Following a five year process of review and consultation, the Trusts and Trustees (Amendment) Act was published on the 25th of April 2014, implementing a number of key changes to the legal and regulatory regime governing trusts and trustees in Malta. The changes introduced are welcome, and are generally intended to either clarify existing provisions, or to introduce useful new concepts and flexibilities, such as the introduction of ‘family trusts’
An overview of the key changes is provided below.
Applicability
Article 1 of the Act has been amended to clarify that persons acting as trustees, but not required to obtain authorisation, are subject to the provisions of the Act, except for those provisions relating to the registration of trustees.
Rights of beneficiaries
The amendment states that ‘rights of a beneficiary are personal to him and cannot be transmitted by inheritance except as provided for in the terms of the trust’. This indicates that an heir of a beneficiary cannot advance a claim with regard to a beneficial entitlement, unless expressly provided for in the terms of the trust.
Duration of trusts
The perpetuity period applicable to a trust is being extended to 125 years.
Settlor reserved powers
A new article has been introduced providing that the settlor may reserve powers to ‘appoint, add or remove trustees, protector or beneficiaries’ and powers to appoint any ‘investment adviser or investment manager’ without effecting the validity of the trust or delaying the taking effect of the trust.
Appointment of trustees
The act also introduces a number of provisions aimed at clarifying the processes that are applicable in the case of death or insolvency and winding up of trustees.
The Enforcer
The act introduces the new office of ‘enforcer’. An enforcer may only be appointed with respect to a charitable trust (in non-charitable trusts the functions of the enforcer fall to the beneficiaries). The role of the enforcer is that of ensuring that the trustee administers the trust in accordance with the terms of the trust and to promote the purposes of the trust. The law further provides that should the enforcer become aware that the charitable purposes of the trust are not being observed, the enforcer is to take action against the trustee for breach of trust.
Regulation of trustees
A number of amendments focusing on the regulation of trustees are provided for by the act. These include the introduction of a minimum capital requirement of EUR 15,000 for both trustees as well as mandatories, whether individuals or body corporates. The law provides for a transition period of 2 years with respect to this requirement. A requirement to maintain insurance cover at all times is also introduced; a transition period of 6 months has been granted.
Family trusts
The act introduces a light touch regime for ‘family trusts’. In case where a trustee is set up as a company whose objects and activities are limited to acting as trustee in relation to a specific settlor or settlors and providing administrative services in respect of a specific family trust or trusts, and which does not otherwise hold itself out as trustee to the public, and which does not act habitually as a trustee in any case in relation to move than give settlors at a time, then authorisation in term of the Trusts and Trustees Act is not required. Instead a simple registration is required.
Auditors’ obligations
The act introduces the duty on auditors of trustees to report to the MFSA certain issues or facts which may come to the attention of auditors in their capacity as such, including any facts which could lead to a serious qualification of the auditor’s report or which constitute a material breach of the legal and regulatory obligations of trustees.
Public interest powers
The act grants the competent authority (the MFSA) broad powers to perform various actions in order to protect the public interest. The actions which the MFSA may take include that of requiring the trustee to perform specific actions, that of appointing persons to advise trustees on the proper conduct of their business, and the power to appoint a person to take charge of the assets of a trustee.
