Fund Structures

Funds can be set up as limited liability companies. Companies may be established as open-ended investment companies (SICAVs) or as close-ended investment companies (INVCOs).

Open-ended investment companies (SICAVs) 

  • A SICAV may be formed as a public or private company with variable share capital and is governed by the Companies Act. 
  • A public company may offer its shares or debentures to the public. A private company is restricted to the extent to which it can transfer shares and is prohibited from issuing any invitation to the public to subscribe to any of the shares or debentures of the company. 
  • They allow the introduction of additional investors without having to wait for the liquidation of an existing holding. 
  • The value of a unit in an open-ended scheme reflects the NAV of the scheme. 
  • The SICAV has become the most common form of retail and professional investor fund structures both for domestic purposes as well as international offerings. The main reason for this is that investment companies can easily benefit from Malta’s wide network of double taxation treaties and have low-running costs.

Close-ended investment companies (INVCOs) 

  • INVCOs are public companies with a fixed share capital. 
  • INVCOs business is restricted to the investment of their funds mainly in securities, while they can also operate as a retirement fund. 

The activities of an INVCO are further restricted by the following requirements: 

  • The company’s holdings in any other company not being an investment company with fixed share capital does not exceed 15 per cent by value of its investments; 
  • distribution of the company’s capital profits is prohibited by its memorandum and articles of association; and 
  • the company does not retain more than 15 per cent of the income derived from securities. 
SICAVs and INVCOs can operate as umbrella funds, whereby the share capital may be divided into different classes of shares, with each class of shares representing a distinct sub-class of the company. This allows the scheme to operate a number of separate sub-funds having different investment policies.

SICAVs can also be formed as Incorporated Cell Companies. Each incorporated cell within an incorporated cell company is a limited liability company endowed with its own legal personality.

Limited Partnerships

Private equity funds are usually set up as limited partnerships. 

  • Partnerships must have a registered office in Malta where they keep the personal information of all limited partners. 
  • Limited partnerships are regulated under the Companies Act. Under Maltese law, a limited partnership is any partnership that includes one or more limited partners. Their liability to pay the partnership’s obligations is limited to the amount that they have invested in the partnership. 
  • A limited partnership still needs general partners, who are fully liable for any debts that the partnership may incur. Both partners can be limited liability companies formed in any jurisdiction. 
  • The capital of the partnership can be divided into shares, however, this is not an obligation. The new regulations do not require the capital to be divided in this way. 
  • It is also possible for partnerships to be constituted as multi-class partnership or as multi-fund partnership.

Contractual Funds

  • Contractual funds are not deemed a separate legal entity since they are established through a contractual obligation. 
  • They can be licensed as single or umbrella funds, and are generally constituted by a public deed or by private writing. 
  • Private collective investment schemes (limited to 15 participants) may also be set up as Contractual Funds. 
  • A contractual fund may set up one or more special purpose vehicles, which would be a company and through which the fund may gain access to double taxation treaties. 
  • Both local and foreign custodians and fund managers can be appointed and funds can opt for listing on the Malta Stock Exchange.

Unit Trusts

  • Collective Investment Schemes can be constituted by a trust deed between a management company and a trustee. 
  • Unit trusts are mainly used for retail funds as they allow for the sale of separate units. 
  • Unit trusts are governed by the Trusts and Trustees Act. This Act enables both residents and non- residents to set up various trust structures such as constructive trusts, discretionary trusts, fixed interests trusts and purpose trusts. 
  • Trustees operating in Malta must be approved by the MFSA. 
  • Trusts established in foreign jurisdictions may be recognised in Malta, and it is therefore possible to set up an investment fund as a foreign law trust.

Shariah Funds

As a general rule, Shariah-compliant funds can be set up either as retail funds (UCITS or non-UCITS), PIFs or as AIFs. 

  • However, Ijarah Funds, Commodity Funds and Murabaha Funds, which generally invest in nonconventional asset classes, may be licensed in Malta as PIFs or AIFs, while Shariah-compliant Equity Funds can be set up as Maltese UCITS schemes, Maltese nonUCITS schemes, licensed AIFs, NAIFs or PIFs. 
  • Shariah Funds may be set up in accordance with the Shariah Fund Guidelines published by the MFSA and are regulated in the same manner as non-Shariah Funds. 
  • The level of disclosure and the applicable conditions are the same as those that are applicable to the respective category of retail or professional funds.

Umbrella Funds

A Collective Investment Scheme may be structured as a multi-fund (umbrella) scheme in Malta, with a number of sub-funds thereunder, constituted by one or more different classes of shares (which could be denominated in different currencies). 

  • Each sub-fund can have its own investment objectives, policies and restrictions. 
  • The assets and liabilities of each sub-fund are considered to constitute a separate patrimony, distinct from the assets and liabilities of (and ring- fenced from the creditors of) the other sub-funds. 
  • This structure allows for major cost-savings and allows investors to switch between different sub-funds easily.

Incorporated Cells

The cellular concept of a SICAV ICC is also available under Maltese law. The Incorporated Cell Company (ICC) provides for the establishment of a cluster of incorporated cells grouped under an incorporated cell company structure. 

  • Assets and liabilities are attributed either to the incorporated cell company itself, or to a particular separate cell of the cell company. 
  • Each incorporated cell must be a limited liability company (SICAV or INVCO) with separate legal personality and requiring a licence independently from the ICC. 

The difference between umbrella funds and ICCs lies in the fact that in an ICC, liability is limited through the separate legal identity of each cell, whereas in a segregated multi-fund company, limitation of liability is achieved through the option of segregation of assets and liabilities of each sub-fund stipulated by virtue of the company’s memorandum of association.