MALTA S REGULATORY REGIME FOR TRUSTEES OF FAMILY TRUSTS

Transcription

1 MALTA S REGULATORY REGIME FOR TRUSTEES OF FAMILY TRUSTS Dr Petra Camilleri Analyst - MFSA 12 April 2018 STEP MALTA CONFERENCE 2018

2 HOW DID WE GET HERE? A BRIEF HISTORY Malta a hybrid legal system : Roman Law and Code Napoleon Civil Code English Law Public Law, Private International Law, Commercial law 1988 Offshore Trusts Act Trusts available for non-residents and property outside of Malta (other than movables) Registration of Trust Deed with the Malta Financial Services Authority 1994 Recognition of Trusts Act which incorporated the Hague Convention of Recognition of Trusts into Maltese Law 2004 Trusts Amendment Act Trusts integrated fully into Maltese law Conditions for EU Accession removal of offshore rules applicable to trusts Removed requirement for registration of trusts greater focus on regulation of trustees Amendments of various other laws (Income Tax Act, Civil Code etc) Various Financial Services Laws (Amendment) Act 2012 Introduction of the concept of Family Trusts

3 REGULATION OF TRUSTEES THE MALTESE SCENARIO Trusts and Trustees Act, Cap. 331 Laws of Malta ( TTA ) today s main source of legislation relating to trusts and trustees. Article 43 - A person acting as trustee who : (a) receives or is entitled to remuneration for so acting, or (b) does so on a regular and habitual basis, or (c) holds himself out to be a trustee, must obtain AUTHORISATION from the MFSA, which is the competent authority for the regulation and supervision of trustees.

4 THE INTRODUCTION OF FAMILY TRUSTS REGULATORY APPROACH FOR TRUSTEES OF FAMILY TRUSTS Malta maintain a competitive edge whilst ensuring a robust regulatory environment Mirroring private trustee regulatory regime available for individuals Regulatory approach based on international models of Private Trust Companies, but slightly more controlled Article 43B, TTA introduced by virtue of the 2012 amendments.

5 WHAT IS A FAMILY TRUST? DEFINITION IN TERMS OF ARTICLE 43B 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 can be ascertained.

6 TRUSTEES OF FAMILY TRUSTS WHAT S THE DIFFERENCE? Trustee set up as a company to act as trustee for a family trust(s) as defined in Art. 43B: DOES NOT require authorisation Subject to a registration requirement Still subject to a degree of ongoing supervision

7 ELIGIBILITY In order to qualify for registration as a trustee of family trusts, a trustee company must: have its objects and activities 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; not otherwise hold itself out as a trustee to the public; not act habitually as a trustee, in any case in relation to more than five settlors at a time.

8 REGISTRATION PROCEDURE Private Trust Companies (PTCs) in other jurisdictions: Generally prohibited from providing their services to the public at large Exempt from any authorisation/licensing requirements Merely subject to notification to relevant authority Malta: Registration requirement - beyond mere notification Mitigating dangers of a regulatory vacuum

9 WHY OPT FOR A TRUSTEE OF FAMILY TRUSTS? Services of a private trustee in corporate form Trustee company to manage family estate/family business under trust for the benefit of family members - as opposed to placing assets under the control of professional trustees. Tailor-made estate-planning for high net-worth individuals to suit the specific needs of their families. Promotes continuity of business and reduces risk of business fragmentation. Settlor and family members involvement in family business comfort of experience, knowledge of business history and dynamics

10 WHY OPT FOR A TRUSTEE OF FAMILY TRUSTS? (2) Possibility of appointing settlor and/or family members to the Board of Directors Shareholders may be family members shareholder voting control over the trustee company Flexibility Faster decision-making Possibility of reduction of administrative costs

11 SETTING OUT A REGULATORY FRAMEWORK RULES FOR TRUSTEES OF FAMILY TRUSTS Amendment of Article 52 TTA - empowering Authority to issue binding rules to regulate trustees of family trusts. Additional requirements and conditions : Activities of such trustees Responsibilities vis-à-vis MFSA Registration Procedure Rules for Trustees of Family Trusts published on 29 April 2016, following Consultation Procedure.

12 MATTERS REGULATED BY RULES (1) DEFINITION OF FAMILY MEMBERS/FAMILY DEPENDANTS Individuals related to the settlor, by consanguinity, adoption or affinity, in the direct line up to any degree, whether ascendant or descendant, or in the collateral line up to the fifth degree inclusively. Charitable purpose/institution set up for a charitable purpose may benefit as a residual beneficiary upon the termination of the family trust.

13 MATTERS REGULATED BY RULES (2) CONDITIONS FOR REGISTRATION Limited liability company to be registered in Malta Submission of an application to be included in Register of Trustees for Family Trusts available to the public and updated on a regular basis Applicant s M&A to limit the company s objects and activities to acting as trustee in relation to a specific settlor(s) and providing administrative services only in respect of a specific family trust or trusts. Must provide a declaration that trust structure(s) complies with definition of family trust, as defined.

14 MATTERS REGULATED BY RULES (3) CONDITIONS FOR REGISTRATION (CONT D) Board of Directors to be composed of at least three (3) directors. ALL directors must be individuals ALL directors to undergo fit and proper test At least ONE Director: Proven knowledge and experience in trust administration One of the executive directors/senior officer: MLRO

15 BOARD COMPOSITION THE BEST OF BOTH WORLDS Settlor and family members retain control through participation in management of the trust inside knowledge of any underlying business and family dynamics Average family members (acting as directors) unlikely to have the necessary expertise and experience relating to trust administration Risk of disregard of terms of trust, corporate formalities and trust being attacked as a sham if trust is administered only by family members with no professional guidance Director with trust knowledge - ensures professional standards of trust management and compliance with legal requirements.

16 DUTIES OF DIRECTORS WHAT DOES IT ENTAIL? Ensuring the proper operation and management of the trustee company - TTA and Companies Act requirements Maintenance of accounts, holding of meetings and keeping minutes, record-keeping, including beneficiary identification documents, recording of any discretions exercised and any dealings, etc Obtaining written consent of the MFSA prior to certain actions Notification obligations to the MFSA of certain events

17 REPORTING OBLIGATIONS & SUPERVISION WHAT ARE THE EXPECTATIONS? Open and co-operative relationship with the MFSA and other regulatory authorities Annual reporting to the Authority: Details relating to the trustee company and number of trusts administered by it Certificate of Compliance Timely submission of any required documents or returns in terms of the Rules or upon MFSA s request, as may be required from time to time. Keep accurate accounts and records of administration of family trusts and maintenance of proper records accessible to the MFSA to monitor compliance, particularly during on-site inspections. Record retention requirements

18 CONCLUSION Maintain Malta s competitiveness as a trust jurisdiction Trustees of Family Trusts A local statutory equivalent to the Private Trust Company to promote the use of such alternative structures Not intended to bypass authorisation and supervisory framework applicable to professional trustees Recognition of the limited and private nature of such operations Ensuring that Malta s sound reputation is not jeopardised by striking the right regulatory balance

19 Thank you Dr Petra Camilleri Analyst Malta Financial Services Authority