The Family Trust & the Family Trustee

The scope of a family trust (the “Trust” is to provide for a vehicle and medium through which property may be settled by settlors (the “Settlors”), and administered by a trustee (the “Family Trustee”) to the benefit of family members or family dependents (the “Beneficiaries”).

Set up of the Family Trustee

A Family Trustee must be a company duly registered at the Malta Business Registry, which, at all times, has:

• A minimum of three directors (individuals, not legal persons).
• One of the directors must possess knowledge and experience in the administration of trusts.

The objects of the company duly registered as a Family Trustee must be limited to acting as trustee in relation to a specific settlor or settlors, in any case for not more than five settlors at a time, and only with respect to family trusts.

One of the executive directors OR another senior officer of the company, as incorporated, must be registered as the Money Laundering Reporting Officer with the Financial Intelligence Analysis Unit (the “FIAU”).

A request for registration must be made to the Malta Financial Services Authority (the “MFSA”). For effective registration, documents which need to be submitted to the MFSA include, inter alia:

• Copy of draft memorandum and articles of association.
• Copies of the different management agreements which the Family Trustee is to use with different settlors.
• Copy of the trust deed of the first trust/s which the Family Trust shall be administering upon successful registration.

Ongoing obligations with respect to the Family Trustee include:

• The maintenance of an ongoing account of each Trust’s dealings
• Obtaining consent from the MFSA with respect to ongoing changes in the company’s board of directors and shareholders.
• The submission of a certificate of compliance, declarations as may be required by the MFSA to confirm the Trustee’s corporate and organizational structure.

The Trust is set up via the promulgation of a trust deed.

AML Obligations

A Family Trustee is considered to be carrying out ‘relevant activity’ as it is considered to be a ‘trust service provider’ (in terms of Regulation 2(1) of the Prevention of Money Laundering and the Funding of Terrorism Regulations (the “PMLFTR”)), and accordingly, is considered to be a ‘subject person’ for AML purposes. This is the reason as to why an MLRO needs to be appointed.

The MLRO shall be responsible for all AML/CFT related obligations and is answerable to the FIAU.

Criteria in order to set up a family trust and family trustee

In order to set up the respective trust, a trust deed needs to be entered into between the settlor and the respective family trustee entity. For a family trustee entity to be set up and be duly registered with the MFSA, promoters of such an entity would need to set up a limited liability company with three natural persons as directors. At lease one of the directors must demonstrate sufficient knowledge in the operation and management of trusts, and all directors must be considered to be fit and proper to hold such a position. Additionally, a family trustee must appoint an MLRO for the proper adherence of all applicable AML and CFT laws and regulations. Since family trustees must be duly registered with the MFSA, promoters of such are required to submit the relevant application form, due diligence documentation and draft trust deed to be availed of with the respective family trusts under trusteeship.

Surrendering, suspending and/or cancelling a family trustee registration

Registration to act as a family trustee may be voluntarily surrendered by the family trustee entity through notification of such an intention to the MFSA, the latter of which may impose specific conditions relevant to such surrender. Such conditions may include, for example, the imposition of a delay prior to proceeding with surrender. For a request of surrender to be successful, the family trustee must confirm to the MFSA that, inter alia, it has informed its clients of such surrender, it has ceased to promote itself, in any manner, as a family trustee and that the company has no pending lawsuits and litigation. The MFSA may cancel or suspend registration of the family trustee if the respective family trustee entity is found to have breached applicable requirements in terms of law or regulation or if the respective family trustee hasn’t engaged in the management of family trusts within 12 months from the date upon which such family trustee has been successfully registered as such by the MFSA.

Registration of the Trustee

A Family Trustee is set up with the intention to administer Family Trusts and their respective Family Trust Funds. A Family Trustee is set up as a company:

• Whose object and activities are restricted to acting as a trustee for a specific settlor or settlors and administering a specific family trust or limited amount of family trusts; and
• Which does not hold itself out as offering its services as a trustee to the public; and
• Acts as a trustee, and administers Family Trust Funds limited to no more than five settlors at any point in time.

The Family Trustee will need to be registered with the Malta Financial Services Authority (“MFSA”), as shall be delineated below.
The following criteria must be adhered to prior to the start of the Family Trustee’s operations and on an ongoing basis:

• The Family Trustee must be set up as a limited liability company registered in Malta in terms of the Companies Act;
• The applicant must submit a request to the MFSA, as per the application form published by the MFSA, for the inclusion in the Register of Trustees for Family Offices;
• The Memorandum and Articles of Association of the applicant shall limit the Family Trustee’s objects and activities to acting as trustee in relation to a specified settlor or settlor, in any case no more than five at a time, and administering the specified family trust or trusts;
• The Family Trustee must maintain insurance cover proportionate to the nature and size of the activities of the trustee company;
• The Board of Directors shall be composed of at least three directors, that must be considered to be “Fit and Proper” by the MFSA. The fitness and properness shall be assessed through the submission of a personal questionnaire that will allow the MFSA to assess the proposed directors’ integrity, competence and experience, and financial soundness and solvency;
• At least one of the proposed directors must possess knowledge and experience in administering trusts;
• One of the directors or a senior officer of the company must take on the role of Money Laundering Reporting Officer (“MLRO”).

The following documents must be submitted to the MFSA:

• The Memorandum and Articles of Association of the company;
• A copy of each family trust deed that shall be administered by the trustee;
• Declaration that the proposed trust structure(s) complies and shall continue to comply with the definition of a family trust;
• An application fee as noted by the MFSA;
• Copies of any client agreements that the applicant intends to use;

The MFSA may request further documentation, on a case-by-case basis, but once it is satisfied that all above criteria have been fulfilled, the Family Trustee will be registered accordingly.

A Family Trustee must initiate its activities as per the registration with the MFSA within twelve months from the date of registration.

Duties and Obligations of the Directors of a Trustee Company

• -When applying for registration as a Family Trustee, as per the form stipulated by the MFSA, shall include the following information relating to the trustee company:
  
  • The name;
  • The names and addresses of its shareholders;
  • The names and addresses of its directors;
  • The number of family trusts administered by the trustee company;
  • A statement noting that the trustee company adheres to requirements exempting it from authorisation but eligible for registration as a Family Trustee; and
  • Details of the registered office and place of business;
• Annual submission of a Certificate of Compliance one year from the date of registration;
• Maintaining proper accounts and accurate records of the family trust administration, including the implementation of record-keeping procedures in relation to beneficiaries’ information and the assets of the family trust fund;

Directors must also obtain written consent from the MFSA prior to:

• Changing directors, either through appointment or termination of a director;
• Implementing a change that would impact the trustee company’s eligibility for registration; and
• Surrendering its registration.

Directors must notify the MFSA in writing and without delay when:

• Being engaged as a Family Trustee for an additional family trust/s, whereby they must provide a copy of the trust deed and the respective declarations mandated by the MFSA;
  Amending the shareholding of the registered trustee.