The only consistent feature in the political and economic environments worldwide is that they are constantly changing. This is precisely what prompts individuals and families to structure their assets and wealth within a jurisdiction with a more stable and dependable climate, particularly EU countries with a sound, comprehensive, and well-regulated legal framework. The challenge faced by families, then, is determining the extent to which they wish to retain control over the assets of the family.
Different jurisdictions across the globe boast an intricate and dependable trust regime pioneered by professional trustees. However, if families wish to remain to some degree involved in the management of their family wealth, they might need to look at alternative routes. All of us have a strong sense of ownership which comes from an innate feeling that we need to collect our assets and take possession of what is ours. It is very common to find clients who feel the need to retain some level of control over their assets and who are not willing to relinquish in full control over the family assets. Nevertheless, keeping in mind the protection of family wealth for future generations, ownership may not be the most sensible route. Other options include structuring ownership through holding companies, private trust companies and foundations. Many countries have opted to promulgate legislation which allows and regulates the management of family trusts via such Private Trust Companies. Two countries which offer this option are Malta and Jersey. In Malta, the Malta Financial Services Authority (MFSA) regulates the financial sector and is regarded as a medium which successfully balances flexibility and security. Jersey is also a sought-after jurisdiction for the protection of family wealth. We will now be delving into the Private Trust Company (PTC) by analysing it from both a Maltese and Jersey law perspective.
Private Trust Companies (PTCs) are privately owned corporate trustees, acting as trustees tasked with administering the family assets in question. Such arrangements are typically chosen by High Net Worth Individuals (HNWIs) where company start-up costs are seen as proportionate to the benefits enjoyed by such structure. The level of control the PTC structure affords families can be regarded as the main pull factor for such clients. Essentially, PTCs are intended to strike a balance between complete detachment from the ownership of the assets and including the family in the taking of decisions involving their assets.
Members of the family usually comprise the board of directors of the PTC in question. The family is thus able to maintain a certain degree of control on its wealth since the family would be able to take decisions as to what happens to the trust.
A comparison of Malta and Jersey PTCs
Aspects of Jurisdiction and Regulation
Throughout its 15-year full EU membership, Malta has managed to offer a mirage of solutions and enjoys a stable and growing economy which does not merely rely on foreign direct investment. With its pro-active and business-friendly stance, Malta balances the attraction of investment and a high level of regulation and supervision. A civil law jurisdiction at its core, Malta has welcomed common law institutes, namely, the trust. The MFSA guidelines for Trustees of Family Trusts, which were issued in 2016, provided the regulatory clarity needed by the Maltese model.
As a Crown Dependency, Jersey enjoys almost total self-governance and autonomy and although not a member of the European Union and thus not bound by community acquis, it does enjoy a special relationship with the Union, as evidenced in Protocol 3 of the UK's 1972 Accession Treaty. This is seen mainly in Jersey's access to the common market. Having said this, the fact that laws are not codified might be perceived as a potential weakness which may lead any legal issue surrounding PTCs to become the subject of litigation, unless resolved via alternative dispute resolution.
It is essential to understand the structure of a PTC in order to opt for the most desirable system for one's family assets. In Malta PTCs need not be authorised by the MFSA but do need to be registered as Maltese companies with the Registry of Companies and with the MFSA as trustees of family trusts. Insofar as Jersey is concerned, up until the year 2000, PTCs and Trustees had to be registered with the Jersey Financial Services Commission (JFSC). Nowadays, such companies are exempt from registering under Article 4 of the Financial Services (Jersey) Order.
Maltese law requires that one of the PTC's executive directors or senior officers needs to take on the Money Laundering Reporting Officer (MLRO) as per the Prevention of Money Laundering and Funding of Terrorism Regulations. On the other hand, the Proceeds of Crime (Jersey) Law 1999 explicitly excludes PTCs from its sphere of application. In other words, under Jersey law, PTCs need not have a dedicated anti-money laundering officer. Despite the fact that neither jurisdiction requires authorisation, they both require registration of PTCs. In Malta, this process falls within the purview of the MFSA, wherein in Jersey, it is the JFSC.
As we have seen, both jurisdictions have stronger and weaker elements making professional guidance essential for any family wishing to adequately protect its assets. The family's background, priorities and past experiences, coupled with their outlook at future proofing their assets are the essential elements which will duly determine the choice of jurisdiction.
Dr Priscilla Mifsud Parker is a private client lawyer who heads the Families & Wealth & Fintech practice groups within the firm. She specialises in wealth structuring and preservation for business families and high net worth individuals, corporate structure set up, relocation planning and businesses wishing to enter the FinTech industry.
For more information, you can contact Priscilla on firstname.lastname@example.org or phone +356 2205 6603
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.