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Redomiciliation of funds into the EU

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By Laragh Cassar – Malta’s rules on the redomiciliation of investment funds have contributed to its success story as an alternative fund domicile in the European Union. Coupled with a robust yet flexible regulatory framework and a highly skilled workforce, Malta can offer fund managers added value and synergies through increased efficiencies and returns.

Merit is also due to the Malta Financial Services Authority as it has lived up to its philosophy of offering a level of flexibility within firm regulatory principles, earning itself the title of a reputable authority while being sensitive to the particular requirements of applicants.

During a period when added returns have become an important consideration in the decision-making process, Malta offers lower compliance costs than other jurisdictions without undermining the high level of professionalism provided by the service providers available on the island.

As a result of the implementation of the Alternative Investment Fund Managers Directive, the redomiciliation of investment funds to Malta as an EU jurisdiction may also allow managers to benefit from the Europe-wide passport offered to professional investor funds. This will allow fund managers to establish a European base and promote their funds in all 27 member states of the union through the single authorisation requirement obtained from the MFSA.

With the surge of exchange-traded products in the funds industry, it is worth noting that Maltese funds may be listed on the Malta Stock Exchange as well as obtain access to listing on foreign exchanges. In fact, the Malta exchange has been recognised by the UK and a number of Malta-based companies have listed on the London Stock Exchange.

A redomiciliation of the fund to Malta would not affect the fund’s existing listing arrangements in other jurisdictions. Further efficiencies of redomiciling include efficient tax planning opportunities for the fund, its investors and its service providers, which are achieved by Malta’s established and efficient taxation framework as well as the extensive network of double-taxation treaties with around 58 countries.

The process of redomiciliation is available to funds (as well as service providers) in the form of corporate bodies and established in jurisdictions that permit the redomiciliation of their companies. The scope of the applicable laws regulating the redomiciliation of companies ensures continuity and a smooth transition from their original jurisdiction to their newly-acquired Maltese domicile.

This is reflected in the legal effects of redomiciliation under Maltese law, as this does not create a new legal entity nor does it affect the continuity of the company. The redomiciliation does not have any effect on the property of the company, its assets, liabilities and obligations, nor does it render defective any legal proceedings against the company. The applicable regulations also provide for the validity of share pledges made in the jurisdiction where the company was originally formed.

Fund managers and investors need not worry about the validity of existing contracts entered into with service providers, the registration of fund investors, or the ownership of the portfolio of assets belonging to the fund.

Continuity of the contracts entered into with a fund’s service providers is also facilitated by the fact that the MFSA currently does not require the service providers of non-retail funds to be established in Malta.

Laragh Cassar is a partner with Camilleri Preziosi

Please click here to download a copy of the Hedgeweek Special Report: Malta Hedge Fund Services 2011


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