A private collective investment scheme is a fund:
a) that limits the total number of participants to fifteen persons;
b) where the participants should be close friends or relatives of the promoters;
where the scheme is essentially private in nature and purpose;
where the scheme does not qualify as a professional investor fund in terms of guidelines issued for this purpose by the MFSA.
The law allows the flexibility that one of the fifteen unit holders can be a body corporate, on condition that:
- Taking into account the ultimate individual beneficial owners of such company, the maximum number of fifteen participants is still satisfied;
- the company's ultimate individual beneficial owners are close friends or relatives of the promoters;
- the company is in no manner involved in the manager or administration of the scheme and its connection with the scheme is merely that of an investor.
If a scheme qualifies as a private scheme, then there is no need to get a license under the Investment Services Act, and there would only be the requirement to obtain a recognition from the MFSA. The MFSA will only grant the scheme recognition as a private collective investment scheme if it is satisfied that the scheme complies with all the criteria and requirements for it to be considered private in nature and purpose and is satisfied of the “fit and proper” status of the Directors/Officers of the Scheme as well as that of its participants. The MFSA will normally limit its due diligence procedures to determining the integrity of the persons concerned and unlike in the case of licensed schemes, the MFSA will not assess the competence of the persons responsible for managing the Scheme, and will not subject the Scheme to any investment or borrowing restrictions or other conditions other than those which may be specified in the recognition certificate.
