Malta has established itself as a prime jurisdiction for global HNWI and families to set up trusts or foundations. This activity attracted a number of established international trustee companies and fledgling start-ups to establish a trustee company in Malta, duly licensed by the Malta Financial Services Authority (MFSA).
The Legal Basis
The Trust and Trustees Act 2004, Cap. 331 ("the Act") regulates the establishment, administration and duties of trustees, as well as the conduct expected from persons holding this office. Article 2 of the Act defines the term trustee, as the person or persons who hold or in whom the property is vested under trust for the benefit of the beneficiaries. The trust instrument is normally used to appoint trustees, indicating the number of trustees appointed to that particular trust.
The Act does not impose specific restrictions on who is to act as a trustee, however, it indicates that the trustee may be:
- A natural person, as long as he/she is of full age and has the legal capacity to carry out such acts; or
- A juridical person, as long as the objects of that person include acting as a trustee and is properly licensed by the competent authority.
Furthermore, the Act also establishes that a corporate trustee may also be defined as a trustee which is any legal person, wherever incorporated.
Authorising a Trustee
The activities of a trustee may be carried out either in a professional or in a private capacity.
Any person, whether operating in Malta, as an individual resident or a corporate trustee registered and operating in Malta, who receives any property in relation to the trust, or accepts to take on the role of a trustee or co-trustee of a trust and:
- Receives or is entitled to receive remuneration for his/her role, or
- Carries out his/her role on a regular and habitual basis, or
- Presents himself/herself to be a trustee
will require authorisation from the MFSA under the Act.
Any person, whether a corporate entity or an individual, may apply in writing to the Authority for authorisation to be recognised as a professional trustee. Upon satisfaction of the conditions prescribed in the Act, the Authority will grant authorisation. Additionally, the Authority must determine the type of power which is to be granted, whether it should be general or restricted to certain activities only.
The application itself must follow the form which is issued by the Authority and shall include:
- Any information and particulars, which are prescribed by the Authority, apart from those required by law;
- Verification by the MFSA;
- An address in Malta for the service on the applicant of any notice or other documents which need to be served on him/her by or under the Act;
- Payment of the registration fee, as prescribed within the authorisation applied for.
The Trustee's Duties
The office of trustee implies a fiduciary obligation towards the beneficiaries and are therefore onerous. In executing his/her duties, powers and discretions, the trustee is required to act with prudence, diligence and good faith. They are required to act in the best interest of the beneficiaries, subject to their legal obligations towards other persons or bodies.
The duties of the Trustees also extend to:
- Carrying out the administration of the trust according to the terms of the trust;
- Safeguarding the trust property from loss or damage;
- Maintaining accurate accounts and records of the trusteeship, and upon the request of the beneficiary, to disclose these accounts and records;
- Providing full and accurate information on the state and amount of trust property;
- Keeping trust property distinct from the trustee's property and other property held by him/her under any other trust or title;
- Acting jointly in the performance of their duties and powers in the case of co-trustees;
- Acting impartially in the interest of all of the beneficiaries;
- Not delegating powers, unless specifically permitted to do so under the law, the trust deed or by the court; and
- Informing third parties with whom he/she is dealing with that he/she is acting as a trustee.
Additionally, the Trustee must not carry out the following acts without Court authorisation:
- Profit himself/herself directly or indirectly from the trusteeship (except for permitted professional fees);
- Cause or permit someone to profit directly or indirectly from such trusteeship;
- Enter into any transaction in relation to trust property on his/her own account, or
- Delegate his powers unless permitted via the trust deed
Trustees are not able to reap benefits of any trust which they are trustees of unless they have prior authorisation from the MFSA or the Court to do so. Likewise, the trustee is not entitled to remuneration for the services rendered unless there is due authorisation within the trust deed, written approval by the beneficiaries, or court authorisation. In relation to expenses incurred by the trustee in relation to the trust, the trustee may be reimbursed or may be able to make payments out of the trust itself.
The Code of Conduct issued by the MFSA must be strictly followed by all Trustees.
The Trustee's Powers
The trustee must always exercise his/her powers in the interest of the beneficiaries and according to the terms of that trust. The main powers which the trustee is entrusted with, is in relation to the trust property, where the trustee will retain all of the powers of a natural person having absolute title over such property.
Establishing a Trust Company in Malta
Companies providing services relating to trusts may be incorporated and managed in Malta, in accordance with the statutory requirements upheld in Maltese law, which are typically concerned with administrative services of the trust. It is within the MFSA's powers to issue rules establishing which activities constitute administrative services in relation to trusts, as well as the criteria for the conduct of such activities.
If the company in question carries out or intends to carry out trustee services, it must obtain prior authorisation from the MFSA to act as a corporate professional trustee. A duly authorised trustee company will also be granted the power to carry out the activity of Corporate service Provider.
Re-Domiciling Trust Companies to Malta
The Continuation of Companies Regulations has been specifically enacted to make it possible for foreign companies to relocate to Malta and continue their operations from Malta, without having to go through the process of winding up their operations within their original country. This is possible as long as the foreign company in question has been lawfully established within an approved jurisdiction.
Anti-Money Laundering Efforts
Trustees are bound to act in accordance with the Prevention of Money Laundering Act as well as any subsequent guidelines which have been issued by the MFSA and/or the FIAU, Malta's Financial Intelligence Analysis Unit.
The Taxation of Trust Companies in Malta
Companies that are ordinarily resident and domiciled in Malta, that provide trust-related services will be subjected to the normal corporate tax rate of 35% on their worldwide income. If, however, they are involved in international activity, it would be possible for non-resident shareholders receiving dividends to claim a refund of the tax paid by the company on the profits out of which the dividend is paid.
Our Trust Team
Our Financial Services lawyers and regulatory experts have ample experience in setting up licensed trust companies in Malta, as well as guiding them to meet the requirements that must be satisfied under the provisions of the Trust and Trustees Act.
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.