The new Article 43B of the TTA caters specifically for ‘family trusts’ defined as a trust created to hold property settled by the settlor or settlors for the present and future needs of family members and dependants.
This new article provides that a trustee company:
- whose objects and activities are limited to acting as trustee in relation to a specific settlor or settlors and providing administrative services in respect of specific family trusts;
- which does not hold itself out as trustee to the public; and
- does not act habitually as a trustee (in any case in relation to more than five settlors at a time),
is not required to go through the full authorisation process with the Malta Financial Services Authority (MFSA), but need merely register with them. This proposal had already been advanced by the MFSA on 30 January 2012 as part of a proposed Bill to amend various financial services laws.1
For the purposes of this registration procedure, the MFSA has also been given the power to issue rules regulating trustees that are subject to this procedure. These rules may lay down additional requirements and conditions relating to the activities of such trustees, the payment of their fees, or any other matter that the authority may consider appropriate. The clear aim of this new provision is that of incentivising the use of private trust companies in Malta, in the context of family trusts, by simplifying the authorisation procedure and offering a more straightforward registration route.
As recently as 25 November 2014, the MFSA has issued for consultation the draft rules that it is proposing to publish in terms of the recently amended Article 52(3) of the TTA to regulate PTCs (or trustees of family trusts as they are referred to). The MFSA has set 23 December 2014 as the deadline for feedback to be submitted. The rules are expected to be published early in 2015.2
The draft rules provide a definition of persons who are deemed to be ‘family dependants’ in relation to family trusts and set out further details relating to the registration process of such PTCs. The idea is that the registration process for PTCs will be simpler and quicker than the full-blow authorisation that applies to a professional trustee, although the draft rules understandably still set out certain reporting obligations and duties of cooperation with the regulatory authorities.
The idea is that these rules will be binding on PTCs and will not operate merely as guidelines.
PTCs operate in an extremely useful manner and have become particularly attractive due to a number of advantages that they bring to the administration of an estate, including:
- the possibility of having effective control over the PTC itself (and as a result on the administration of the trust) in the form of shareholder control (where this is possible and desirable)3;
- a simple and efficient way of changing trustees through the removal and substitution of members of the Board of Directors of the PTC rather than the forced removal or resignation of the trustee itself;
- an increase in settlor or other family involvement through the management of the PTC;
- enhanced communication with all parties involved, including beneficiaries; and
- a reduction in administration costs; among other benefits.
This article was published in Trusts & Trustees (2015)
First published online: January 20, 2015
1. On 30 January 2012 the MFSA issued for consultation a proposed Bill entitled ‘Various Financial Services Laws (Amendment) Act, 2012’ which was primarily aimed at transposing Directive 2010/78/EU as well as other amendments to various financial services laws but also proposed the new art 43B that was eventually enacted by means of Act XI of 2014 in April 2014. The consultation procedure was concluded on 29 January 2012 <http://www.mfsa.com.mt/Files/Announcements/Consultation/Documents/30_01_2012%20Consultation%20Document%20-%20Bill%20transposing%20Omnibus%20I%20Directive.pdf> accessed 5 January 2015.
2. Consultation Document: ‘Proposed Rules for Trustees of Family Trusts’ (MFSA Ref: 09/2014) 25 November 2014; See, <http://www.mfsa.com.mt/pages/announcement.aspx?id=6598> accessed 5 January 2015.
3. There may be considerations that make this less desirable depending on the settlor’s particular circumstances.