Fund Formation and Management

Zeta's aim is to ensure that our clients achieve their objectives. We achieve this with the vast experience and hands-on approach that our advisors can offer across the Zeta platform. Our delivery is practical and efficient, ensuring that it is tailored to our clients' requirements.

At Zeta, our specialist advisors can provide you with sound practical advice on funds, our managers, service providers as well as our investors. With our extensive experience advising on a wide variety of funds and related investment vehicles and products, we are well positioned to provide guidance within the sector.

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Malta investment fund services

The Investment Services Act (1994), Chapter 370 of the Laws of Malta, establishes the principal regulatory framework governing investment services and investment funds. As such, any fund operating in or from Malta is required to procure an appropriate licence from the Malta Financial Services Authority (MFSA).

The current MFSA Investment Services rules set out a regulatory framework governing the following principal types of investment funds:

  • Retail funds (including Undertakings for Collective Investment in Transferable Securities [UCITS] and non-UCITS schemes);
  • Non-retail Funds, including Alternative Investment Funds (AIFs) and Professional Investor Funds (PIFs).

A Maltese fund 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 the following characteristics:

  • The scheme or arrangement operates according to the principle of risk spreading, 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, have, or will be issued continuously or in blocks at short intervals.

The risk spreading requirement does not apply in respect of AIFs marketed to professional investors and in respect of PIFs targeting Qualifying Investors and Extraordinary Investors. Risk spreading remains mandatory in respect of retail funds, AIFs marketed to retail investors, and PIFs targeting experienced investors.

Malta funds structure

Under Maltese law a fund may be constituted in the form of:

  • An investment company with variable share capital (Société d'Investissement à Capital Variable, or “SICAV”);
  • A limited partnership divided into shares;
  • A unit trust;
  • A common contractual fund.

The overwhelming majority of funds established in Malta to date have been licensed as PIFs and typically in the form of open-ended public or private limited liability investment companies with variable share capital.

As indicated above, a fund may be constituted as a standalone fund or as an “umbrella” type structure, whereby the assets and liabilities of each sub-fund are treated as a patrimony separate from the assets and liabilities of each other sub-fund of the fund itself, thereby segregating risks and rewards.

A SICAV can be formed as a private or a public company. The number of shareholders in a private company is limited to 50 such that promoters typically establish SICAVs in the form of public limited liability companies at the outset. A SICAV established as a public limited liability company must include the designations “SICAV plc.” as part of its registered company name.

Retail funds

Retail Funds are characterised as such insofar as such funds are promoted to retail investors. There are two main categories of retail funds in Malta, namely Undertakings for Collective Investment in Transferable Securities (“UCITS”) and retail non-UCITS schemes.

UCITS schemes are characterised as such in light of Directive 2009/65/EC on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities, or the "UCITS Directive".

Whilst retail non-UCITS schemes are not regulated by the UCITS Directive, insofar as such schemes are promoted to retail investors, retail non-UCITS schemes are nonetheless subject to a stringent level of regulation which is relatively similar to that which is applicable to UCITS schemes.

The units or shares of a Maltese UCITS scheme may be marketed to retail investors in any another EU or EEA member state by virtue of passporting entitlements arising pursuant to the UCITS Directive. These passporting entitlements do not extend to Maltese retail non-UCITS schemes so that they are not freely marketable across the EU/EEA.

Professional investor funds

PIFs are divided into three broad categories largely depending on participating investors’ wealth and experience. As such, PIFs may be promoted to:

  • Experienced Investors – subject to a minimum investment threshold of €10,000 or the equivalent in any other currency;
  • Qualifying Investors – subject to a minimum investment threshold of €75,000 or the equivalent in any other currency; or
  • Extraordinary Investors – subject to a minimum investment threshold of €750,000 or the equivalent in any other currency.

What makes Malta an attractive location to set up a PIF ?

Malta strives to balance the interests of operators and consumers by providing a pro-business regulatory environment but which is secure and robust and intolerant of abusive practices.

In addition, no tax is payable in Malta on income or gains, other than income or gains from immovable property situated in Malta, derived by an investment fund (thus including PIFs) provided that more than 15%of the fund’s assets are situated outside Malta.

In turn, any Malta tax would not be levied or withheld on dividends distributed by an investment fund in favour of non-resident members/unit holders.

A Malta tax would not be chargeable on gains realised by a non-resident on a disposal of any units in an investment fund, albeit provided that the non-resident is the beneficial owner of the relevant gains and is not owned and controlled by, directly or indirectly, nor acts on behalf of an individual or individuals who are ordinarily resident and domiciled in Malta.

An investment fund established in Malta should also be entitled to access Malta’s extensive tax treaty network.

Alternative investment funds

Alternative Investment Funds (“AIF”) are essentially funds characterised as such in light of the EC Alternative Investment Fund Managers Directive (‘AIFMD’). Accordingly, and in principle, any fund targeting professional investors and which is managed by an Alternative Investment Fund Manager (in terms of the AIFMD) or which, in the case of a self-managed fund, holds more than €100 million assets under management or which opts-in to benefit from EU/EEA passporting entitlements, would be characterised and regulated as an AIF.

The units or shares of a Maltese AIF may be marketed to professional investors in any other EU or EEA Member State by virtue of the said passporting entitlements.

Re-domiciliation fund  in Malta

A foreign investment fund may also be re-domiciled and continued to Malta, provided that this foreign fund is incorporated as a body corporate which is similar in nature to a Maltese company, in a jurisdiction which allows the re-domiciliation and continuation of companies to Malta. The licence application process outlined above would typically run concurrently with the re-domiciliation process which would be undertaken by the foreign fund for the purposes of its continuation from its current jurisdiction of the establishment to Malta as a licensed fund.


A Malta licensed fund would not be subject to tax in Malta, provided that more than 15% of the fund’s assets are situated outside of Malta.

In turn:

  • A Malta tax would not be levied or withheld on dividends distributed by a Fund in favour of non-resident members/unit holders; and
  • A Malta tax would not be chargeable on gains realised by a non-resident on a disposal of any units in a Fund[1]  

In addition, Malta has a large and expanding double tax treaty network currently comprising more than 60 treaties in force, including treaties with all EU member states and the United States of America.

[1] Provided that the non-resident is the beneficial owner of the relevant gains and is not owned and controlled by, directly or indirectly, nor acts on behalf of an individual or individuals who are ordinarily resident and domiciled in Malta.

Gibraltar investment fund services

Investment funds in Gibraltar are usually formed under a trust deed either as unit trusts or mutual funds or under the Companies Ordinance as private or public companies. A Public Investment Company (PIC) must have a minimum paid-up capital of GIP 50,000 (at the turn of 2016) and if it is not listed on a recognised exchange its head office must be in Gibraltar.

In 2005 Gibraltar introduced Experienced Investor Funds under the Financial Services (Experienced Investor Funds) Regulations, 2005. These are funds designed for professional, High Net Worth or experienced investors. The 2005 Regulations were replaced with Financial Services (Experienced Investor Funds) Regulations 2012, which came into effect on April 12, 2012.

The new regulations include a revised definition of an administrator, including administrators established within the EEA and from jurisdictions approved by the FSC in conjunction with the Finance Minister. Under the new regulations, funds may be administered outside of Gibraltar, thus allowing funds that would previously not have considered Gibraltar to be domiciled on the island.

Gibraltar funds structure

As from 22 July 2013, all collective investment schemes (not being UCITS) will be classified as Alternative Investment Funds (“AIFs”) for the purposes of the Directive, either as EU AIFs or as Non-EU AIFs.

The Directive focuses on the Managers of funds as opposed to Funds themselves and creates a regulatory and supervisory framework for Fund Managers (AIFMs). AIFMs must submit applications for authorisation under the Directive within one year from 22 July 2013. Once authorised under the Directive, AIFMs will benefit from a Pan-European passport to manage and market AIFs throughout the EU.

If an AIF does not have an external Manager and its legal form permits internal management (i.e. self-management of investments by its Board of Directors), the AIF itself becomes an AIFM for the purpose of the Directive.

The Directive has exceptions for “small” AIFMs and the exceptions also apply to self-managed AIFs. The exceptions apply where AIFMs (or self-managed AIFs) manage investment portfolios of AIFs (directly or indirectly) whose assets under management do not exceed a threshold of €100 million (leveraged) or €500 million (close-ended, unleveraged).

Small AIFMs are subject to a “lighter touch” regime and must register with the Gibraltar Financial Services Commission (“FSC”), provide the FSC with information on the main instruments in which the AIFM is trading, and on the principal exposures and most important concentrations of AIFs that it manages. The information provided must be sufficient to enable the FSC to monitor systemic risk effectively. Small AIFMs can, however, “opt in” to the provisions of the Directive applicable to in-scope AIFMs.

In-scope AIFMs have until 22 July 2014 to bring their operations in line with the Directive and are required to comply with the various obligations set out in the Directive.

Whether or not the intended Experienced Investment Fund (“EIF”) will be in-scope, the Directive, therefore, needs careful consideration from the outset as do other regulatory obligations which may apply and restrict, marketing of the Fund in other jurisdictions, the ability of the Fund to trade in securities, the ability of brokers and other counterparties to extend credit, as a few examples. The regulatory environment worldwide impact on funds generally is changing and evolving. For example, the U.S. Foreign Account Fax Compliance Act which, from 1 January 2014 will require non-U.S. financial institutions to identify and disclose their U.S. members or be subject to a 30% withholding tax on all U.S. sourced income.

Current Gibraltar legislation governing funds in Gibraltar include:

  • The Gibraltar Companies Act;
  • The Financial Services (Collective Investments Schemes) Regulations 2006; and
  •  The Financial Services (Experienced Investor Funds) Regulations 2012.

Gibraltar presents a unique offering to funds and their managers:

  • Established EU jurisdiction for a wide range of investment funds;
  • Well-developed fund regime, including UCITS, EIFs, and private funds;
  • High supervisory standards, supported by an approachable regulatory environment for fund managers;
  • Unique offering for asset managers, combining quality of life with fiscal and legislative stability;
  • Fully AIFMD and MiFID compliant, with passporting rights across the EU;
  • Professional and internationally recognized fund and investment expertise;
  • Specialist jurisdiction for European master-feeder fund solutions.

Key features of UCITS in Gibraltar

UCITS funds are regulated by the FSC and have investment restrictions. The funds must comply with the Financial Services (Collective Investment Schemes) Regulations 2006. As Gibraltar is within the European Union, locally based UCITS funds may passport their services within the European Union on the basis of their UCITS licence, provided they are managed by an authorised UCITS manager. UCITS funds are generally for investment by retail investors.

UCITS funds are desirable when the primary investment is in ‘transferable securities’ listed on a recognised EU or other recognised stock exchange. In this case, a fund in Gibraltar can be licensed in compliance with the European Directives on Undertakings in UCITS. 

Non-UCITS retail funds

Non-UCITS retail funds are licensed by the FSC and can be distributed to retail investors. These funds can be structured as:

  • Umbrella funds;
  • Hedge funds;
  • Feeder funds;
  • Fund of funds ;
  • Mutual funds.

It is important to note that licensing can take between three to six months and involves:

  • The submission of the fund’s formation documents;
  • The Prospectus (offering document) of the fund;
  • An application forms for the fund;
  • The submission of the names of the Directors of the fund; and
  • The submission of the name of the Investment Manager of the fund.

Re-domiciliation fund in Gibraltar

There are many factors that are attracting funds to re-domicile to Gibraltar, these being the same factors that are also attracting newly established funds to the jurisdiction. These factors include the high regulatory standards, fiscally effective legislative framework for funds and managers, accessibility, economic stability, European time zone as well as the high-quality professional services infrastructure. With the entry of AIFMD and the subsequent harmonisation of fund regulation across Europe, AIFs located outside the EU wishing to market to EU-based investors will find it useful to establish a European feeder fund structure in jurisdictions such as Gibraltar. This factor will address the restrictions in place on fund managers marketing non-EU domiciled funds in Europe and provide funds with an EU marketing passport based on AIFMD.

In order for a fund to re-domicile to Gibraltar the following criteria must be met:

  • The entity meets the provisions of the legislation;
  • The fund is established in a form recognised under Gibraltar Law and is approved by the FSC;
  • The fund’s by-laws, as well as the laws and regulations of the home jurisdiction, must also allow for the re-domiciliation to take place.

It must be noted that the re-domiciliation process does in no way operate to create a new legal entity, prejudice or affect the property of the company or affect the continuity of the company.

The 2012 EIF Regulations include provisions within the definition of an ‘Experienced Investor’ to allow for participants in funds that are re-domiciling to Gibraltar to automatically qualify, under definite circumstances, as "Experienced Investors for the purposes of Gibraltar Law".

The Fund Administrator

A foreign Administrator requires approval from its home Regulator, and must be located within the EEA or in a jurisdiction with similar regulatory and legislative standards to those of Gibraltar. The appointed Fund Administrator must receive consent from the FSC and the Minister responsible for Financial Services.

As per Gibraltar’s 2012 EIF legislation, it is not a requirement for a re-domiciled fund to appoint a local fund administrator, however, it may be beneficial for the foreign administrator to appoint a local administrator to act as its agent. The local agent typically handles the co-ordination of filings with Companies House, the FSC and other functions that the foreign administrator may wish to delegate locally.

Gibraltar CIS

A private fund is a Collective Investment Scheme (CIS) that can be offered privately to any identifiable group. It can accept up to 50 participants (investors). There are no restrictions on the type of investor that can subscribe, as long as the investor belongs to an identifiable group. Typically, the participants tend to be families, groups of employees or groups of individuals or friends wishing to run their investments in a fund structure.

Private funds are set up as a company under the Companies Act (2014) but are not regulated or authorised by the FSC. As long as the appointed Directors follow the investment objectives as stated in the offering document of the private fund, there are no other statutory investment restrictions. This allows private schemes to be established cost-effectively and quickly.

  • A standard private fund set up would include:
  • The appointment of at least two Directors to assume responsibility for the fund;
  • A professionally drafted offering document, setting out how the fund operates, the investment strategy and the risks involved;
  • The issuance of two share classes: ordinary shares with voting rights, and preference shares, which participate in the gains/losses of the fund;
  • The fund set up as being open-ended or close-ended.

Honeycomb Fund Services Platform

The Honeycomb Fund Services Platform provides a simplified, faster and cheaper path to setting up a Collective Investment Scheme (“CIS”), or fund, in Malta. Through our relationships with various authorised service providers we have pre-arranged agreements in place through which prospective funds can benefit from:

  • Saving on the time and effort it takes to put these agreements in place; and
  • Lower and more predictable setup and operational costs.

The Honeycomb platform also benefits from the experience of the Zeta Group and a team which brings extraordinary competence and experience in setting up regulated businesses and in supporting operations across a range of business sectors.

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