In relatively recent years, certain legal institutes have been introduced into the Maltese legal system which give clients a higher number of legal vehicles which they may use for their investment, asset-protection or social purpose. Among these legal institutes, one finds trusts, foundations and associations.
Trusts
The Trusts and Trustees Act (Chapter 331 of the Laws of Malta) regulates the setting up of trusts in Malta. Through strict regulation, the Act provides a high level of security in relation to the authorisation and supervision of trustees by the Malta Financial Services Authority (MFSA).
The Act lays down that a trust exists where a trustee holds as owner or has vested in him property under an obligation to deal with that property for the benefit of beneficiaries, whether or not yet ascertained or in existence, which is not for the benefit only of the trustee, or for a charitable purpose, or for both such benefit and purpose aforesaid.
The trust property constitutes a separate fund owned by the trustee, distinct and separate from the personal property of the trustee and from other property held by the trustee under any other trust.
The types of Maltese trusts include security trusts, discretionary trusts, charitable trusts, contingent trusts, life interest trusts, fixed interest trusts and trusts for commercial transactions.
In the Schedule, the Act incorporates the Hague Convention on the law applicable to trusts and on their recognition, which Malta has ratified.
Foundations
A foundation is defined by Article 26 (1) of Sub-Title 1 of Title III of the Second Schedule to the Civil Code as an organization consisting of a universality of things whereby the assets thereof are destined either:
and are entrusted to the administration of a designated person or persons.
A foundation is constituted in writing by means of a public deed. It may also be constituted by the founder or founders by means of a will. However, in both cases the patrimony, namely the assets and liabilities of the foundation, must be kept distinct from those of the founder or founders, administrators or the beneficiaries. A foundation also presupposes an entity with a distinct legal personality from that of the founders thereof, thereby resulting in a separate moral person constituted by the deed of foundation and which is able to own property, acquire its own assets and do other acts which are corollary of a distinct juridical personality.
Maltese law mainly recognizes two types of foundation namely the private and the public foundation. A private foundation is constituted by the founder for the exclusive private benefit of one or more persons or for the benefit of a defined class of persons being the beneficiaries of the fund. On the other hand, a public foundation may be established for a charitable or social purpose whether as a profit or non-profit organization. Both types of foundations must have a lawful purpose in order to be valid in terms of Maltese law.
Associations
According to Article 27 of Sub-Title 1 of Title III of the Second Schedule to the Civil Code, an association is an agreement between three or more persons to establish an organisation with defined aims or purposes to be achieved through the dedication of efforts and resources by such persons and others who may join voluntarily. The patrimony of the association is distinct from that of the members, its administrators or any beneficiaries. Associations are not bound to register as legal persons but are entitled to do so.
Associations may be established for the promotion of a particular trade or profession or even for a social purpose or on a non-profit making basis. In the latter cases, the Voluntary Organisations Act may also be applicable to associations in the same manner as it applies to trusts and foundations.
Our lawyers working in the corporate sector are well versed on the significance of the abovementioned legal vehicles and are able to give expert advice to our clients on the incorporation of a trust, a foundation or an association.
