Unlike other types of Collective Investment Schemes (CISs), a Private Collective Investment Scheme (“Private Scheme”) is not subject to a licence in terms of the Investment Services Act (the “Act”) in order to provide investment services in or from Malta or to use Malta as a ‘base’ for this reason, but is instead subject to recognition by the Malta Financial Services Authority (“MFSA”). In addition to bespoke advisory solutions, CSB Group offers wealth of experience in the licencing and ongoing administration of Private Schemes.
Requirements for a Malta Private Collective Investment Scheme
In order for a Maltese Collective Investment Scheme to be recognised as a Private Scheme by the MFSA, the Maltese investment fund must satisfy the following requirements:
- limit the total number of participants to fifteen persons;
- he participants must be close friends or relatives of the promoters of the Maltese investment fund;
- the Authority must be satisfied that the scheme is essentially private in nature and purpose; and
- the Maltese investment fund must not qualify as a professional investor fund in terms of guidelines issued for this purpose by the MFSA.
Whilst participants in Private Schemes are usually individual persons (i.e. physical persons), one of the participants in such a Private Scheme is permitted to be a body corporate, subject to the following conditions:
- taking into account the ultimate individual beneficial owners of such company, the maximum number of 15 participants is still satisfied;
- the company’s ultimate individual beneficial owners are close friends or relatives of the promoters;
- the company is in no manner involved in the management or administration of the scheme and its connection with the scheme is merely that of investor.
Private Collective Investment Schemes – Structures
Under Maltese law, a Private Scheme may take the following legal forms:
- A Private Limited Liability Company (Ltd);
- A Public Limited Liability Company (PLC);
- An investment company with variable share capital (SICAV);
- An investment company with fixed share capital (INVCO);
- A Commercial Partnership;
- A Unit Trust;
- A Contractual Fund.
Of the vehicles outlined above, the most common legal form for a Maltese investment fund is the SICAV (multi class or single class open ended investment company), particularly due to the structural and operational flexibility associated with such forms of companies. Here we note that Malta’s legislative framework also accommodates “umbrella” type structures, whereby the assets and liabilities of each sub-fund are treated as a patrimony separate from the assets and liabilities of each other sub-fund of such company, thereby containing the risks associated with each investment made by the class of shares within the respective class.
Investment & Restrictions of a Private Collective Investment Scheme
The MFSA does not subject Private Schemes to any investment or borrowing restrictions albeit these may be imposed in the recognition certificate issued by the MFSA following application.
It is also important to note that, given their private nature, Private Schemes cannot be listed on the Malta Stock Exchange.
Tax Treatment of the Private Scheme
Any recognition granted with respect to a Private Scheme shall not be deemed to be a licence for the purpose of articles 2 and 12 of the Income Tax Act, meaning that the special income tax rules applicable to other types of schemes do not apply. Accordingly, Private Schemes do not enjoy the exemption from tax applicable in respect of the income of other Maltese collective investment schemes.
However, Private Schemes shall still be entitled to a tax exemption or to a 6/7ths refund of Malta Corporate Tax paid (taking net effective tax rate to 0% or 5%) depending on the characterisation of the income being derived by the Private Scheme (or the respective sub-fund/s, depending on the selected structure).
Furthermore, Private Schemes also benefit from an exemption from Malta Duty on Documents and Transfers (Stamp Duty).
Management of the Private Scheme
A recognised Private Scheme is not required to appoint an external manager.
Costs & Fees of the Private Scheme
An application fee amounting to €2,000 is payable to the MFSA on submission of a letter formally applying for recognition and is not refundable.
The Supervisory Fee amounting to €750 is payable on the day the applicant is recognised as a Private Scheme and thereafter annually, upon the anniversary of that date.