Redomiciliation of investment funds into Malta
Regulations issued at the end of 2002 permitting the redomiciliation of companies into and out of Malta have had the effect of prompting a considerable number of companies to be continued principally into Malta.
There are various reasons for this, but these regulations are being extensively used in the context of the redomiciliation to Malta of offshore companies providing fund management services or offshore investment funds that have decided to move to an onshore centre.
The possibility of redomiciling existing investment funds is an important facility in that it ensures continuity of performance, it does not give rise to the crystallisation of capital gains for investors, the custody or prime brokerage contract remains in place, assets remain untouched and do not need to be transferred or adjusted in any way, and most importantly, unitholders remain registered as before with their status unaffected by the move.
The primary effect of a redomiciliation is the change in the fund's domicile of choice to Malta. This implies that the fund will, as of the date of continuation, be subject to Maltese company law, which is based on EU company law directives while drawing substantially on UK company law, and Maltese tax law.
Maltese funds, albeit subject to tax, are fully exempt from paying any tax on their income or capital gains unless these are made from certain assets situated in Malta. The country also has a double taxation treaty network of around 48 treaties, which could offer some interesting structuring possibilities.
The fund will also be subject to Malta's regulatory framework, under which Maltese investment funds are subject to authorisation and licensing by the Malta Financial Services Authority - a marked difference to the situation in non-EU jurisdictions.
The regulation reflects the players involved - when authorised in other approved jurisdictions, the scrutiny is light - or the structure; where a professional investor fund is involved, investment restrictions feature far less.
However, Malta's EU membership and its regulatory regime provide certain interesting solutions if promoters wish to convert an offshore non-Ucits fund into an onshore EU-based Ucits fund with the passporting possibilities which come with this status. Furthermore, Malta has a recognised stock exchange, and if it is important to the investors that a fund be listed, it is possible to list the fund on the Malta Stock Exchange.
Interestingly, any type of corporate vehicle can be redomiciled to Malta so long as this is permitted by the laws of the country where the vehicle in question is domiciled. It is possible to continue a closed-ended or open-ended investment company into Malta as well as a limited liability partnership.
In the last 15 years the offshore and financial services world has undergone a major change in concept, perception, regulation and law. What was normal a short time ago is no longer acceptable as a result of actions taken by the Organisation for Economic Co-Operation and Development, the Financial Action Task Force, the US government and the EU as well as a host of other organisations. Whether these actions were well inspired and designed or not is hardly relevant to the fact we are experiencing their effects now.
Dr. Andre Zerafa is a senior associate in the investment services and funds practice at Ganado & Associates Advocates
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