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TRUSTS & FOUNDATIONS

Trusts and Foundations are two legal arrangements that are very often thrown into the same melting pot because both can serve as asset protection vehicles. However, whilst both arrangements share this similarity, their set-up and operation varies in many ways.

The following is an overview of the salient features of Trusts and Foundations under Maltese law.

Trusts under Maltese Law

Trusts registered in Malta are mainly regulated by the Trusts and Trustees Act (Chapter 331 of the Laws of Malta).

Under Maltese law, a Maltese trust is defined as a pledge, or a binding agreement, between the settlor/s and the trustee/s to hold and administer property (in whatever form), which the settlor/s would transfer to the trustee/s, for the benefit of a third party/parties (the beneficiaries) in a pre-agreed manner (normally, but not exclusively, through a trust deed or will).

In this sense a Trust that is set up under Maltese law has no separate legal personality, and legal personality is vested in the trustee/s. This notwithstanding, the law provides that any property of the Trust (the Trust Fund) is distinct and separate from the personal property of the trustee/s and accordingly creditors of the trustee/s cannot access or make recourse against the Trust Fund.

Under Maltese law a Trust is set up and funded by the settlor through an initial settlement (which can be followed by subsequent settlements that are accepted by the Trustee).

A Trust can only exist for a maximum of 125 years under Maltese law, with the exception of trusts created for charitable purposes, unit trusts or a retirement scheme licensed in terms of the Retirement Pensions Act and set up as a trust. Several types of trusts are accommodated under the Maltese trust law including, inter alia, discretionary trusts, charitable trusts,  trusts for certain prescribed commercial transactions (including securities offerings, collective investment schemes, or employee benefit).

Foundations under Maltese Law

Foundations registered in Malta are regulated by the Second Schedule of the Civil Code, Chapter 16 of the Laws of Malta.

Under Maltese law Foundations may be set up by virtue of a public deed or by a will, by one or more Founders who are required to “endow” the Foundation with an initial endowment of at least €1,165, except in the case of a public benefit foundation in which case the endowment shall be of €233.

Foundations are normally classified into either:

  • Purpose Foundations, that is foundations set up to fulfill a specific purpose; or
  • Private Foundations, that is foundations set up for the benefit of a named person/persons or a specific class of persons.

Unlike Malta Trusts, Foundations set up under Maltese law can have separate legal personality, provided they are registered with the Registrar for Legal Persons. Without such a registration a Foundation would not have legal personality. Foundations that are registered with the Registrar of Legal Persons are therefore capable of holding assets for their own benefit, and of incurring obligations for which they are liable.

Whilst a Maltese Foundation cannot be established to trade or carry on commercial activities, it may:

  • be endowed with commercial property or a shareholding in a profit-making enterprise, a franchise, a trade mark, a ship or other asset which gives rise to income;
  • be used as a collective investment vehicle (subject to the applicable licensing formalities), the management of which is delegated to a third party;
  • be used as a vehicle for the purpose of securitisation transactions, borrowing monies against the issue of bonds and conduct related acts.

Different types of Foundations may exist for different time limits. For private foundations there is a limit of up to 125 years. For public benefit foundations, foundations used for collective investment vehicles and foundations used for securitisation transactions however there is no time limit and therefore these types of foundations may be established for an unlimited term.

Mifsud & Mifsud Advocates is actively involved in providing advice on both Trusts and Foundations to its local and international clients. For this reason, it is advisable to contact us so that we may assess your specific circumstances and provide you with a solution tailor made to your requirements.

The firm offers the following services in relation to Trusts and Foundations:
  • Assisting Settlors in the setting up of Trusts and Foundations;
  • Assisting Trustees, Administrators of foundations and other fiduciaries in the regulatory requirements of their fiduciary activities;
  • Employee Benefit Trusts (EBTs);
  • Private Trusts and Foundations set up for succession planning, estate management and other private purposes;
  • Purpose foundations in the context of securitisation transactions;
  • Advice as to the taxation requirements involved in relation to different trusts and foundations; and
  • Domestic proceedings involving trusts and foundations.

OUR LAWYERS SPECIALISING IN THIS FIELD

Malcolm Mifsud

Founding Partner

Stephanie Scerri

AEGIS Corporate Services - Manager

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