Setting up a trust structure in Malta is, for the most part, a straightforward and relatively painless procedure. The law governing their creation is the Trust and Trustees Act (Chapter 331 of the Laws of Malta) which, since its implementation has been under constant review and scrutiny by both the legislator and the regulator indicating that trust law development in Malta is far from stagnant. The most recent amendments to the TTA were implemented in 2014 after a collaborated effort between the Maltese Regulator (the Malta Financial Services Authority), the Institute of Financial Services Practitioners (“IFSP”) and other trust law experts.
One of the most recent additions is the introduction of article 43B that caters for the setup of Private Trust Companies (PTCs) or rather, family trusts. These structures have proven to be an effective and popular means of holding property in trust for families in other jurisdictions. Such companies benefit from lessened regulatory formalities, which is an attractive quality for estate planners worldwide. The nature of the trustee in this respect is rather different to that of a qualified trustee in a normal trust setup. Here, the trustee does not act habitually or for the public, but privately. In fact, as the legal provision states, the Trustee may only act on behalf of a maximum of five settlors at a time.
What is particularly interesting in these cases is that Authorisation from the Malta Financial Services Authority is not required as it is in other Trust structures which is seen to be another redeemable quality of PTCs. Having said that, registration is still necessary and the Regulator still has certain supervisory obligations in this regard, albeit less onerous ones. In fact, Article 52 of the TTA allows for the MFSA to issue regulatory rules (hereinafter referred to as the PTC Rules) in their respect. The PTC Rules are binding on trustees and were officially implemented in April of 2016.
The PTC operates through a Board of Directors consisting of at least three that may be a mixture of both qualified individuals and family members related to the settlor by consanguinity, adoption or affinity in the direct line up to any degree or in the collateral line up to the fifth degree inclusively.
The PTC Rules emphasise that one of the three directors must necessarily have the relevant experience in trust administration. It is the intention of the PTC to allow settlors to maintain a level of control of their assets as they are able to appoint themselves to the board of directors so long as they are not the only beneficiaries to the trust. Alternatively, they may appoint a member of their family. In doing so, settlors are able to maintain a say in what happens to their estate, yet achieve peace of mind that there is also an experienced individual on board, who will make informed decisions in the best interest of the trust. In this way, discretionary balance is achieved.
Benefits of setting up a Private Trust Company
Some benefits of creating a PTC include:
- an added degree of control it provides (particularly where the settlor is from a jurisdiction unacquainted with such a trust concept)
- The PTC seeks to eliminate the difficulties found by most settlors to comprehend the notion of surrendering control of their own assets to people they do not know, let alone trust in a jurisdiction they are not familiar with.
The Trustee must be a Maltese registered limited liability company set up in accordance with the Companies Act with its M&A limiting it to act as a Trustee for specific settlors only not amounting to more than 5 in one go and to providing specific administrative services. The directors cannot be corporate directors, but must sit on the board as individuals and must satisfy the Regulator’s fit and proper test following the submission of their Personal Questionnaires. One of the managing directors must assume the role of Money Laundering Reporting Officer (“MLRO”) in terms of the Prevention of Money Laundering and Funding of Terrorism Regulations (S.L. 373.01, Laws of Malta) and the FIAU’s Implementing Procedures and must satisfy all obligations in this regard. This will ascertain the director’s integrity, competence and financial standing. A formal application is filed with the MFSA which is subsequently kept in the Register of Trustees for Family Offices and given public access. The Trustee Company must ensure that it maintains adequate insurance cover proportionate to the nature and size of the activities throughout the entire duration of the Trust setup. The PTC Rules go on to define the role, obligations and duties pertaining to directors of the PTC. The factors that may lead to a suspension or cancellation of registration with the MFSA as well as the reporting obligations owed to the Regulator.