1. Introduction

The SICAV is Malta's most widely used form of investment vehicle. Established under the Companies Act (the "Act"), the SICAV is a dedicated investment company whose flexibility renders it equally suitable for setting up as an AIF, a UCITS or a PIF.

2. Establishment of a SICAV

In order to validly constitute a SICAV, a memorandum of association must be entered into and subscribed by at least two persons and registered with the Registrar of Companies (the "Registrar") who, on approval of the company's name and on verification of all other legal requirements, will issue a certificate of registration.1 The prerequisites and process of registration are generally the same as those pertaining to other forms of company, including such requirements as the establishment of a registered office in Malta. However, due to the innate variability of a SICAV's share capital, it is not possible for the memorandum and articles ("M&As") of a SICAV to state the amount of share capital by which the company proposes to be registered. Instead, the M&As are required to provide that:

  • the share capital of the company shall be equal to the value for the time being of the issued share capital of the company; and
  • such share capital shall be divided into a specified number of shares without assigning any nominal value thereto.

Furthermore, the investment nature of the SICAV must be reflected in the "objects clause" within its M&As, which is required to specifically limit the company to either one of the following objectives:2

  • the collective investment of its funds in securities and in other movable and immovable property, or in any of them, with the aim of spreading investment risk; and giving the company's shareholders the benefit of the results of the management of its funds, as well as the performance of any connected or ancillary act in the fulfilment of this object; or
  • to act and operate as a Retirement Fund within the meaning of articles 2 and 4 of the Special Funds (Regulation) Act.

The M&As are also required to provide for the actual value of the paid up share capital of the SICAV at all times to be equal to its net asset value ("NAV") and for the company to be able to purchase its own shares at the request of any of the holders thereof or as otherwise provided by the M&As.

As regards the officers of a SICAV, the same requirements relating to companies generally also apply to SICAVs i.e. a SICAV is required to have at least one director and one company secretary.

3. Ongoing Obligations

3.1 The SICAV as Company

Once registered, a SICAV will continue to be subject to ongoing obligations under the Companies Act and the subsidiary legislation issued thereunder. These obligations include the filing of annual reports and the obligation to notify the Registry of any changes in the composition of the officers of the company. The Companies Act in its Fifth Schedule also prescribes dedicated rules on the individual accounts and the directors' report required to be drawn up for a SICAV, which rules are to be applied in conjunction with those applicable generally to companies and without prejudice to any requirements laid down under the Investment Services Act.3 Amongst the requirements contained in the Fifth Schedule is the requirement that the SICAV disclose the number of units in circulation along with the NAV per unit or share. Furthermore, the accounts should disclose the composition of the SICAV's portfolio, making appropriate distinctions between categories of investments.

3.2 The SICAV as Fund

In tandem with its company law obligations, the SICAV qua investment vehicle will also be subject to the Investment Services Act and the subsidiary legislation and Investment Services Rules issued thereunder. Under this framework, the SICAV will be subject to supervision by the MFSA.

The Investment Services Rules include the Rules for Alternative Investment Funds, the Rules for Professional Investor Funds and the Rules for Retail Collective Investment Schemes and will be applicable to a given SICAV according to the fund form in respect of which the SICAV has been licensed by the MFSA. Each set of Rules prescribes tailored provisions on the licence application process as well as ongoing licence conditions on matters such as the fund's management and governance, the service providers the fund is required to appoint, the investment restrictions by which the fund is required to abide and the disclosures required to be made. A particular feature of note with regards to investment strategy is that AIFs and PIFs, unlike UCITS and Retail Collective Investment Schemes, are exempt from the requirement to diversify risk.

The Investment Services Rules for Investment Services Providers are also relevant to investment vehicles since they regulate the external fund managers and fund custodians that may be appointed by the fund.4

4. Distinctive Features of the SICAV

The development of the SICAV has been augmented by way of subsidiary legislation, primarily the Companies Act (Investment Companies with Variable Share Capital) Regulations (the "SICAV Regulations"). These Regulations set forth the distinctive features that render the SICAV particularly suitable for investment when compared to a regular trading company.

One such feature is the possibility for the SICAV to be established as a multi-class- or as a multi-fund company. In either case, the company's shares are divided into distinct classes and such classes may be denominated in different currencies. However, a multi-class company may not elect for the segregation of its assets and liabilities. On the other hand, a multi-fund company (also known as an umbrella fund) may elect to have the assets and liabilities of each of its sub-funds treated at law as a patrimony separate and distinct from the assets and liabilities of each other sub-fund within the company. The implication of this is that the liabilities incurred in respect of each sub-fund would be paid out of the assets forming part of that sub-fund's patrimony and the creditors in respect thereof would have no claim or right of action against the other assets of the company.

Both multi-class and multi-fund companies having their share capital denominated in different currencies may draw up their annual accounts in any one of those currencies. However, in the case of a multi-fund company, the law contains an express provision requiring the directors to maintain separate records, accounts, statements and other documents as may be necessary to evidence the liabilities and assets of each sub-fund as distinct and separate from the assets and liabilities of the other sub-funds within the company.5

Further distinctive features of the SICAV include the possibility of issuing fractional shares and, in the case of a SICAV licensed as a Qualifying Investor Fund or Extraordinary Investor Fund, the possibility under certain conditions to issue shares at a discount.6 Furthermore, the SICAV Regulations render certain provisions of the Companies Act inapplicable to SICAVs. For instance, Article 120 of the Act relating to the issue of certificates on the transfer or transmission of shares does not apply to SICAVs; instead, all notices of transfers or transmissions of securities are required to be given to the SICAV itself.7 Furthermore, Article 122 of the Act regarding the pledging of securities is also disapplied and a dedicated rule in the SICAV Regulations is applicable in its stead, thus catering specifically to the exigencies of an investment company.8

More recent subsidiary legislation that further adds to the SICAV framework is comprised within the Companies Act (SICAV Incorporated Cell Companies) Regulations and the Companies Act (Recognised Incorporated Cell Companies) Regulations. The former of these Regulations has served to enhance the aspect of segregation introduced in the form of the multi-fund SICAV. In terms of these Regulations, each incorporated cell ("IC") within an incorporated cell company ("ICC") is a limited liability company in its own right with a legal personality that is separate and distinct from that of the ICC. The assets and liabilities of each IC are therefore in turn required to be kept separate and distinct from those of the ICC. Furthermore, the financial statements of the IC may not be consolidated with those of the ICC or with those of any other ICs comprised within the ICC, except where the IC in question is a subsidiary of the ICC and, if so, only to such extent. The latter of these Regulations has served to introduce into Maltese legislation the concept of the fund platform, whereby a recognised incorporated cell company ("RICC") provides purely administrative services to the ICs within its corporate structure.

5. Extending the Benefits of the SICAV

The benefits of the SICAV structure have been extended to partnerships by way of the Tenth Schedule to the Companies Act. The Tenth Schedule provides that the deed of partnership of a partnership en commandite or limited partnership the capital of which is divided into shares may provide for its constitution as a partnership en commandite with variable share capital. The effect of this is that certain of the legal provisions relative to SICAVs, including those contained within the Fifth Schedule to the Act and those relative to multi-class or multi-fund SICAVs, are rendered applicable mutuatis mutandis to this form of partnership, thereby providing yet another choice of investment vehicle for the financial services industry.

The advantages of the Maltese SICAV are also easily attainable for foreign companies in that the legal framework, by means of the Companies Act (Continuation of Companies) Regulations, provides for the redomicilation or continuation of a foreign company in Malta without the need for that company to be wound up in its jurisdiction of domicile and reincorporated in Malta. Instead, on fulfilment of the conditions prescribed within the Regulations, the company will be able to move its domicile to Malta and to continue to operate within Malta as a Maltese company of whatever form – including that of a SICAV -without the need of winding up its previous business structure.

Footnotes

1. A memorandum of association may be validly entered into by a single person in the case of a single member company constituted in terms of Article 212 of the Act.

2. Article 84(2)(b) of the Companies Act

3. In the case of an inconsistency between the general Companies Act provisions and the dedicated provisions set forth in the Fifth Schedule, the latter are to prevail.

4. While the appointment of a custodian is a requirement for AIFs, UCITS, Retail Non-UCITS Schemes and Experienced Investor PIFs, there is no such requirement in the case of Qualifying Investor PIFs or Extraordinary Investor PIFs, subject to their setting in place of adequate safekeeping arrangements.

5. Regulation 9(4)

6. Regulations 3 and 15

7. Regulation 13

8. Regulation 14

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.