee. Trustees operating in Malta must be approved by the MFSA whilst trusts established in foreign jurisdictions may be recognized in Malta and it is therefore possible to set up an investment fund as a foreign law trust.

ular vehicle is the SICAV, usually established as an open-ended umbrella fund, therefore having a UCITS comprising of two or more sub-funds, each with different features.

Limited partnerships

Limited Partnerships benefit from a similar legislative framework to the one offered to SICAVs and may be constituted as multi-class partnerships or as multi-fund partnerships and the capital of the partnership can be divided into shares.

The most popular vehicle is the SICAV, usually established as an open-ended umbrella fund, therefore having a UCITS comprising of two or more sub-funds, each with different features.

Corporate Requirements

The UCITS’ head office and registered office are to be both established in Malta and there must be a minimum of two directors, at least one must be independent from the manager and the custodian and if the Fund is self-managed, it shall have as a minimum of one Maltese resident director.

Service Providers

Investment company

UCITS may be set up as limited liability companies and may be established as open-ended SICAVs, which may be formed as a public or private company with variable share capital. However, it must be noted that a UCITS set up as a private company is restricted to the extent to which it can transfer shares and is prohibited from issuing any invitation to the public to subscribe to any of the shares or debentures of the company whilst a public company may offer its shares or debentures to the public.

The most popular vehicle is the SICAV, usually established as an open-ended umbrella fund, therefore having a UCITS comprising of two or more sub-funds, each with different features.

Contractual funds

Contractual funds are established by means of a deed of constitution entered into for such purpose by the UCITS Management Company and the depositary of the UCITS and are not deemed to be a separate legal entity since they are established through a contractual obligation and can be licensed as a multi-fund or multi-class UCITS. A contractual fund may set up one or more special purpose vehicle, which would be a company and through which the UCITS may gain access to double taxation treaties.

The most popular vehicle is the SICAV, usually established as an open-ended umbrella fund, therefore having a UCITS comprising of two or more sub-funds, each with different features.

Unit trusts

UCITS can also be constituted by a trust deed between a management company and a trustee. Trustees operating in Malta must be approved by the MFSA whilst trusts established in foreign jurisdictions may be recognized in Malta and it is therefore possible to set up an investment fund as a foreign law trust.

ular vehicle is the SICAV, usually established as an open-ended umbrella fund, therefore having a UCITS comprising of two or more sub-funds, each with different features.

Limited partnerships

Limited Partnerships benefit from a similar legislative framework to the one offered to SICAVs and may be constituted as multi-class partnerships or as multi-fund partnerships and the capital of the partnership can be divided into shares.

The most popular vehicle is the SICAV, usually established as an open-ended umbrella fund, therefore having a UCITS comprising of two or more sub-funds, each with different features.

Capital requirements

Third-party managed: EUR 125,000 (if formed as a company)

Self-managed: EUR 300,000

Composition of a Fund’s Board of Directors

The Board of Directors of an AIF, Notified AIF and PIF must be composed of three or more Directors being independent from the Manager or the management function (in the case of a self-managed Fund), the Administrator and the Custodian, and having experience in the financial services industry.

Management of A Fund

A UCITS, AIF and PIF may be self-managed or managed by an external fund manager, while a Notified AIF must always be managed by an AIFM as previously discussed.

Should an external manager not be appointed in respect of a given fund, responsibility for the portfolio and risk management of the Fund’s assets would be vested in its Board of Directors.

The Board of Directors of a self-managed Fund would typically appoint an Investment Committee – which must be composed of at least three persons who satisfy “fit and proper” tests and an additional competence assessment by the MFSA.

Other Functionaries

Apart from having a Board of Directors and an Investment Committee as outlined above, the Fund would be required to set up a proper infrastructure in Malta in order to maintain and operate its licensed activities. The nature and extent of that infrastructure would depend upon the operations proposed to be conducted, but would essentially include:

  • (in the case of a self-managed AIF and UCITS) the constitution of a dedicated and independent risk management function, which would involve the appointment of a risk officer who would be responsible for the implementation and ongoing maintenance of the risk management function which the self-managed AIF and UCITS would be required to constitute;
  • (in the case of a self-managed AIF) the constitution of a valuation function for the AIF so that a proper and independent valuation of the assets of that Fund will be performed in accordance with the AIFMD – such function may be carried out either by an independent external valuer or by the AIF itself but only if the valuation task is functionally independent from the portfolio management function within the AIF;
  • compliance officer, being resident in Malta, who would not be involved in any management or other executive capacity in the Fund, and who would be responsible for monitoring and ensuring the Fund’s adherence to the licence conditions which would be imposed by the MFSA upon the Fund; and
  • a money laundering reporting officer, being one of the Malta resident directors, who would be responsible for monitoring and ensuring the Fund’s adherence to the anti-money laundering and funding of terrorism obligations imposed under Maltese Law. This function may also be outsourced to the Fund Administrator.

In addition, any proposed shareholders/partners, ultimate beneficial owners, directors and officers must be suitable, fit and proper persons.

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For more information, please contact us on info@atomfs.com.mt or +356 2247 9000.