4. Other Forms/entities

A. The Limited Liability Company

The most commonly used corporate legal entity under Maltese law is the limited liability company, wherein the liability of its members is limited to the amount, if any, unpaid on the shares respectively held by each member. A limited liability company can be either private or public; private companies may be either exempt or non-exempt1. A limited liability company may also take the form of an investment company with variable share capital (SICAV) or an investment company with fixed share capital (INVCO). A limited liability company cannot be incorporated for the purpose of carrying out any lawful purpose or trade in general; specific objects must be stated in the company’s memorandum and articles of association. A company’s corporate capacity is limited to its objects as stated in the relevant objects clause.

Maltese law provides for the continuation of companies into and out of Malta. Redomiciliation is regulated by the Continuation of Companies Regulations, according to which a body corporate similar in nature to a Maltese limited liability company that is registered in an approved jurisdiction may apply to be registered as being continued in Malta, provided the law of such jurisdiction and the constitutive documents of the body corporate permit it to do so. Once the body corporate fulfils the requirements of Maltese law it may be registered as being continued in Malta within a fairly short period.

B. The Unlimited Partnership

An unlimited partnership may be formed by two or more partners and is characterised by the unlimited and joint and several liability of all the partners for all the obligations of the partnership with all their property, present and future, not merely up to the amount of their contribution to their partnership. It operates under a partnership name and has its own, separate legal personality, distinct from its partners. It is created by the signing of a deed of partnership followed by registration with the registrar of companies.

C. The Partnership

A partnership en commandite operates under a partnership name, and also enjoys its own separate personality as a legal person. Its obligations are guaranteed by the unlimited and joint and several liability of one or more partners, called the general partners, and by the liability limited to the amount, if any, unpaid on the contribution by one or more partners, called the limited partners. There has to be at least one general partner and one limited partner.

D. The Limited Partnership

The Maltese partnership en commandite or limited partnership can be used as a tax-transparent collective investment vehicle. Limited partnerships for investment purposes are set up as collective investment schemes. The Companies Act sets out the particular rules applicable to limited partnerships that are used as vehicles for collective investment schemes. There is no limit on the number of limited partners, and typically the promoter of the scheme would be the general partner with unlimited liability and the investors would be the limited partners whose liability is limited to the amount, if any, unpaid on their contribution. The investors do not have a say in the administration and representation of the partnership, which is vested in the general partner.

E. Foundations

Foundations are not new to the Maltese legal sphere but have been employed for many years by various sectors of society in many contexts. Act XIII of 2007 amending the Civil Code (chapter 16 of the Laws of Malta) introduced a second schedule to the Civil Code, creating a comprehensive legal structure regulating foundations and other organisations while conferring juridical personality on foundations upon registration.

A foundation is constituted by public deed inter vivos or by a will (testament) and no alternative forms of constitution are permitted. Maltese law differentiates between purpose and private foundations. When a foundation is established exclusively for a charitable, philanthropic or other social purpose, as a non-profit organisation, or for any other lawful purpose, it is referred to as a ‘purpose foundation’. On the other hand, a foundation is considered to be a ‘private foundation’ when it is established for the private benefit of one or more persons or a class of persons who can be ascertained or are ascertainable. An interesting feature of a Maltese private foundation is that the founder can also be a beneficiary of the foundation.

Foundations exist from the date of registration and cease to exist from the date when they are struck off from the relevant register. The term of a private foundation cannot exceed 100 years. An exception to this rule is made for purpose foundations, foundations used as collective investment vehicles or foundations used in securitisation transactions, which may all be established for an unlimited term.

There are various players within a foundation: (i) the founder; (ii) the board of administrators; (iii) the beneficiaries; and (iv) the protector or supervisory council. Any person who acts as an administrator on the board of administrators of a private foundation or a purpose foundation whose purpose is not charitable must, like a trustee of a trust, be authorised to act by the MFSA.

Maltese law goes out of its way to safeguard the beneficiaries’ rights and grants extensive powers to the courts to ensure such protection. Subject to terms of the foundation, an administrator is also obliged to provide full information as to the state and amount of the foundation property. Beneficiaries have a right to be informed of their entitlement to benefit under a foundation and also have the power to disclaim the whole or part of their interest. Subject to terms of the foundation, a beneficiary also has the right to sell, charge or otherwise deal with his interest.

It is important to distinguish foundations from other legal institutes, particularly trusts. First and foremost, foundations, unlike trusts, have separate legal personality. Consequently, in the case of foundations, assets are further segregated from the persons administering them, which may be reassuring for those persons who are reluctant to give up legal title to assets in favour of trustees they may hardly know.

Trusts and private foundations are definitely comparable in so far as both may be created for the benefit of beneficiaries who are identifiable or ascertainable. However, when it comes to purposes, foundations offer further scope. While purpose trusts are the exception under Maltese law and trusts for any purpose other than a charitable one will fail, a foundation may be established for a charitable, philanthropic or other social purpose, or as a non-profit organisation or for any other lawful purpose.

Foundations also offer certainty and enjoy recognition as persons under principles of private international law and, unlike trusts (which are sometimes dependent on the ratification of international conventions such as the 1985 Hague Convention on the Law Applicable to Trusts and on their Recognition), foundations are not usually dependent on international conventions to be recognised in cross-jurisdictional situations.

Even though trusts might be seen as more flexible than foundations, foundations offer various practical uses. A foundation may be particularly suited where the founder wishes to reserve more control than would be permissible in the context of a trust. Foundations are also proving to be particularly useful as special purpose vehicles in themselves or for owning all the shares in such special purpose vehicles, particularly because of the possibility of surmounting the problem of having to determine who is to own the special purpose vehicle (thereby lending themselves neatly to ownerless structures). Moreover, as foundations can be used for non-charitable purposes, they are particularly useful for bridging the gap between purpose trusts and private benefit trusts in jurisdictions like Malta, where non-charitable purpose trusts are not permitted. Finally, beyond the possibility of limited commercial uses and uses in the field of estate planning, private foundations increasingly also have an important role in the charitable sector.

F. Taxation Of Foundations

Regulations have recently come into force to provide certainty and cater for the lacuna previously present in Maltese tax law in relation to the tax treatment of foundations. By default, a foundation is to be treated, for tax purposes, in the same manner as a company ordinarily resident and domiciled in Malta, and therefore any rules applicable in the context of a Maltese company would equally apply to a foundation, including the applicable tax refunds on distributions.

A novel feature of Maltese foundations is that instead of being taxed as a company ordinarily resident and domiciled in Malta (as is the default position), a foundation may opt to be taxed in the same manner as a trust, whereby the provisions applicable to trusts would be applicable to the founder, the foundation and the beneficiaries. A Maltese foundation may also be set up with segregated cells and each cell would, for tax purposes, be treated separately from the other cells and taxed accordingly. Thus, one cell may be treated as a company ordinarily resident and domiciled in Malta, while another cell may be treated as a trust if it is more beneficial for that cell to be treated as such because of the nature of the income that particular cell derives. These options granted to Maltese foundations for income tax purposes provide broad planning opportunities and a great amount of flexibility when it comes to structuring one’s affairs in an efficient manner.

G. Protected Cell Companies (pccs) And Incorporated Cell Companies (iccs)

In 2004, Maltese law introduced regulations that allow the PCC model to be adopted by regular insurance companies, insurance brokers and insurance managers alike. A cell company is a company that contains one or more cells for the purposes of segregating and protecting the cellular assets of the company. A cell is in turn a class of shares within a cell company designated as a cell and created for the purpose of segregating and protecting cellular assets belonging to the company. A cell company is a single legal person; although a cell company may have any number of cells, such cells do not enjoy separate legal personality.

In 2010, the Companies Act was amended, empowering the responsible Minister to make regulations that provide for the formation, constitution, authorisation and regulation of ICCs and incorporated cells as limited liability companies with separate legal personality in the insurance and the investment sector. Three sets of regulations were subsequently issued under the Companies Act: (i) the Companies Act (SICAV Incorporated Cell Companies) Regulations (enacted by Legal Notice 559 of 2010), regulating the creation of sub-funds in terms of investment companies; (ii) the Companies Act (Cell Companies Carrying on Business of Insurance) Regulations (enacted by Legal Notice 243 of 2010); and (iii) the Companies Act (Incorporated Cell Companies Carrying on Business of Insurance) Regulations (enacted by Legal Notice 558 of 2010), regulating the creation of PCCs and ICCs in the insurance and reinsurance company sectors.


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