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Amendments to the Company Service Providers Act and the CSP Rulebook Consultation Document

MEDIA ROOM

December 15, 2020

The MFSA has issued a CSP Rulebook for consultation, building on from the feedback obtained in a previous consultation period. The proposed Rulebook is published following the advent of Bill 162 of 2020 that provided for a number of amendments to the CSP Act. These proposed provisions are intended to further strengthen the CSP industry from a regulatory perspective, whilst also focusing on raising the necessary standards.

Bill 162 of 2020 sets the foundation on which the proposed CSP Rulebook (“Rulebook”) is built by providing for the following provisions:

  • The scope of an entity was extended to include all legal persons not just companies;
  • The current exemption from authorisation for warranted professionals shall expire as from 8 months of the Bill coming into force.
  • CSPs that are already licensed would not need to reapply but will go through a classification process.

Classes

  • The Bill establishes 3 classes of CSPs:
    • Class A – A company service provider authorized to provide, by way of its business, the following services to third parties:
      • Formation of companies or other legal entities; and, or
      • Provision of a registered office, a business correspondence or administrative address and other related services for a company, a partnership or any other legal entity.
    • Class B – A company service provider authorized to provide, by way of its business, the service to third parties of acting as, or arranging for another person to act as director or secretary of a company, a partner in a partnership or in a similar position in relation to other legal entities.
    • Class C – A company service provider authorized to provide, by way of its business, all of the services of a company service provider.

The Rulebook built on this foundation by introducing 2 thresholds, “Under threshold Class A CSPs” and “Under threshold Class B CSPs” that are de minimis regimes applicable to individuals that offer CSP services with certain limitations in place.

As per the introduction of the above classes, the Rulebook introduced more stringent capital requirements, in line with the below:

  • Class A: Eur 10,000
  • Class B: Eur 15,000 and Mandatory Professional Indemnity Insurance (“PII”)
  • Class C: Eur 25,000 and Mandatory PII
    The share capital must be maintained on an ongoing basis.

Fitness and Properness Criteria

The Rulebook subjects certain functionaries to fitness and properness criteria, namely:

The fitness and properness criteria shall be below:

  • Competence
  • Reputation
  • Conflicts of Interest and Independence of Mind
  • Time Commitment

Ongoing Obligations

The heftiest changes can be seen when it comes to the ongoing obligations of authorized entities, with a big focus on governance requirements. The ongoing obligations center around the following:

  • Adequate business continuity and disaster recovery procedure;
  • Compliance with authorization requirements must be exhibited;
  • Scenarios when notification and/or prior approval is required from the MFSA;
  • Insurance requirements;
  • Governance conditions;
  • Risk Management obligations;
  • Compliance provisions with the main focus on drawing up an annual compliance monitoring program;
  • Outsourcing conditions;
  • Procedures for the reporting of breaches;
  • Record Keeping obligations; and
  • Reporting obligations;

Procedure for Providing Services and Sanctions

The Rulebook closes off by delineating the specific procedures that need to be followed when offering the below services:

  • Company Formation;
  • Acting as Director or Secretary of a Company, a Partner in a Partnership or similar position in other legal entities; and
  • Arranging for another person to act as Director or Secretary of a Company or a Partner in a Partnership or similar position in other legal entities.

When it comes to sanctions, the Rulebook imposes a maximum administrative penalty of up to Eur 50,000 for breach of a rule, without recourse to a court of law.

The CSP Rulebook Consultation Document can be found here. 

About the Author

This article has been authored by Dirk Urpani, CSB Group Legal Counsel & Business Advisor. For any additional information or support required please contact us on [email protected].