Malta Private Collective Investment Schemes
An interesting alternative to licensed CIS is afforded by private schemes, which are subject to a less stringent regime than their licensed counterparts. Private schemes are exempt from the need to obtain a licence under the Investment Services Act, yet must be recognized by the Authority – the Malta Financial Services Authority.
The Authority shall only issue a recognition to the private scheme, insofar that the following conditions are met cumulatively:
- The proposed directors and other officers of the scheme are fit and proper persons who are able to carry out the functions requested of them within the scheme. The identity of all ultimate beneficial owners must be disclosed to the Authority;
- The scheme must comply with all provisions of the applicable legislation, rules and guidelines which may be issued by the Authority from time to time;
Such recognition, albeit a formal stamp of approval by the Authority is not tantamount, nor equivalent to a licence. Consequently, the private scheme cannot avail itself of the special income tax rules, otherwise applicable to licensed schemes, whereby the subscription and redemption of units within the scheme, would insofar that the majority of the assets are located outside Malta, be subject to a blanket tax exemption.
Private CIS do not require an external manager, nor fund administrator. The investment decisions and valuations, which would otherwise be allowed only to the respective service providers, are vested in the scheme itself. This allows Private CIS to contain costs, to a significant degree.
Private CIS may take any corporate form, including a SICAV p.l.c or a private company. However, since one of the limitations for the establishment of a private CIS is that the number of participants be limited to fifteen (15), the latter – a private limited company is often the preferred medium. Private CIS, because of their restricted scope, and inability to solicit external investors, are also debarred from listing on the Malta Stock Exchange.
Private CIS must satisfy the following criteria, cumulatively in order to be recognized by the MFSA;
- The number of participants is limited to fifteen persons. The use of corporate entities subscribing to the scheme is still possible – however the maximum number of fifteen participants must still be satisfied;
- The participants must all be relatives or close friends to the promoters of the CIS;
- The scheme must remain private at all times – no solicitation to individuals outside the aforesaid circle are allowed.