Funds in Malta are in most cases established as companies under the Companies Act. In this case, the scheme is a separate legal entity managed by its own board of directors and can enter into contracts in its own name.
A scheme established as a company can either:
Appoint an external fund manager.
Be self-managed.
A promoter can establish a collective investment scheme under the Companies Act as a:
SICAV – Investment company with variable share capital (société d’investissement à capital variable); and
INVCO – Investment company with fixed share capital, a closed-end structures.
SICAVs
The SICAV is Malta’s most popular legal form. A SICAV can be established as a:
Multi-fund SICAV – this is an umbrella form with multiple sub-funds with a choice as to whether or not to have legal segregation between sub-funds; and / or
Multi-class SICAV – this is a standalone fund with multiple unsegregated classes;
Sub-funds within a multi-fund SICAV do not have a separate legal personality from the SICAV of which they form part. Nevertheless, they benefit from robust provisions on legal segregation.
Whilst SICAVs are open-ended structures, they can adequately cater for closed-ended fund-types through their operating provisions.
RECOGNISED INCORPORATED CELL COMPANY (RICC)
The MFSA has introduced the recognised incorporated cell company concept. This offers the highest level of segregation and has been designed specially to cater to the needs of fund platforms.
Similar to a multi-fund, the RICC platform provides for the separation of the assets and liabilities between the RICC and each incorporated cell. The difference is that in a RICC structure liability is limited through the separate legal identity of each incorporated cell (as each cell has its separate legal personality), whereas in multi-fund PIF, limitation of liability is achieved through the option of segregation of assets and liabilities of each sub-fund stipulated by virtue of the memorandum of association of the UC.
The benefit of the RICC structure is that it allows for several types of licensed CISs to coexist under one platform while retaining separate features and separate legal patrimonies while each incorporated cell may benefit from certain cost savings through the centralization and standardization of contractual agreements.
INVCO
The INVCO is a closed-ended fund structure. Unlike a SICAV, it must always be a public limited company. The structure has fallen into disuse in favour of the far more attractive SICAV.
A limited partnership (or partnership en commandite) can have its capital divided into interests or shares and be licensed as a fund under the Investment Services Act.
Limited partnerships established as funds have their commercial objects limited to the collective investment of funds in securities and other property, with the partners benefiting from the proceeds of the management of funds.
Like the SICAV, a limited partnership can be established as a:
Multi-fund limited partnership; and / or
Multi-class limited partnership.
Schemes can be constituted by a trust deed.
Maltese trust law expressly provides that the assets of a trust will constitute a separate, distinct estate to that of the trustee. A trust deed in place between the trustee and the investment manager. The trustee must be independent from the investment manager. Unit trust do not have their own legal personality.
The Investment Services Act contains equivalent provisions for unit trusts to operate in much the same way as SICAVs.
Schemes can also take the form of a foundation that is constituted by a founder for either the fulfilment of a specified purpose or benefit of a named person or class of persons and whose assets are administered by a designated person.
Unlike unit trusts, foundations are granted legal personality by statute. When used for collective investment purposes there is no limitation on its lifespan of the foundation.
A fund can be established by a “deed of constitution.” This is a contract between the investment manager and the custodian. The interest in the fund can be divided into units and title to the units is evidenced by certificates or contract notes issued jointly by the fund manager and the custodian.
A contractual fund can be a single fund or can use an umbrella structure, as in the case of SICAVs.
Contractual funds do not have legal personality and can be open-ended or closed-ended.