Tue, 30/08/2011 - 09:57
By Katya Tua – Although Malta has seen its profile grow among the global financial services community particularly over the past two or three years, its fund industry has been developing for more than a decade.
Even at the outset, the island’s potential as a jurisdiction offering appropriate and flexible fund regulation was evident, and the regulations allowing companies to be redomiciled have existed since 2002. Redomiciliation is available for any corporate structure, regardless of whether it is licensed or not in the original jurisdiction, enabling other types of corporate entity to be redomiciled to Malta.
For a licensed entity such as a fund, the redomiciliation process takes place simultaneously with the licensing of the vehicle in Malta, enabling the fund to move as a going concern and retain its existing track record; there is no need for any redemption, nor tax implications for the fund or its investors. The investments remain in the same assets; all that moves is the domicile of the corporate structure. Compared with closing a company and launching a new one, or carrying out a merger, it is a very rapid and straightforward process.
One restriction is that the corporate body moving domicile must be able to adopt a similar corporate structure to that in its original domicile. However, the range of available vehicles was expanded in February this year with the extension of Malta’s existing cell company regulations to collective investment schemes. This means, for instance, that a Guernsey incorporated cell company structure may now be redomiciled, which was not the case in the past because Malta lacked a corporate structure in which each compartment had its own legal personality.
The addition of cell companies to the range of vehicles available to funds in Malta is just one of a number of ways in which the island has sought to meet the requirements of the international fund industry. For example, under the Companies Act funds can be structured as limited partnerships, although today the Sicav plc – open-ended investment company – remains the most popular structure among promoters.
Partnerships may gain more interest in the future following amendments to the Companies Act also introduced earlier this year that grant them more flexibility, while another recent change involves the introduction of regulations governing contractual funds. Malta strives to keep its regulation and laws in line with what clients require, which often involves anticipating developments that the market will seek in the future.
The success of the Professional Investor Fund regime is poised to benefit the island further when the EU’s Alternative Investment Fund Managers Directive makes regulation of the alternative fund industry the norm across the continent from July 2013. While passage of the directive has boosted interest in redomiciliation of funds to Malta, European managers with existing offshore structures are also looking to replicate them within the EU.
Having a fund domiciled in a jurisdiction within the union is an important factor for investors, as we saw with the upsurge of business following Malta’s accession. But ultimately it is the responsiveness of the legislator, adequate legislation and regulation, and the expertise of service providers that drive decisions to bring business here.
Katya Tua is head of the investment services department with Simon Tortell & Associates
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