How is an Alternative Investment Fund (AIF) managed in Malta?
Alternative Investment Funds (AIFs) may opt for either a self-managed structure or an externally managed structure. An AIF which is self-managed must be composed of an Investment Committee, appointed by the Board, to handle the portfolio management of the AIF subject to the governing Terms of Reference. The Investment Committee must be composed of, at least, three (3) members of which one is local. The Committee may also delegate the day-to-day portfolio management of the AIF to a designated portfolio manager (such as an individual, AIFM and/or MiFID licenced Firm) whilst also appointing independent experts and consultants in the operations of the AIF’s underlying assets.
On the other hand, a Full-Scope AIFM as duly licenced by the Alternative Investment Fund Management Directive (AIFMD) may act as an External Manager of the AIF. In such a scenario, the Board of the AIF will not appoint and investment committee as such committee will be within the helm of the AIFM.
What are the Initial Share Capital requirements for an Alternative Investment Fund (AIF) in Malta?
For an AIF which is self-managed the initial share capital should be of €300,000. Should its NAV fall below such amount, the MFSA must be notified accordingly.
What are the main laws governing an Alternative Investment Fund (AIF) under Maltese Law?
Following the transposition of the Alternative Investment Fund Managed Directive (AIFMD) in 2013, the main legislation governing Alternative Investment Funds is the Investment Services Act (Cap. 370 of the Laws of Malta) and, depending on the corporate form of the AIF, the Companies Act (Cap. 386 of the Laws of Malta). Additionally, Alternative Investment Funds are also subject to the Standard Licence Conditions (SLC) in Part B of the Rules whereby outlining the ongoing conditions in the operation of an AIF. Should the Fund be also listed on the Malta Stock Exchange, then the AIF is also subject to the Admissibility requirements for Collective Investment Schemes (Chapter 8 of the Listing Rules).
What are the main Maltese legal structures for Alternative Investment Funds (AIFs)?
The Maltese Rule Books offer five main legal structures which may be applicable to AIFs. Due to its flexibility, the main structure adopted for Malta AIFs is the SICAV which can easily be used in the creation of Umbrella Funds (having a number of sub-Funds), Multi-Class, and Master Feeder structures. Other structures also include the Limited Partnership which was recently refreshed and governed by Schedule 10 of the Companies Act. Although not widely used, the LP may be applicable for Private Equity classes and which vehicle is tax transparent should its share capital not be divided into shares. Other legal forms also include the INVCO and a Unit Trust, although both are not widely adopted due to their nature. The rules also cater for an Incorporated Cell (IC) within and Recognised Incorporated Cell Company (RICC). Each cell will carry a separate legal personality from all the other ICs within the RICC platform and can take form of any of the above mentioned legal structures. Each Incorporated Cell can also have sub-Funds (each of which having a separate patrimony).
Are there any investment restrictions for Alternative Investment Funds (AIFs) under Maltese Law?
The investor base for AIFs are Qualifying (with a minimum holding of €100,000) and Professional Investors as defined by MiFID. When it comes to investment restrictions, these mainly apply when the AIF licence is that of a Retail-AIF. Other strategies in the likes of Hedge Funds, Real Estate Funds, Venture Capitals, Loan and Mezzanine Funds, and Shariah-Compliant Funds are subject to the investment restrictions as set out in their respective Offering Document.
What are the minimum requirements permitted by Maltese Law for an Alternative Investment Fund (AIF)?
The Malta licensed AIF must be composed of, at least, three (3) Board Members (of which one is local in cases of a self-managed structure) and, where applicable, an Investment Committee of at least three (3) members of which one is local. The AIF is not obliged to appoint an administrator but must have a Depository / Custodian (must be local as from mid-2017), Compliance Officer and an MLRO at all times. The AIFMD also necessitates that the Fund will have a Valuation Policy in place and the Offering Document / Supplement of the Fund must also lay down who will be responsible for the valuation function of the underlying assets (financial and non-financial) and the external valuers being appointed. The Fund must also be subject to an annual audit and thus an Auditor is required. The AIF may also have unlimited counterparty agreements in the process of operating the Fund. Besides having a Maltese registered office, the Fund must also appoint a local representative who will be the main point of contact with the Regulator.
What are the liabilities of investors within an Alternative Investment Fund (AIF) under Maltese Law?
In terms of Maltese law, the liability of members of a limited liability company is restricted to their obligation to pay the unpaid balance (if any) on shares held in such company. However, AIFs set up as SICAVs may not issue partly paid-up shares. Therefore, investors in a SICAV have no liability to contribute to the assets of the AIF in the event of its insolvency. In the case of AIFs set up as limited partnerships, the liability of the limited partners is limited to the extent, if any, unpaid on the contribution of such investors.
What are the requirements for the licensing of an Alternative Investment Fund (AIF) in Malta?
When applying for an AIF licence, the applicant should provide the MFSA with a duly filled application form together with a Memorandum and Articles, Offering Memorandum (and Offering Supplement/s in the cases of sub-Fund/s), the applicable fee, PQs of Directors, Compliance Officer, MLRO and, where applicable, Investment Committee members. The MFSA must also be provided with Competency Forms of the acting Compliance officer, MLRO and, where applicable, the portfolio manager.
How can CSB Group assist with Malta Hedge Funds?
With offices in Malta, Switzerland and the UK, CSB Group has been into the financial services industry for over 30 years with investment services professionals available to assist in any enquiries. Our investment services team can help you advance your fund from concept to launch through the advisory, licensing and incorporation, ongoing administration and accounting.