Establishment of a private investment fund
Private collective investment schemes or private investment funds, unlike other collective asset management instruments in Malta, are not subject to a licence under the Investment Services Act, but are only recognised by the Maltese Financial Services Authority (MFSA) regulator.
In order to be recognised by the MFSA, a Private Investment Fund must meet the following requirements:
- The number of investors must be for a maximum of 15 investors;
- Investors must be close relatives or friends of the promoters;
- Promoters must produce all necessary documentation to prove to the Authority (MFSA) that the fund and its purposes are of a private nature;
- The fund must not, in any manner, lead back to a professional investment fund;
- The investors do not necessarily have to be natural persons;
- In the event in which a company invests in the fund:
- The maximum number of investors in the fund must be 15, including the company shareholders;
- The investor company shareholders must be close friends or relatives of the promoters;
- The company cannot in any way be involved in the management of investments, but must only have the role of investor;
The MFSA is required to consider the following in order to recognise the fund:
- that the international agreements are maintained;
- the requirements of good repute and eligibility of investors and promoters are linked to the fund;
Corporate structures for private investment funds
The mostly used legal form for these funds is the SICAV (multi-class or single class) due to their structural and operational flexibility that characterizes these types of companies. Maltese legislation also provides for “umbrella” fund structures through which the assets or liabilities of individual sub-funds can be treated as separate assets.
Private investment funds are set up through SICAV Ltd.
Private funds cannot be listed on the stock exchange.
The fund investment typology must be mentioned in the recognition certificate issued by the MFSA.
Tax treatment of the private regime
Private investment funds do not enjoy the tax exemption provided for other collective investment undertakings. However, they fall within the tax benefits provided for private companies, consequently the net tax rate applied to non-resident promoters amounts to 5%.
Management of the private fund
The recognised private investment fund is not required to appoint an external manager.
The process for the fund recognition
The recognition process, as a private collective investment organisation, involves the submission of an application to the MFSA by the promoters, through which all the details regarding the fund objective and strategy are outlined with the competences and identity of the directors that are checked.
The application process can be divided into two distinct phases as follows:
PHASE ONE – PREPARATORY
Cognitive interview with the MFSA regulator, after which, the Promoters must submit the application letter together with the required documentation:
- The MFSA assesses the application and documents and responds within three weeks of submitting the documentation.
- The MFSA may request additional information or carry out any investigations it deems fit. At this stage, verifications are carried out on the competences and good repute of the promoters.
STEP TWO – PRE-RECOGNITION
- The regulator shall express an opinion on the possibility of approving the issue of recognition;
- Submission of signed copies of the additional application form with all the attached additional or corrected documentation required by the regulator;
- Resolution and completion of all issues that emerged during the application process;
- Issue of recognition.
Documentation required for the request for recognition:
- Formal request for recognition on unstamped paper;
- A copy of the Memorandum and Articles of Association, or of an equivalent incorporation document depending on the private fund’s legal form;
- Details of the investment objectives and policies;
- Personal questionnaire duly completed by each director and promoter;
- Fund’s registered office;
- Details of the subscribers to the fund’s shares and a signed and approved statement by the board in which they declare that they are close relatives or friends of the promoters;
- Declaration by the directors and subscribers that the fund follows the private investment funds criteria;
Payment of the registration fee amounting to €1,750
THIRD PHASE – POST LICENCE / BEFORE INITIATING WITH THE ACTIVITY
The regulator, before the formal start of activities, may, at its discretion, review the documentation and if necessary request further clarifications.
Costs and fees
- Non-refundable registration fee amounting to EUR1,750 to be paid with the application submission, to the MFSA regulator, for the fund recognition.
- Fee amounting to €500 per annum, payable to the Supervisory Commission once the investment fund is recognised.