Malta Family Trust

The Trust and Trustees Act (Chapter 331 of the Laws of Malta) (TTA) provides for the appointment of Trustees to administer and oversee the functioning of trusts in Malta. As of May 2016, the Malta Financial Services Authority (MFSA) issued guidelines, the rules of which specifically provide for the process of setting up a family trust as well as the roles to be undertaken within this family trust, which may also be referred to as a Private Trust Company. 

What is a Malta Family Trust?

A Malta family trust is a trust created to hold property settled by the settlor or settlors for the present and future needs of family members or family dependants, who are definite and ascertainable. Nothing, however, precludes discretionary family trusts from being created for the benefit of a class of family members or dependants who are ascertainable, but not yet definite.

Family Members and Dependents

Dependents and family members (in terms of these new rules and of article 43B of the TTA) refer to any individual who is related to the settlor creating the trust, by consanguinity, adoption or affinity in the direct line up to any degree, whether ascendant or descendant. If in the collateral line, this is up to the fifth degree inclusively.

It is also possible for the trust instrument to provide for a charitable purpose or an institution set up for such purpose, which will benefit as a residual beneficiary upon the termination of the family trust.

Who Do These Rules Apply To?

The Rules of Trustees for Family Trusts apply to Trustees of Malta trusts. These must be set up according to Article 43B of the TTA and their objects and activities must be limited to acting as a Trustee in relation to a specific settlor or settlors, as well as providing administrative services in respect of a specific family trust or trusts. They also apply where the Trustee does not hold itself out as a Trustee to the public in terms of article 43 of the Act, and where the Trustee does not habitually act as Trustee in relation to more than five settlors of a family trust at this same time.

The Requirements for Trustees when Setting up a Family Trust 

The Trustee of a Malta family trust is subject to a registration process, as per article 5 of the Rules for Trustees of Family Trusts. All Trustees who fall within the remit of Article 43B and, therefore, require registration in terms of the Act, are expected to have regard to these rules. Most significantly, a Trustee registered in terms of article 43B may not carry out any other activity regulated by the Trusts and Trustees Act, including acting as a mandator or administrator for Malta private foundations. The Trustee is also not permitted to carry out duties of a company service provider (as defined in the Company Service Providers Act), or any other duty that would require authorization in terms of the TTA Article 43. 

It will, therefore, only be possible for a Trustee registered in terms of article 43B to carry out his duties as a Trustee in relation to a specific settlor or settlors of the family trust. This must be for a maximum of five settlors at a time, where the trustee will provide administrative services only in respect of a specific family trust(s).

Once the Trustee is registered in terms of article 43B of the TTA, activities shall commence within 12 months of the granting of registration. Should the Trustee be unable to comply with this requirement, the Authority may cancel or suspend the registration.

Registration of a Trustee when Setting up a Family Trust

When setting up a family trust, the registration of the trustee can be carried out through the form of a company, once the criteria in Article 43B of the TTA has been fulfilled. Upon doing so, it becomes subject to a specific registration process and not the authorisation generally required in terms of the Act.

For such a Trustee to be eligible for registration in terms of article 43B, the Trustee company must satisfy the following criteria at application stage as well as on an ongoing basis:

1. The Trustee company must be a limited liability company registered in Malta, as per the Companies Act
2. The applicant must submit a request in the form and manner prescribed by the MFSA. This will then be included in the Register of Trustees for Family Offices, which will be kept by the MFSA and shall be available to the public and updated on a regular basis.
3. The Memorandum and Articles of Association of the applicant company shall limit the objects and activities of the company to acting as a Trustee for specific settlor/s. This cannot be for more than 5 settlors at a time, where the trustee is limited to providing administrative services only for a specific Malta family trust(s)
4. The applicant company must be covered by insurance at all times. This must be proportionate to the nature and size of the activities carried out by the Trustee company.
5. The applicant company’s Board of Directors must be made up of at least 3 directors, all of whom shall be collectively responsible for the proper administration of the Trustee company. This would include the fulfilment of the relevant Trustee’s duties.
6. The directors must be individuals, which according to the MFSA, are deemed to be fit and proper persons.
7. The directors must submit a personal questionnaire in the form and manner as prescribed by the MFSA to determine their fitness and properness. The MFSA will thereby establish the proposed director’s:
8. Integrity: the proposed director must be of good repute and act honestly and in a trustworthy manner in relation to clients and other involved parties
9. Competence & experience: the proposed director must be able to demonstrate an acceptable level of knowledge, professional expertise and experience in relation to the role assumed.
10. Financial soundness & solvency: the proposed directors must be able to demonstrate the ability to effectively manage their personal financial resources.
11. At least one of the proposed directors of the company must possess knowledge and experience in relation to the administration of trusts.
12. One of the executive directors or another senior officer at the company shall take on the role of Money Laundering Reporting Officer (“MLRO”) in terms of the Prevention of Money Laundering and Funding of Terrorism Regulations (S.L. 373.01, Laws of Malta) and the FIAU’s Implementing Procedures. Such officer shall be responsible for the fulfilment of the obligations applicable to the MLRO in terms of the said regulations and procedures.

Documents Required for Registration of a Private Trust Company

The applicant Trustee Company must also provide the following documents to the MFSA:

1. Memorandum and Articles of Association of the company;
2. A copy of the trust deed for every family trust that the Trustee intends on administering at application stage;
3. A declaration that the proposed trust structures comply, and shall continue to comply, with the definition of a family trust as prescribed by the Act and these Rules;
4. An application fee, as may be prescribed by the MFSA;
5. Copies of the standard management agreements (client agreements) that the applicant intends to use.

The MFSA may also request that the applicant company produce any additional information, as deemed appropriate. Once the MFSA is satisfied that the conditions and requirements mentioned above have been fulfilled, it will proceed to register the Trustee in the Register of Trustees for Family Offices.

If it is the case that the Trustee company was formerly registered as a Trustee for Malta Family Trusts, however no longer satisfies the requirements to act as such, should the Trustee wish to provide trustee or fiduciary services in terms of Article 43 of the Act, then the Trustee must, within 30 calendar days, apply to the MFSA for authorisation to act as a Trustee.

Failure to seek the necessary authorisation will result in the Trustee being prohibited from providing future services. The MFSA will, subsequently, cancel the trustee’s registration as a Trustee for Malta Family trusts.

Duties of the Directors of a Trustee Company

When setting up a family trust and subsequently establishing the trustee company, it is essential to set out the individuals who are to hold the role of the director within the trustee company. The directors are responsible for ensuring the proper operation and management of a trustee company. It is crucial that they always act in line with the provisions of the Act and the Rules of Trustees for Family Trusts, as well as the general rules applicable to Directors as per the Companies Act.

According to the Rules of Trustees for Family Trusts, the duties of the directors shall include the following:

1. A declaration, which is to be submitted to the MFSA in the form prescribed. Upon submitting a request for the registration of the trustee company as a trustee for Malta Family Trust, the following must be clearly indicated:
2. The name of the Malta trustee company applying for registration
3. Names and addresses of the shareholders of the Malta trustee company
4. Names and addresses of the directors of the Malta trustee company
5. The number of Malta family trusts being administered by the trustee company, if any, at application stage.
6. A statement providing a clear indication that the trustee company satisfies all the requirements which exempt it from authorization, but make it eligible for registration as a Trustee for Malta Family Trusts
7. Details of the registered office and place of business of the Trustee Company
8. An annual submission of a Certificate of Compliance on the anniversary of the date of Registration, utilising the form found in Annex 1 of these Rules.
9. An assurance that the trustee company’s accounts are duly accurate and that the relevant records are kept for the administration of the trust. The directors must also ensure that the company establishes adequate systems to properly maintain records of the identity and residence of beneficiaries and of the dealings and assets in connection with the Malta family trust and compliance with applicable law. These accounts and records should be available for inspection by the MFSA.
10. Prior written consent by the MFSA is required for the following acts to be carried out:
11. Upon registering the appointment or resignation of a director, or in the event that any of the directors have their engagement terminated or are otherwise hindered in the performance of their duties;
12. Decisions affecting any change which would have a bearing on the trustee company’s eligibility for re-registration, including any change to its charter, statute, Memorandum and Articles of Association or any other document constituting the company, directors or members;
13. Surrendering its registration
14. The MFSA must be duly notified in writing and without delay if:
15. There is any new engagement by the registered trustee in relation to any additional family trusts(s). This must follow registration with the MFSA and providing the authority with a copy of the relative trust deed and the relevant declaration that the proposed trust structure(s) complies. It must nonetheless continue to comply with the definition of a family trust as prescribed by the Act and these Rules;
16. There is any change in the shareholding of the registered trustee.

Surrender, Suspension or Cancellation of Registration of Family Trusts

Surrender of Registration

In the event that a registered trustee intends to surrender its registration, it must inform the MFSA of this at an early stage. The MFSA may deem it necessary that the trustee delay this surrender of registration as a trustee of Malta family trusts, or wind-up such business in accordance with any conditions which may be imposed on the MFSA.

A registered trustee shall abide with the following procedure for surrendering its registration. This may be subject to additional requirements imposed by the MFSA:

1. Once the registered trustee company has informed the MFSA of its intention to surrender its registration, the registered trustee shall submit the following confirmations/documents to the authority:
2. A formal request asking for approval to surrender its registration;
3. A certified true copy of the Directors’ Resolution confirming the company’s intention to surrender its registration certificate, once the necessary formalities are finalized. This is subject to the MFSA’s approval;
4. Confirmation that the registered trustee has given due notice to its clients of its intention to surrender its licence;
5. A confirmation that no litigation is pending, arising out of any event that occurred while the registered trustee was registered;
6. A confirmation that the registered trustee will remove from all letterheads and any other stationery, any reference to being registered by the MFSA.
7. A confirmation that the registered trustee has informed its auditor and insurer of its intention to surrender its registration.
8. Once all of the aforementioned requirements have been duly met, the MFSA shall commence the approval process of the surrender of registration. The final decision shall be conveyed to the registered trustee, which will then cease to be so registered thereafter.
9. The registered trustee will subsequently return the original registration certificate to the MFSA;
10. Following the MFSA’s approval of the surrender, unless arrangements are made for the winding up of the registered trustee, a certified true copy of the Constitutional Document of the registered trustee must be amended, removing all references to acting as trustee of family trusts from its Objects Clause. It may also be deemed appropriate to change the name of the registered trustee. This must subsequently be submitted to the MFSA.

Suspension/Cancellation of Registration 

The MFSA may, at any time, suspend or cancel the registration of a trustee registered in terms of article 43B of the Act (as provided in these Rules) if:

1. It considers that the holder of the registration no longer satisfies the requirements laid out in these Rules and fails to seek authorization, where applicable, to act as a trustee within 30 days;
2. It is of the belief that the holder of the registration doesn’t fulfil the requirements set out under the Act or Rules applicable, or has failed to satisfy or comply with any obligation or condition, which the Trustee or the Registration itself is subject to;
3. The MFSA has been furnished by, or on behalf of, the registered trustee, with information or declarations which are false, inaccurate or misleading;
4. Within 12 months from the date of granting registration, the registered trustee doesn’t commence its registered activities.

Reporting Obligations & Co-operation with Regulatory Authorities

A registered trustee in terms of the Trusts and Trustees Act, is expected to openly co-operate with the MFSA and any other relevant regulatory authorities.

The registered trustee must also have arrangements in place for all records and accounts of its administration of the family trusts to be kept. These records must be easily accessible, allowing the MFSA to carry out its duty to monitor compliance with any requirements under the TTA and the Rules of the MFSA. This is particularly important in the event of on-site compliance visits which may be carried out by the MFSA. The trustee must ensure that backups of these records are maintained.

A registered trustee must also ensure that all submissions required under these Rules, and any other submissions which the MFSA may request, are submitted in a timely manner. The trustee must retain the records relating to the administration of a family trust for a period of not less than 10 years from the date of termination of the trust or trusteeship, whichever occurs earlier. 

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