On the 14th of December 2012, the Malta Financial Services Authority (MFSA) issued a consultation document comprising proposed amendments to the Trusts and Trustees Act (Chapter 331 of the Laws of Malta), which is the main body of law that regulates trusts and trustees under Maltese law, and other related legislation. Click here for a copy of the consultation note.
Below is a brief outline of some of the major amendments which are being proposed:
Duration of Trusts
In line with what is happening in other jurisdictions the consultation includes a proposal to extend the 100 year perpetuity period of trusts to 125 years;
Settlor Reserved Powers
The MFSA proposes that a new article specifically dealing with settlor reserved powers be introduced. This proposed article expressly provides that the reservation or grant by the settlor of any beneficial interest in trust property or of any of the powers to appoint, add or remove trustees, protectors or beneficiaries and of any powers to appoint an investment adviser or manager, shall not affect the validity of a trust.
Duties of Trustees
The proposed amendments to article 21 of the Trusts and Trustees Act include a general express duty of trustees to avoid conflicts of interest, and an obligation on authorised trustees, which obligation currently applies to private trustees only, to draw up an inventory of the trust assets.
Another new article is being proposed which enables the terms of a trust set up for a charitable purpose, to provide for the appointment of an enforcer, with the duty to ensure that the trustee administers the trust in accordance with its terms and its charitable purpose, and to take action against the trustee for any breach of trust.
Furthermore, with regard to charitable trusts, the MFSA is also proposing to provide the Court with the power to vary the terms of these trusts where the charitable purpose has ceased to be charitable or has ceased in any other way to provide a suitable and effective method of using the trust property. In such cases it is being proposed that the Court may declare that the trust property shall be held for such other charitable purpose as the Court considers to be consistent with the original intention of the settlor.
Limitation of Actions
It is being proposed that the limitation of 30 years within which action can be taken against trustees for fraud or for the recovery of trust property, be removed, thus making it clear that trustees cannot acquire by prescription.
Authorisation and Regulation of Trustees and Other Fiduciaries
The MFSA is proposing to limit authorisation to act as trustees only to corporate trustees, and this in consideration of the risks involved in the trustee business and the onerous obligations imposed on trustees, but without extending such limitation to persons wishing to act as administrators of a foundation, or mandatories (nominees) who hold property for another person. With regards to the latter, however, the MFSA are proposing requiring authorisation for those individuals or companies who act as such in the holding of securities and/or immovable property.
Minimum Capital and Professional Insurance
The MFSA are also proposing the introduction of a minimum share capital requirement of €25,000 and a financial resource requirement applicable to corporate trustees and corporate mandatories. It is also being proposed that corporate trustees should be obliged to hold a suitable professional insurance cover commensurate to the activities provided by the trustee.
New Auditor Reporting Duties
Another new article is being proposed dealing with the duty of auditors of authorised trustees, corporate mandatories, and corporate administrators of foundations to notify the authority of specific circumstances which they become aware of in their capacity as auditors.
As part of its licensing process the MFSA is also proposing requesting corporate trustees, corporate mandatories and corporate administrators of foundations, to identify a Compliance Officer, i.e. an individual who will be responsible for ensuring the trustee’s, mandatory’s and administrator’s compliance with the requirements imposed by the Trusts and Trustees Act.
The Identification of the Courts
Through this consultation document the MFSA is consulting with the industry as to whether and how (if at all) the article in the Trusts and Trustees Act dealing with Court applications, enforcements and hearings of trust matters, should be amended to provide for procedures regulating both contentious and non-contentious trust matters. The Trusts and Trustees Act as currently drafted, simply makes reference to the Civil Court in its Voluntary jurisdiction, which is traditionally limited to non-contentious issues.
Unit Trusts and Sub-Trusts
The MFSA is also evaluating the need for regulations providing for the use of sub-trusts in pensions and investments, the scope of sub-trusts being that of creating separate funds within the same trust and governed by the same trust deed which are segregated one from the other. The MFSA is asking the industry whether this should be expressly regulated through statutory provisions, and what issues such provisions should seek to regulate.
Private Family Offices
The MFSA are also proposing the introduction of a new article by virtue of which a trustee set up as a company for the purposes of acting as a trustee to specific settlors and in respect of specific family trusts, does not require authorisation, but is only required to apply for registration with the MFSA. This registration procedure will apply to the extent that the trustee does not otherwise hold himself out as trustee to the public and does not habitually act as such, and in any case not in relation to more than 5 settlors.
Some of the other proposed amendments aim to simply clarify the current provisions, such as those dealing with the termination of a trust and the appointment of successor trustees.
The consultation document also contains certain proposed new regulations which are to be issued under the Trusts and Trustees Act dealing with, the registration of notaries to act as qualified persons, as well as regulations dealing with notarial trust deeds and their registration, conservation and access.
The MFSA is also currently working on an updated and more detailed Code of Conduct for Trustees, Accounting Guidelines for Trustees and an Annual Compliance Return for Trustees, which documents will be issued for consultation during the course of this year.
While all interested parties have been invited to send their comments on this consultation document in writing by the end of February, lawyers at Ganado Advocates have reviewed the consultation document and the draft proposed legislation carefully, and have drafted and sent detailed submissions to the MFSA in relation thereto.