Company in Malta

Maltese Notified PIFs: A New Fund Structure – What Is Being Proposed?

Background

Malta has long been a hub for innovative fund management, and in 2023 the Malta Financial Services Authority (MFSA) unveiled its latest offering to assist smaller managers: the Notified Professional Investor Fund, or NPIF for short.

Who will a NPIF be attractive to and why?

This new structure is attractive to de minimis AIFMs and third country AIFMs looking for alternative fund structures based in an EU country. The fund is an unregulated structure, with managers required to notify the Malta Financial Services Authority (MFSA), rather than going through a full-blown licensing process.

The NPIF merges the appeal of Malta’s existing Professional Investor Fund (PIF) framework with the benefits of “Notified” status, creating an efficient solution for fund managers.

What sets NPIFs apart is their remarkable speed to market, making them a perfect fit for time-sensitive investment strategies.

The NPIF primarily targets de minimis Alternative Investment Fund Managers (AIFMs) with Assets Under Management (AUM) of less than €100 million when leveraged, or €500 million when unleveraged, and qualifying for the lighter regulatory regime defined by the EU’s AIFM Directive.

It is suitable for de minimis AIFMs across all EU Member States, as well as AIFMs in a wide range of non-EU third party domiciles, if they are authorised by the MFSA or an EU or third-party equivalent. In addition to the speed to market offered by the Notified PIF, the structure also allows de minimis AIFMs and third country AIFMs to have more direct control over the portfolio management process.

The industry has also seen a growing appetite for co-investment vehicles. A Notified PIF can be used very efficiently as a co-investment vehicle. A particular structure can also be used as a feeder fund into a master structure.

National private placement rules

Any manager considering of setting up their fund as a Notified PIF must be aware that this fund does not have access to the marketing passport under the AIFMD but can be sold under the national private placement rules of the target countries. These differ considerably as some countries require a simple registration while others might offer a blanket exemption.

Key characteristics

Notified PIFs will improve Malta’s appeal as a fund jurisdiction, particularly for US, UK and other third country investment managers.

  • Notified PIFs will be subject to a notification process rather than full licensing.
  • The notification process may be completed within 10 working days.
  • Promoters may benefit from lower setup and other operational and regulatory costs.
  • Marketing material and offering documentation will not (is this correct?) be reviewed and approved by the MFSA.
  • Notified PIFs can only be non-retail schemes available to Qualifying Investors, due to their risk level and minimum supervision.
  • Due to the minimum level of supervision, adequate risk disclosures are to be made to any prospective investors accordingly.
  • Any investment strategy, except for ‘Lending’ activity, will be allowed.
  • Notified PIFs can only be set up as third-party managed funds, managed by specific Alternative Investment Fund Managers (“AIFMs”).
  • Notified PIFs are not required to appoint a custodian.
  • Fund administration services must be carried out by a Maltese established and recognised fund administrator, such as Dixcart.
  • A third-party service provider shall conduct due diligence with respect to the Notified PIF, both at notification stage and on an ongoing basis.

Money Laundering Reporting Officer

Notified PIFs must appoint a Money Laundering Reporting Officer (“MLRO”). This function may be delegated to:

  1. The administrator of the Notified PIF, provided that such administrator is:
    1. A recognised fund administrator; or
    1. Is authorised in an EU Member State or in a reputable jurisdiction.

  2. An officer of the Notified PIF who has sufficient seniority and command.
  3. At least one of the Directors must be resident in Malta.
  4. The MFSA shall be notified of the appointment, removal, or replacement of any service provider to the Notified PIF in advance of the change.
  5. The MFSA may remove a Notified PIF, including any Sub-Fund, from the List of Notified PIFs at any time at its sole discretion.

Regulation Details

Apart from the introduction of a dedicated rulebook, in its effort to establish this new NPIFs framework, the MFSA is proposing amendments to the following Regulations:

  • Investment Services Act (List of Notified AIFs) Regulations (S.L. 370.34)
  • Investment Services Act (Exemption) Regulations (S.L. 370.02)
  • Investment Services Act (Fees) Regulations (S.L. 370.03)
  • Trusts and Trustees (Exemption) Regulations (S.L. 331.02)
  • Companies Act (Investment Companies with Variable Share Capital) Regulations (S.L. 386.02)

Additional Information

For further information about Maltese funds and how they might be of advantage to you, please contact our Dixcart office in Malta: advice.malta@dixcart.com.

Alternatively, please speak to your usual Dixcart contact.

Citiscape in Malta

The Legal Differences Between the Two Most Popular Fund Vehicles in Malta: SICAVs (Sociétés d’Investissement à Capital Variable) and INVCOs (investment company with fixed share capital).

Malta – A Popular Fund Regime

Since Malta joined the EU, in 2004, the country has enacted new legislation, and introduced additional fund regimes, which have made Malta an attractive location to establish a fund ever since.

Malta is a reputable and cost-effective jurisdiction, and also offers multiple types of fund to choose from, depending on the preferred investment strategy. This provides flexibility and an ability to adapt to different circumstances.

Malta allows the use of a variety of legal vehicles in the context of hedge funds and can be structured using the following legal vehicles:

  • Investment company with variable share capital (SICAV)
  • Investment company with fixed share capital (INVCO)
  • Partnership
  • Unit trust
  • Common contractual fund

The Different Legal Vehicles

SICAVs and INVCOs are companies that enjoy separate juridical personality, while Unit Trusts, Mutual Funds and Limited Partnerships are non-corporate forms.

While the most popular legal form is the SICAV, with the vast majority of Maltese funds being structured using this form, each structure has different characteristics which may make it more or less suitable for particular investment objectives.

Malta SICAVs in More Detail

The investment company with variable share capital (‘Société d’Investissement à Capital Variable or ‘SICAV’) is by far the most popular structure for Maltese hedge funds. The SICAV closely resembles the Luxembourg structure of the same name is a ‘tried and tested’ vehicle for funds.

Shares in a SICAV are not assigned a nominal value, and the share capital of the company is always equal to the value of the issued share capital of the company. Essentially this means that the structure is particularly well suited for ‘open-ended’ schemes.

Also of interest is the fact that the Malta Companies Act states that, the objective of a SICAV is ‘the collective investment of its funds in securities and in other movable and immovable property or in any of them’. This, combined with the MFSA’s flexible approach to investment restrictions, in the context of Professional Investor Funds, means that the SICAV is a very flexible vehicle which permits a great variety of investment strategies.

Malta INVCOs in More Detail

The INVCO is an investment company with fixed share capital. The Malta Companies Act states that the INVCO is a public company, the business of which is that of ‘investing in funds, mainly in securities, with the aim of spreading investment risk and giving members of the company the benefit of the results of the management of its funds’.

An INVCO is also subject to the following restrictions:

  1. The INVCO’s holdings in other companies, that are not investment companies with fixed share capital, must not exceed 15% of the value of its investments;
  2. Distribution of the INVCO’s capital profit is prohibited, by its memorandum and articles of association; and
  3. The INVCO must not retain more than 15% of income derived from securities.

These restrictions have caused the INVCO to become a less popular form of investment company in Malta when compared to the SICAV.

What are the Main Differences between SICAVs and INVCOs?

The principal differences between a SICAV and an INVCO are as follows:

  1. A SICAV is an investment company with variable share capital (commonly referred to as “open-ended”).
  2. An INVCO is an investment company with fixed share capital (commonly referred to as “closed-ended”).

The provisions of the Malta Companies Act require that the object of a SICAV Malta are restricted solely to the “collective investment of its funds in securities and in other movable and immovable property, or in any of them”; while those of an INVCO are limited to the investment of its funds “mainly in securities”.

In both cases, business must be conducted with the aim of spreading investment risk and giving shareholders of the company, the benefit arising from the management of its funds.

In addition, a SICAV has a duty to repurchase (i.e. redeem) any of its shares, on request, by a shareholder, and this duty of the SICAV has to be specified in its Memorandum and Articles of Association. 

Finally, as detailed above, the SICAV enjoys considerably higher levels of flexibility when it comes to the investment strategies which it can follow.

Additional Information

For further information about Maltese funds and how they might be ofadvantage to you, please contact our Dixcart office in Malta: advice.malta@dixcart.com.

Alternatively, please speak to your usual Dixcart contact.

Isle of Man Exempt Funds: 7 Things You Need to Consider

Due to the level of flexibility offered by an Isle of Man Exempt Fund, enquirers often approach conversations with a carte blanche mindset regarding the structuring and operation of the Fund, and often believe that this is a simple solution.

Unfortunately, there are many aspects that need to be considered, some of which require expert guidance and services. It is these factors which I aim to introduce in this short piece. As this article’s name suggests, these are the elements you need to consider when, and ideally prior, to commencing structuring your Fund.

In this article we will examine and highlight some of the following elements:

Setting up an Isle of Man Exempt Fund

In this section we will not cover the legislative framework, but rather some of the options open to the Promoter regarding the constitution of their Isle of Man Exempt Fund.

You can read our article An Isle of Man Exempt Fund – What, How and Why? to find out more about the legislative framework and requirements of an Isle of Man Exempt Fund.

The Promoter should first take advice that will underpin their structuring – it will inform them of which entity, or mix of entities, is best suited to achieve their objectives.

There are two common choices regarding structuring:

A Limited Partnership

This is by far the most common route elected, and involves a Private Limited Company acting as General Partner (GP), formed under either the Companies Act 1931 (CA 1931) or Companies Act 2006 (CA 2006). You can find out more about the differences between the two regimes here:

Usually the GP is a CA 2006 company, and the investors are the Limited Partners (LP).

The GP has unlimited liability and engages in the actual administration of the Exempt Fund.

The LPs’ liability is limited to their contributed capital, and they must not engage in the day-to-day management of the Exempt Fund.

Usually the GP engages a third-party investment adviser to manage the assets, however, subject to certain criteria the Promoter of the Isle of Man Exempt Fund can act as an investment adviser to the GP.

A Limited Partnership offers a more traditional structure that would be well suited to Promoters wishing to operate a single Isle of Man Exempt Fund.

A Protected Cell Company

Protected Cell Companies (PCC) were not covered in our foundation article, so I will give a little extra insight here for completeness.

The Isle of Man Protected Cell company can be formed under the CA 1931 or CA 2006. If the PCC is formed under the CA 1931, it is also subject to the Protected Cell Companies Act 2004. If the PCC is formed under the CA 2006, it is governed by the terms of the CA 2006.

Regardless of which Act the is chosen, the PCC must be limited by shares, however those shares can be of nominal or nil value. Further, an existing company that meets the requirements of a PCC can apply to be converted into a PCC.

A PCC is a single legal entity and can make agreements, be sued and own assets in its own right. The PCC can create an unlimited number of Cells, each of which represents ringfenced assets and liabilities which are segregated from the other Cells and the Non-Cellular assets and liabilities i.e. the PCC’s assets and liabilities. Importantly, each Cell does not have separate legal personality, and does not represent a separate legal entity.

In addition to the PCC’s Non-Cellular Ordinary Shares, Cellular shares may also be issued. The Shareholder of Cellular shares can participate in the activities of that Cell i.e. those rights defined by the Articles of Association. For our purposes this means the Investor, subject to meeting certain criteria and being compliant with their Tax Advice, can participate in the Investment Management – again we will consider this further down.

A set of accounts must be maintained, and a Tax Return submitted in respect of each Cell. Further, each Cell must be clearly identifiable as a Cell, and any transacting party must be made aware that they are dealing with a Cell of a PCC.

A PCC may be a good option for those seeking to create several Isle of Man Exempt Funds in a cost efficient manner. This can be for many different reasons, such as:

  • Different rounds of investment
  • Investing into different economic trade areas
  • Structuring the Cells to mature at different dates
  • Investing into different or ringfenced asset classes
  • Segregating projects e.g. Real Estate development etc.

Whether the Promoter prefers the Limited Partnership or PCC, they will require legal services to draft important constitutional contracts, which will often be tailored to the structure the Promoter required e.g. will the Isle of Man Exempt Fund be an open or closed ended arrangement? Any particular operational requirements or objectives they want to make provision for etc.

This documentation can include, where appropriate, a modified Articles of Association or Partnership Agreement, Service Agreements between the fund administrator and the Promoter, Agreements between the Investment Manager and administrator, notices or declarations etc. All of which have cost implications for the Promoter to bear in mind – we consider costs later.

Dixcart work with legal experts to ensure all constitutional documentation is appropriate, compliant and fit for purpose. This drafting provides the bedrock for not only our relationship with the parties involved, but also delivers certainty and stability to the arrangement.

Isle of Man Exempt Fund Investors

To recap on what we covered in An Isle of Man Exempt Fund – What, How and Why?, an Isle of Man Exempt Fund provides some restrictions concerning the investors:

  • There must be no more than 49 investors per Isle of Man Exempt Fund;
  • The Isle of Man Exempt Fund cannot be promoted to the public.

The Isle of Man Exempt Fund is not designed to be a retail investment for high volumes of investors, rather it is geared as a private arrangement, describes as one on a ‘family and friends’ basis, for experienced investors. I have purposefully worded the first bullet here to underline the fact that, for example, under a PCC the Promoter can have an unlimited number of Cells and therefore Exempt Funds, so long as each Cell meets the requirements of a bona fide Isle of Man Exempt Fund.

With this in mind, careful consideration needs to be given as to the ‘who’ and ‘how’ of the Isle of Man Exempt Fund – Who will be your target investors and how will you engage them?

Additionally, although not prescribed by statute, the Promoter should consider other relevant features of their target investor’s profile, such as the anticipated average level of investment, if there are minimum investment requirements, which jurisdictions will the investors be based etc.

For example, the Promoter may already work or associate with a group of appropriate individuals or companies, or may be a member of a network, or know appropriate Promoterele. There may be a minimum investment amount of hundreds of thousands set, with a target total investment pot of X million and an estimated rate of return at X%.

In short, the Promoter needs to develop a clear rationale for how the Isle of Man Exempt Fund is promoted, what is expected from the investors and what the investors can expect. Always remembering that public promotion must be avoided absolutely.

Isle of Man Exempt Fund Asset Selection

The regulatory framework offers the Isle of Man Exempt Fund ultimate flexibility with regards to the Promoter’s choice of asset classes, how custody is arranged, auditing etc. However, the Corporate Service Provider will have to meet its obligations regarding compliance, and therefore ensure their statutory duties are met.

Whilst it is not a strict legal requirement, it is best practice for a thorough Private Placement Memorandum (PPM) to be drafted which expressly covers all of the Ts&Cs of the Isle of Man Exempt Fund.

The PPM details the rules and objectives of the Isle of Man Exempt Fund in a similar way to a Fund Prospectus. It is the document that a prospective investor will want to review, in order to fully understand the Isle of Man Exempt Fund and how it operates.

The PPM covers subject matter such as the targeted asset classes, how and when capital is deployed, if the Exempt Fund will accumulate gains or distribute income. Here, the features relating to the selection of assets include:

Geolocation of assets and their custody – The Promoter needs to have a full understanding regarding the situs of the linked assets – where are they located and or held in the world? The rules governing compliance still reign supreme here. If the Promoter is wishing to deploy capital into jurisdictions at higher risk of money laundering, terrorist finance, bribery or corruption, this needs to be considered carefully. Even where the risks can be mitigated by process and procedure, and activity undertaken by the Corporate Service Provider, those structures that carry higher risks also incur enhanced compliance monitoring and controls, which in turn have cost implications.

Nature of the linked assets – where the fund is ‘vanilla’ in nature i.e. carries out a simple investment mandate such as investing into listed stocks and shares etc. such activity does not negatively affect the risk rating. Whereas, if the scope of the Isle of Man Exempt Fund included novel assets, such as Crypto Currencies, the activity could very well carry compliance implications.

It is our current policy that holding NFTs as personal investments can be acceptable. However, to deal with or offer out such assets in a commercial setting would be outside of our risk profile. In the instance of an Exempt Fund this can be a nuanced point and would be taken on the circumstances of the Fund offering, considering the purpose of the Fund and investors amongst other things.

In the instance of an Isle of Man Exempt Fund, where novel assets are being considered, it is best to contact us at an early stage to discuss the acceptability of the prospective asset classes.

Important disclosures – If the promoters have any existing interests either in the assets being transferred into the Isle of Man Exempt Fund, or in the proposed assets to be invested into, such interests need to be disclosed within the PPM e.g. if there is an introducers arrangement, if they hold a position within a company whose shares will be purchased or transferred, if there is a commercial relationship with the vendor of the assets, or any other incentive of any kind, this must be disclosed.

There are many more aspects to be considered, which are of course unique to each Isle of Man Exempt Fund.

Isle of Man Exempt Fund Investment Management

There are no prescriptive legislative requirements pertaining to an Isle of Man Exempt Fund and how it manages its linked assets. However, this isn’t to say that the Promoter has a blank canvas regarding how the Exempt Fund property is managed.

The service provider will have its own appetite for risk, and therefore corresponding policies and procedures that relate to asset management. At Dixcart we offer two options in this regard:

  1. The Promoter or Dixcart engage a third-party investment manager;
  2. Under certain circumstances, the Promoter can act as investment adviser.

Option no’1 is preferable, as the investment manager will be a qualified and licensed professional who is geared to deliver such services.

Option no’2 is considered on a case-by-case basis and requires that the Promoter applying to be the investment manager has demonstrable experience or expertise in the chosen asset classes. This may flow from their career to date, qualifications etc.

The investment management of the Isle of Man Exempt Fund needs to be considered from outset.

Banking for Isle of Man Exempt Funds

When the Promoter is considering how they bank the Isle of Man Exempt Fund, there are similar considerations to their asset selection. There will be a risk-based approach adopted by the chosen bank and various factors e.g. jurisdictions, asset class etc. will directly influence how acceptable the application for an account will be. This may also result in higher banking costs.

Further, many high street banks simply will not provide services to entities that do not have Isle of Man Directors. Where this is the case, other options may have to be considered i.e. can you bank in other jurisdictions? Does the Promoter have existing banking relationships?

Dixcart have existing relationships with all major banks on the Isle of Man and can facilitate banking services on fully managed entities. Or where Dixcart are not providing Directors, introductions can be made where appropriate.

Tax Treatment of Isle of Man Exempt Funds

In my line of work, I think I may say this sentence more than any other:

‘Have you taken tax advice?’

Tax advice is absolutely and unequivocally at the centre of any offshore planning. As a Corporate and Trust Services Provider, we need to be sure that A) the Promoter is not creating any unknown liabilities for themselves, and B) the Promoter structuring is not going to create any adverse consequences for Dixcart C) the structuring will work as intended.

There are many angles that need to be considered when it comes to the Isle of Man Exempt Funds – here are a few of the considerations:

Assets

The advice will consider where the assets are located. Depending on the treatment of the asset within the jurisdiction and the nature of the assets, there may be tax liabilities e.g. an asset that generates income and gains etc.

The Investors

When entering and exiting the fund, the investors will need to take tax advice to ensure they do not create any unintended tax consequences – an unexpected tax bill could remove any benefit of participating within the Exempt Fund, or even create a loss.

The Promoter

As with the investors, the Promoter will need tax advice to assess their personal circumstances in order to ensure that the structure is the most effective way to achieve their objectives, and that engaging in the structuring will not lead to any unintended tax consequences.

These are only very high-level considerations, and there are likely to be many more. Each Isle of Man Exempt Fund will be unique on the facts, and therefore this complex arrangement demands that all parties’ tax positions are fully considered.

Over our 50+ years, Dixcart have built up a superb network of professionals who can advise on such structures. No matter where you are in the world, we can make appropriate introductions to a local tax adviser.

Isle of Man Exempt Fund Costs

I have already alluded to this earlier within the article, so I will keep this short. I am not dissuading the Promoter of the virtues of the Isle of Man Exempt Fund, as they can be very beneficial, however this does need to be caveated:

Setting up an Isle of Man Exempt Fund may well be a cheaper exercise than establishing other types of Fund, however please note that this is NOT a cheap exercise. We would always suggest that the Promoter also considers the potential use of an investment holding company as an alternative to their Isle of Man Exempt Fund, and whether their objectives can be met in this way.

The legals alone will likely cost in the order of tens of thousands of pounds. The Promoter will also have the Corporate Service Provider’s administrative fees, which are usually calculated as the higher of a minimum cost and a percentage of assets under management. Finally, the Promoter will have to meet any third-party fees – which will thoroughly depend on the nature of the linked assets i.e. if the assets are property such as real estate, you may need property managers, insurance etc.

In summary, the Exempt Fund could have six figure running costs, so this will need to be factored into the likely growth on the Isle of Man Exempt Fund and any tax savings and efficiencies compared to all other financial considerations.

How Can Dixcart Help

Dixcart hold Class 3(11) and 3(12) Isle of Man FSA licenses, which enables us to act as the Functionary of an Isle of Man Exempt Fund.

We do not provide investment management services or tax advice. We cannot give undertakings with regards to the acceptance of banking, draft your legals or deviate from our compliance obligations.

As a Functionary, we provide statutory support to corporate structures and provide management services e.g. provide Directors, accounting services, produce Net Asset Valuations, banking services, liaise with third party service providers etc.

As a Trust and Corporate Service Provider, we have a network of advisory contacts that span all relevant disciplines all over the world. Whilst we cannot provide all required services, we are very well placed to deliver a solution with these partners.

Get in touch

Dixcart provide a single point of contact for the setup and management of Exempt Funds; establishing the fund and organising the formation and management of the underlying assets.

If you require further information regarding Isle of Man Exempt Funds or any of the vehicles discussed, please feel free to get in touch with Paul Harvey, at Dixcart Isle of Man, to see how they can be used to meet your objectives: advice.iom@dixcart.com.

Dixcart Management (IOM) Limited is Licensed by the Isle of Man Financial Services Authority***

***This information is provided as guidance as at 14/12/22 and should not be considered advice. The most appropriate vehicle is determined by individual Promoter needs and specific advice should be sought.

Why You Should Consider Investing in Maltese Funds

Since joining the EU Malta has become an attractive location to establish a fund. The legislation that was enacted at the time meant that additional fund regimes could be introduced. As a result, Malta has a reputation for being a cost-effective jurisdiction, offering multiple types of funds to choose from, depending on the preferred investment strategy.

All Maltese funds are regulated by the Malta Financial Services Authority (MFSA). Malta benefits from a series of European Union Directives which allow collective investment schemes to operate freely throughout the EU, on the basis of a single authorisation from one member state.

There are various different funds in Malta:

  • Professional Investor Funds “PIF”
    •  PIFs are available only to Qualifying Investors
  • Alternative Investment Funds
    • A new category recently introduced as a result of the Alternative Investment Fund Managers Directive (AIFMD), and now comprising of retail NON-UCITS (Undertaking for Collective Investment in Transferable Securities) and PIFs. There are 3 categories of AIFs:
    • AIFs promoted to Professional Investors
    • AIFs promoted to Qualifying Investors
    • AIFs promoted to Retail Investors
  • Notified Alternative Investment Funds “NAIF”
    • Private Collective Investment Scheme – maximum 15 participants and which does not require a Collective Investment Scheme licence, but needs to be recognised by the MFSA.

Various Fund Structures

Single‐fund and multi‐fund structures are available.

In multi‐fund structures you have separate sub‐funds / compartments with their respective investment themes.

Whereas in multi‐fund (umbrella) structures, an election is made to have the assets and liabilities of each sub‐fund within the umbrella structure treated, for all intents and purposes of law, as separate from the assets and liabilities of each other sub‐fund of that structure (segregation of assets and liabilities).

Need to Instruct a Service Provider

In Malta, each fund requires a  service provider for day-to-day management.

Below is a brief overview of the key roles involved in a fund and their specific duties:

  • Board of Directors

The Board, which is nominated by the Founder Shareholders, is responsible for the general affairs of the scheme, including the appointment of a service provider. In order to adhere to the Maltese regulatory requirements, the Board should:

  • be composed of no less than three members;
    • one of the Directors must be resident in Malta;
    • one of the Directors must be independent.

The majority of the board meetings must be held physically in Malta. Directors of a NAIF are not subject to a due diligence assessment by the Regulator but will be subject to due diligence assessment by the AIFM (Alternative Investment Fund Manager), assuming responsibility of the NAIF.

  • Manager (unless self-managed)

The Investment Manager is the person responsible for the discretionary investment management of the assets of the Fund. This includes; establishing or reviewing investment policy; rules for stock selection; portfolio construction; investment techniques and instruments; as well as negotiation and implementation of the acquisition and disposal of the investments.

This management function includes certain risk management activity, which depends on whether the fund is a UCITS and the AIFMD regime.

  • SelfManaged Schemes

Funds (such as  UCITS, retail non‐UCITS, PIFs or AIFs) which do not appoint an external Investment Manager, are called self‐managed schemes. This self-managed option is only available where funds are bodies corporate (whose structure allows the full assumption of the management function by the administration).

Self‐managed funds must comply with specific provisions applicable to them under MFSA rules (in the form of supplementary licence conditions), including rules on the initial capital requirements of self‐managed schemes.

  • Fund Administrator

The Fund Administrator is the person appointed by the Scheme or its Manager, responsible for the provision of administration services to the Fund. Fund administration services typically include the following:

i. preparation of Net Asset Values;

ii. pricing the investment portfolio;

iii. preparation of contract notes;

iv. registrar functions;

v. payment of bills;

vi. reconciliations;

vii. fund accounting;

viii. preparation of financial statements;

ix. performance reporting;

x. compliance reporting.

  • Compliance Officer and Money Laundering Reporting Officer.

The NAIF, is required to comply, on an ongoing basis, with the provisions of local laws and any applicable rules and regulations, as well any other applicable regulations in any jurisdictions where it is marketed. In this regard, the NAIF must appoint a Compliance Officer, who, in terms of the local requirements, must be the same Compliance Officer as of the AIF.

The Board of the NAIF is also responsible for compliance with its obligations under the Prevention of Money Laundering and Funding of Terrorism Regulations. The NAIF must therefore also appoint a Money Laundering Reporting Officer.

The Fund must also have the following service providers in place; the MLRO, Compliance Officer, Custodian, Auditor, and Investment Advisor depending on the type of fund.

Case Study

Set-up of a Malta Fund – gathering investors from an EU country and the rest of the world such as; US, Thai, China and Middle East. The proposed fund will focus on purchasing buildings to refurbish, plots of land integrally held in an EU country. During the first year, the first round of investments will be around €20 million. 

  • Option A – Launch of a new dedicated collective investment scheme with one sub-fund at launch, structured as a Maltese Notified Alternative Investment Fund (“NAIF”). A dedicated collective investment scheme will provide you with the possibilities to; (i) build your own brand, (ii) launch additional sub-funds in the future under the same brand name, (iii) retain control; you will hold certain voting rights, including the rights to choose the Directors and Service Providers, and (iv) receive income via the founder shareholding.
  • Option B – Launch of a new sub-fund under an already existing collective investment scheme. The SICAV  (société d’investissement à capital variable) would be an already existing Notified AIF, and therefore included in the list of NAIFs held by the Malta Financial Services Authority. The launch of an additional sub-fund within an existing structure will improve the time to market and the total expense ratio of the fund, since certain fixed costs (such as Directors’ remuneration and insurance, for instance) are shared between the sub-funds that are launched.

The proposed solutions offer fund promoters such as; an investor, pension fund, insurance company, bank or management company, different cost-effective ways to launch a product and the possibility to access the market quickly.

Elise Trustees, a sister company of Dixcart Management Malta, holds a fund administrator licence and can therefore provide a comprehensive range of services including; fund administration, accounting and shareholder reporting, corporate secretarial services, shareholder services and valuations.

The fund (the Collective Investment Scheme), must itself be licensed by the MFSA.

Additional Information

For further information on Maltese Funds, please do not hesitate to contact Jonathan Vassallo: advice.malta@dixcart.com at the Dixcart office, in Malta or your usual Dixcart contact.

Alternative Investing – Benefits of Maltese Hedge Funds

Key Data About Malta

  • Malta became a member state of the EU in May 2004 and joined the Euro Zone in 2008.
  • English is widely spoken and written in Malta and is the principal language for business.

Factors Contributing to Malta’s Competitive Advantage

  • Robust legal and regulatory environment with a legislative framework in line with EU Directives. Malta incorporates both jurisdictional systems: civil law and common law, as business legislation is based on English law principles.
  • Malta boasts a high level of education with graduates representing a cross-section of the various disciplines related to financial services. Specific training in financial services is offered at various post-secondary and tertiary education levels. The accounting profession is well-established on the island. Accountants are either university graduates or in possession of a certified accountant qualification (ACA/ ACCA).
  • A proactive regulator that is very approachable and business minded.
  • An ever-growing supply of high-quality office space for rent at prices cheaper than in Western Europe.
  • Malta’s development as an international financial centre is reflected in the range of financial services available. Complementing the traditional retail functions, banks are increasingly offering; private and investment banking, project finance, syndicated loans, treasury, custody, and depositary services. Malta also hosts several institutions specialising in trade-related products, such as structured trade finance, and factoring.
  • Maltese standard time is one hour ahead of Greenwich Mean Time (GMT) and six hours ahead of US Eastern Standard Time (EST). International business can therefore be managed smoothly.
  • International Financial Reporting Standards, as adopted by the EU, are entrenched in company legislation and applicable since 1997, so there are no local GAAP requirements to deal with.
  • A very competitive tax regime, also for expatriates, and an extensive and growing double taxation treaty network.
  • No restrictions on the granting of work permits for non-EU nationals.

Malta Hedge Funds: Professional Investor Funds (PIF)

Maltese legislation does not directly refer to hedge funds. However, Malta hedge funds are licensed as Professional Investor Funds (PIFs), a collective investment scheme. Hedge funds in Malta are usually set up as open or closed-ended investment companies (SICAV or INVCO).

The Malta Professional Investor Funds (PIFs) regime consists of three categories: (a) those promoted to Qualifying Investors, (b) those promoted to Extraordinary Investors, and (c) those promoted to Experienced Investors.

Certain conditions need to be satisfied to qualify under one of these three categories and therefore to be able to invest in a PIF. PIFs are collective investment schemes designed for professional and high-net-worth investors with a certain degree of expertise and knowledge in their respective positions.

Definition of a Qualifying Investor

A “Qualifying Investor” is an investor who fulfils the following criteria:

  1. Invests a minimum of EUR 100,000 or its currency equivalent in the PIF. This investment may not be reduced below this minimum amount at any time by way of a partial redemption; and
  2. Declares in writing to the fund manager and the PIF that said investor is aware of, and accepts the risks associated with the proposed investment; and
  3. Satisfies at least one of the following:
  • A body corporate that has net assets in excess of EUR 750,000 or part of a group that has net assets in excess of EUR 750,000 or, in each case, the currency equivalent thereof; or
  • An unincorporated body of persons or associations with net assets in excess of EUR 750,000 or the currency equivalent; or
  • A trust where the net value of the trust’s assets is more than EUR 750,000 or the currency equivalent; or
  • An individual whose net worth or joint net worth combined with his/her spouse exceeds EUR 750,000 or the currency equivalent; or
  • A senior employee or director of a service provider to the PIF.

What are Malta PIFs Used for and What are their Benefits?

PIFs are often used for hedge fund structures with underlying assets ranging from transferable securities, private equity, immovable property, and infrastructure. They are also commonly used by funds engaging in cryptocurrency trading.

PIFs offer many benefits, including:

  • PIFs are intended for professional or high-worth investors and do not therefore have the restrictions usually imposed on retail funds.
  • There are no investment or leverage restrictions and PIFs can be set up to hold just one asset.
  • There is no requirement to appoint a Custodian.
  • A fast-track licensing option available, with approval within 2-3 months.
  • Can be self-managed.
  • May appoint administrators, managers, or service providers in any recognised jurisdictions, members of the EU, EEA, and OECD.
  • Can be used to set up for virtual currency funds.

There is also the possibility of re-domiciling existing hedge funds from other jurisdictions to Malta. In this way, the fund’s continuity, investments, and contractual arrangements are continued.

Malta Alternative Investment Funds (AIF)

AIFs are collective investment funds that raise capital from investors and have a defined investment strategy. They do not require authorisation under the Undertakings for the Collective Investment in Transferable Securities (UCITS) regime.  

The recent transposition of the Alternative Investment Fund Directive (AIFMD), through amendments to the Investment Services Act and the Investment Services Rules and the introduction of subsidiary legislation has created a framework for the management and marketing of non-UCITS funds in Malta.

The scope of the AIFMD is broad and covers the management, administration, and marketing of AIFs. However, it mainly covers the authorisation, operating conditions, and transparency obligations of AIFMs and the management and marketing of AIFs to professional investors throughout the EU on a cross-border basis. These types of funds include hedge funds, private equity funds, real estate funds, and venture capital funds.

The AIFMD framework provides a lighter or de minimis regime for small AIFMs. De minimis AIFMs are managers who, whether directly or indirectly, manage portfolios of AIFs whose assets under management collectively do not exceed the following amounts:

1) €100 million; or

2) €500 million for AIFMs managing only unleveraged AIFs, with no redemption rights exercisable within five years from the initial investment in each AIF.

A de minimis AIFM cannot use the EU passporting rights deriving from the AIFMD regime.

However, any AIFM whose assets under management fall below the above thresholds, may still opt into the AIFMD framework. This would render it subject to all of the obligations applicable to full-scope AIFMs and enable it to use the EU passporting rights deriving from the AIFMD.

Additional Information

If you require any further information regarding PIFs and AIFs in Malta, please speak to Jonathan Vassalloadvice.malta@dixcart.com, at the Dixcart office in Malta or to your usual Dixcart contact.

Malta

The Various Types of Investment Fund in Malta

Background

A series of European Union Directives implemented in July 2011 allow collective investment schemes to operate freely throughout the EU, on the basis of a single authorisation from one member state.

Characteristics of these EU regulated funds include:

  • A framework for cross-border mergers between all types of EU regulated funds, allowed and recognized by each member state.
  • Cross-border master-feeder structures.
  • Management company passport, which allows an EU regulated fund, established in one EU member state, to be managed by a management company in another member state.

Dixcart Malta Fund Services

From the Dixcart office in Malta we provide a comprehensive range of services including; accounting and shareholder reporting, corporate secretarial services, fund administration, shareholder services and valuations.

The Dixcart Group also offers fund administration services in: the Isle of Man and Portugal.

Investment Fund Types and Why Malta?

Since Malta joined the EU, in 2004, the country has enacted new legislation, and introduced additional fund regimes. Malta has been an attractive location to establish a fund ever since.

It is a reputable and cost-effective jurisdiction, and also offers multiple types of fund to choose from, depending on the preferred investment strategy. This provides flexibility and an ability to adapt to different circumstances.

Currently, all funds in Malta are regulated by Malta Financial Services Authority (MFSA). Regulation is divided into four different types:

  • Professional Investor Fund (PIF)
  • Alternative Investor Fund (AIF)
  • Notified Alternative Investment Fund (NAIF)
  • Undertakings for Collective Investment in Transferable Security (UCITS).

The Professional Investor Fund (PIF)

The PIF is the most popular hedge fund in Malta. Investors usually use this type of fund to achieve strategies linked to innovation, for example investment into cryptocurrency, as the main features of the fund are flexibility and efficiency.

PIFs are known as collective investment schemes designed to target professional investors and high net worth individuals, due to the lower investment, asset threshold and experience required, compared to other types of fund.

To create a PIF the investor must be a Qualified Investor and must invest a minimum of €100,000. The fund may also be created by setting up an umbrella fund which includes other sub-funds within it. The invested amount can be established per scheme, instead of per fund. This method is often viewed as being the easier option by investors, when creating a PIF.

Investors must sign a document stating their awareness and acceptance of the risks involved.

The Qualified Investor must be; a body corporate or a body corporate which is part of a group, an unincorporated body of persons or association, a trust, or an individual with assets of more than €750,000.

A Maltese PIF scheme can be formed by any of the following corporate vehicles:

  • An Investment Company with Variable Share Capital (SICAV)
  • An Investment Company with Fixed Share Capital (INVCO)
  • A Limited Partnership
  • A Unit Trust/Common Contractual Fund
  • An Incorporated Cell Company.

The Alternative Investor Fund (AIF)

An AIF, is a Pan-European collective investment fund, for sophisticated and professional individuals. It can also be created as a multi-fund where the shares may be divided into different types of shares, in that way creating sub-funds of the AIF.

It is called ‘collective’ because many investors can take part in it and any  benefit is distributed across the fund investors in accordance with a defined investment policy (not to be confused with UCITS which have stricter requirements). It is termed ‘Pan-European’ because the AIF has an EU passport and therefore any EU investor can join the fund.

When it comes to investors, these may be Qualifying Investors or Professional Clients.

A ‘Qualifying Investor’, must invest a minimum €100,000, declare in a document to the AIF that he/she is aware of and accepts the risks that he/she is about to take, and finally, the investor must be; a body corporate or a body corporate which is part of a group, an incorporated body of persons or association, a trust, or an individual with assets of more than €750,000.

An investor who is a ‘Professional Client’ must have the experience, knowledge and skill to make his/her own investment decisions and to evaluate the risks. This investor type is generally; entities who are required/authorised/regulated to operate in financial markets, other bodies such as national and regional governments, public bodies that manage public debt, central banks, international and supranational institutions, and other institutional investors whose main activity is to invest in financial instruments. In addition, clients that do not meet the definitions above, may request to be Professional Clients.

A Maltese AIF scheme can be formed by any of the following corporate vehicles:

  • An Investment Company with Variable Share Capital (SICAV)
  • An Investment Company with Fixed Share Capital (INVCO)
  • A Limited Partnership
  • A Unit Trust/Common Contractual Fund
  • An Incorporated Cell Company.

The Notified Alternative Investor Fund (NAIF)

The NAIF is a Maltese product used by investors when they want to market their fund, within the EU, in a fast and efficient way.

The manager of this fund (Alternative Investment Fund Manager – AIFM), assumes all of the responsibility for the NAIF, and its obligations. Following ‘notification’, the AIF can access the market in ten days, as long as all of the documentation received by the MFSA is in good order. Securitisation projects are an example of what NAIFs are used for.

Within this fund, as in an AIF, investors can be Qualifying Investors or  Professional Clients. Either can apply for the process of ‘notification,’ with the only two requirements being;  investors must each invest a minimum of €100,000, and they must declare to the AIF and AIFM, in a document, that they are aware of the risks that they are about to take and that they accept them.

Relevant features of a NAIF include:

  • Subject to a notification process by MFSA, rather than to a license process
  • Can be open or close ended
  • Cannot be self-managed
  • Responsibility and supervision are undertaken by the AIFM
  • It cannot be set-up as a Loan Fund
  • Cannot invest in non-financial assets (including real estate).

A Maltese NAIF scheme can be formed by any of the following corporate vehicles:

  • An Investment Company with Variable Share Capital (SICAV)
  • An Investment Company with Fixed Share Capital (INVCO)
  • An Incorporated Cell Company of a SICAV (SICAV ICC)
  • An Incorporated Cell of a Recognised Incorporated Cell Company (RICC)
  • A Unit Trust/Common Contractual Fund.

Undertakings for Collective Investment in Transferable Security (UCITS)

UCITS funds are a collective investment scheme, a liquid and transparent retail product which can be marketed and distributed freely across the EU. They are regulated by the EU UCITS Directive.

Malta offers a cost-effective option, with flexibility, whilst fully respecting the EU Directive.

UCITS, created in Malta, can be in the form of a variety of different legal structures. The main investments are transferable securities and other liquid financial assets. UCITS can also be created as an umbrella fund, where the shares can be divided into different types of shares, thereby creating sub-funds.

Investors must be ‘Retail Investors,’ who must invest their own money in a non-professional way.

A Maltese UCITS scheme can be established by any of the following corporate vehicles:

  • An Investment Company with Variable Share Capital (SICAV)
  • A Limited Partnership
  • A Unit Trust
  • A Common Contractual Fund.

Summary

A variety of different funds are available in Malta and professional advice, from a firm such as Dixcart, should be taken, to ensure that the fund type selected best meets the particular circumstances and types of investor investing into the fund.

Additional Information

If you require any further information regarding funds in Malta, please speak to Jonathan Vassallo: advice.malta@dixcart.com, at the Dixcart office in Malta or to your usual Dixcart contact.

Malta Funds – What Are The Benefits?

Background

Malta has long been an established choice for fund managers seeking to set-up in a reputable EU jurisdiction whilst being cost-effective.

What Type of Funds Does Malta Offer?

Since Malta became an EU member in 2004, it has incorporated a number of EU fund regimes, most notably; the ‘Alternative Investment Fund (AIF)’, the ‘Undertakings for the Collective Investment in Transferable Securities (UCITS)’ regime, and the ‘Professional Investor Fund (PIF)’.

In 2016 Malta also introduced a ‘Notified Alternative Investment Fund (NAIF)’, within ten business days of completed notification documentation being filed, the Malta Financial Services Authority (MFSA), will include the NAIF on its online list of notified AIFs of good standing. Such a fund remains fully EU compliant and also benefits from EU passporting rights.

EU Collective Investment Schemes

A series of European Union Directives allow collective investment schemes to operate freely throughout the EU, on the basis of a single authorisation from one member state

Characteristics of these EU regulated funds include:

  • A framework for cross-border mergers between all types of EU regulated funds, allowed and recognised by each member state.
  • Cross-border master-feeder structures.
  • Management company passport, which allows an EU regulated fund established in one EU member state to be managed by a management company in another member state.

Dixcart Malta Fund Licence

The Dixcart office in Malta holds a fund licence and can therefore provide a comprehensive range of services including; fund administration, accounting and shareholder reporting, corporate secretarial services, shareholder services and valuations.

The Benefits of Establishing a Fund in Malta

A key benefit of using Malta as a jurisdiction for the establishment of a fund is the cost savings. The fees for establishing a fund in Malta and for fund administration services are considerably lower than in many other jurisdictions. 

The advantages offered by Malta include: 

  • An EU Member State since 2004
  • A highly reputable financial services centre, Malta was placed among the top three financial centres in the Global Financial Centres Index
  • Single regulator for Banking, Securities and Insurance – highly accessible and robust
  • Regulated quality global service providers in all areas
  • Qualified professionals
  • Lower operational costs than other European jurisdictions
  • Quick and simple set-up processes
  • Flexible investment structures (SICAV’s, trusts, partnerships etc.)
  • Multilingual and professional work-force – an English-speaking country with professionals usually speaking four languages
  • Fund listing on the Malta Stock Exchange
  • Possibility of creation of umbrella funds
  • Re-domiciliation regulations are in place
  • Possibility of using foreign fund managers and custodians
  • The most competitive tax structure within the EU, yet fully OECD compliant
  • An excellent network of double taxation agreements
  • Part of the Eurozone

What are the Tax Advantages of Establishing a Fund in Malta?

Malta has a favourable tax regime and a comprehensive Double Tax Treaty network.  English is the official business language, and all laws and regulations are published in English.

Funds in Malta enjoy a number of specific tax advantages, including:

  • No stamp duty on the issue or transfer of shares.
  • No tax on the net asset value of the scheme.
  • No withholding tax on dividends paid to non-residents.
  • No taxation on capital gains on the sale of shares or units by non-residents.
  • No taxation on capital gains on the sale of shares or units by residents provided such shares/units are listed on the Malta Stock Exchange.
  • Non prescribed funds enjoy an important exemption, which applies to the income and gains of the fund.

Summary

Maltese funds are popular due to their flexibility and the tax efficient features that they offer. Typical UCITS funds include equity funds, bond funds, money market funds and absolute return funds.

Additional Information

If you require any further information regarding establishing a fund in Malta, please speak to your usual Dixcart contact or to Jonathan Vassallo at the Dixcart office in Malta: advice.malta@dixcart.com

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Malta Funds – What Are The Benefits?

Background

Malta has long been an established choice for fund managers seeking to set-up in a reputable EU jurisdiction whilst being cost-effective.

What Type of Funds Does Malta Offer?

Since Malta became an EU member in 2004, it has incorporated a number of EU fund regimes, most notably; the ‘Alternative Investment Fund (AIF)’, the ‘Undertakings for the Collective Investment in Transferable Securities (UCITS)’ regime, and the ‘Professional Investor Fund (PIF)’.

In 2016 Malta also introduced a ‘Notified Alternative Investment Fund (NAIF)’, within ten business days of completed notification documentation being filed, the Malta Financial Services Authority (MFSA), will include the NAIF on its online list of notified AIFs of good standing. Such a fund remains fully EU compliant and also benefits from EU passporting rights.

EU Collective Investment Schemes

A series of European Union Directives allow collective investment schemes to operate freely throughout the EU, on the basis of a single authorisation from one member state

Characteristics of these EU regulated funds include:

  • A framework for cross-border mergers between all types of EU regulated funds, allowed and recognised by each member state.
  • Cross-border master-feeder structures.
  • Management company passport, which allows an EU regulated fund established in one EU member state to be managed by a management company in another member state.

Dixcart Malta Fund Licence

The Dixcart office in Malta holds a fund licence and can therefore provide a comprehensive range of services including; fund administration, accounting and shareholder reporting, corporate secretarial services, shareholder services and valuations.

The Benefits of Establishing a Fund in Malta

A key benefit of using Malta as a jurisdiction for the establishment of a fund is the cost savings. The fees for establishing a fund in Malta and for fund administration services are considerably lower than in many other jurisdictions. 

The advantages offered by Malta include: 

  • An EU Member State since 2004
  • A highly reputable financial services centre, Malta was placed among the top three financial centres in the Global Financial Centres Index
  • Single regulator for Banking, Securities and Insurance – highly accessible and robust
  • Regulated quality global service providers in all areas
  • Qualified professionals
  • Lower operational costs than other European jurisdictions
  • Quick and simple set-up processes
  • Flexible investment structures (SICAV’s, trusts, partnerships etc.)
  • Multilingual and professional work-force – an English-speaking country with professionals usually speaking four languages
  • Fund listing on the Malta Stock Exchange
  • Possibility of creation of umbrella funds
  • Re-domiciliation regulations are in place
  • Possibility of using foreign fund managers and custodians
  • The most competitive tax structure within the EU, yet fully OECD compliant
  • An excellent network of double taxation agreements
  • Part of the Eurozone

What are the Tax Advantages of Establishing a Fund in Malta?

Malta has a favourable tax regime and a comprehensive Double Tax Treaty network.  English is the official business language, and all laws and regulations are published in English.

Funds in Malta enjoy a number of specific tax advantages, including:

  • No stamp duty on the issue or transfer of shares.
  • No tax on the net asset value of the scheme.
  • No withholding tax on dividends paid to non-residents.
  • No taxation on capital gains on the sale of shares or units by non-residents.
  • No taxation on capital gains on the sale of shares or units by residents provided such shares/units are listed on the Malta Stock Exchange.
  • Non prescribed funds enjoy an important exemption, which applies to the income and gains of the fund.

Summary

Maltese funds are popular due to their flexibility and the tax efficient features that they offer. Typical UCITS funds include equity funds, bond funds, money market funds and absolute return funds.

Additional Information

If you require any further information regarding establishing a fund in Malta, please speak to your usual Dixcart contact or to Jonathan Vassallo at the Dixcart office in Malta: advice.malta@dixcart.com

Isle of Man

An Isle of Man Exempt Fund – What, How and Why?

Exempt Funds are an often-overlooked vehicle that could provide a client with a cost effective, tailored solution for meeting their long-term financial objectives.

Under an Isle of Man Exempt Fund regulatory requirements need to be met, however ‘Functionaries’ (such as the managers and/or administrators), have a lot of flexibility and freedom to achieve the fund’s purpose.

As a Functionary, Dixcart can assist professional service providers such as Financial Advisers, Solicitors, Accountants etc. in establishing Exempt Funds domiciled in the Isle of Man.

In this article, we will cover the following topics to provide a quick overview:

How is an Isle of Man Exempt Fund defined?

As the name might suggest, an Isle of Man Exempt Fund is established in the Isle of Man; therefore, Manx law and regulation apply.

All Isle of Man funds, including Exempt Funds, must conform to the meanings defined within the Collective Investment Scheme Act 2008 (CISA 2008) and regulated under the Financial Services Act 2008.

Under Schedule 3 of CISA, an Exempt Fund must meet the following criteria:

  1. The Exempt Fund to have no more than 49 participants; and
  2. The fund is not to be publicly promoted; and
  3. The scheme must be (a) a Unit Trust governed by laws of the Isle of Man, (b) an Open Ended Investment Company (OEIC) formed or incorporated under the Isle of Man Companies Acts 1931-2004 or Companies Act 2006, or (c) a Limited Partnership that complies with Part II of the Partnership Act 1909, or (d) such other description of a scheme as is prescribed.

The limitations on what is not considered a Collective Investment Scheme are contained within CISA (Definition) Order 2017, and these apply to an Exempt Fund. Modifications to the rules outlined within CISA 2008 are allowable, but only on application and approval from the Isle of Man Financial Services Authority (FSA).

Appointing an administrator of an Isle of Man Exempt Fund

A Functionary of an Exempt Fund, such as Dixcart, must also hold the appropriate license with the FSA. Management and administration of Exempt Funds fall under Class 3(11) and 3(12) of the Financial Services Act 2008’s Regulated Activities Order 2011.

The Exempt Fund must meet the compliance requirements of the Isle of Man (e.g. AML/CFT). As an acting Functionary, Dixcart is well placed to guide and assist on all applicable regulatory matters.

Available asset classes for an Isle of Man Exempt Fund

Once established, there are no restrictions on the asset classes, trading strategy or leverage of the Exempt Fund – providing a large degree of freedom for achieving the client’s desired objectives.

An Exempt Scheme is not required to appoint a custodian or have its financial statements audited. The fund is free to implement whatever arrangements are appropriate for holding its assets, whether through the use of a third party, direct ownership or via special purpose vehicles to segregate separate asset classes.

Why establish an Exempt Fund on the Isle of Man?

The Isle of Man is a self-governing Crown Dependency with a Moody’s Aa3 Stable rating. The Manx Government boasts strong relationships with the OECD, IMF and FATF; working together with the local Financial Services Authority (FSA) and service providers to ensure a global and modern approach to compliance.

The business friendly Government, beneficial tax regime and ‘whitelist’ status make the Island a leading international financial centre with a lot to offer inbound investors.

Headline applicable rates of tax include:

  • 0% Corporate Tax
  • 0% Capital Gains Tax
  • 0% Inheritance Tax
  • 0% Withholding Tax on Dividends

What holding structures are appropriate for establishing an Isle of Man Exempt Fund?

Whilst CISA 2008 provides a list of applicable structures, ‘Open Ended Investment Companies’ (OEICs), and ‘Limited Partnerships’ are the most commonly used.

The use of a company, or a Limited Partnership offers a number of distinctive features, with only the general characteristics being presented below. For more information, relevant to your client’s specific circumstances, please get in touch.

Using an OEIC Structure for an Isle of Man Exempt Fund

An Isle of Man company benefits from a 0% tax rate on trading and investment income. They are also able to register for VAT, and businesses in the Isle of Man fall under the UK’s VAT regime.

There are no prescriptive requirements regarding the composition of a board of directors or the Exempt Fund documentation. It is however advisable, for the benefit of the investor, to include as much detail regarding the purpose and objectives of the Fund, in so far as a reasonable person might expect, to make a well-informed decision.

An OEIC can be established by the incorporation of a company under either the Companies Acts 1931, or the Companies Act 2006; the outcome of either vehicle will be comparable, but in some areas the legal form and constitution are quite distinct. Dixcart can assist with the effective establishment and administration of an OEIC holding structure for an Exempt Fund domiciled in the Isle of Man.

Using a Limited Partnership for an Isle of Man Exempt Fund

The Limited Partnership entity is a category of ‘Closed-ended Collective Investment Scheme’. The Limited Partnership will be registered under the Partnership Act 1909, which provides the legal framework and requirements of the vehicle, such as:

s47(2)

  • Must have one or more General Partners, who are liable for all debts and obligations of the firm.; and
  •  One or more persons called Limited Partners, who shall not be liable beyond the amount contributed.

s48

  • s48(1) Every limited partnership must be registered in accordance with the 1909 Act;
  • s48A(2) Every limited partnership shall maintain a place of business in the Isle of Man;
  • s48A(2) Every limited partnership shall appoint one or more persons resident in the Isle of Man, authorised to accept service of any process or documents on behalf of the partnership.

Many of the services required for the establishment of a Limited Partnership on the Isle of Man can be provided by Dixcart. These include those relating to; General Partners, the registered place of business and the administration of the Limited Partnership.

The General Partner must be responsible for the day-to-day decision-making and management of the Partnership. However, the Partnership can engage third party intermediaries for advice and management services with respect to the assets.

Investment is typically made by way of an interest-free loan that is repaid on maturity, along with any remaining balance by way of growth, to the Limited Partners. The exact form that this takes will be determined by the terms of the Partnership and the personal tax circumstances of each specific Limited Partner. Limited Partners will be subject to the tax regime in which they are resident.

A working example of a Isle of Man Exempt Fund

Key Benefits of an Isle of Man Exempt Scheme Summarised 

  • Simplicity of ownership – consolidates assets of any class into one vehicle with reduced administration for the Client.
  • Flexibility of asset class and investment strategy.
  • Cost efficiency.
  • The Client can retain a degree of control and can be appointed as a fund adviser.
  • Privacy and confidentiality.
  • The Fund administrator/manager is responsible for compliance and to meet the regulatory obligations. 
  • The Isle of Man holds an Aa3 Stable Moody’s rating, has strong international relationships and is highly regarded as a jurisdiction.

Get in touch

Exempt Funds are outside the scope of normal fund regulation in the Isle of Man, and with the variety of holding structures available, this category of Fund is particularly suited for private investment.

Dixcart provide a single point of contact for the setup and management of Exempt Funds and Fund vehicle; establishing the fund and organising the formation and management of the underlying holding companies.

If you require further information regarding Isle of Man Exempt Funds or any of the vehicles discussed, please feel free to get in touch with Paul Harvey, at Dixcart Isle of Man, to see how they can be used to meet your objectives:

advice.iom@dixcart.com

Dixcart Management (IOM) Limited is Licensed by the Isle of Man Financial Services Authority***

***This information is provided as guidance as at 01/03/21 and should not be considered advice. The most appropriate vehicle is determined by individual client needs and specific advice should be sought.

The Organisation of a Fund in Malta – The Benefits

Dixcart is licensed to provide fund administration services in Malta and in the Isle of Man.

We provide a comprehensive range of services in Malta including accounting and shareholder reporting, corporate secretarial services, fund administration, shareholder services and valuations.

The Benefits of Establishing a Fund in Malta

A key benefit in terms of using the jurisdiction of Malta for the organisation of a fund is the favourable tax regime. In addition, the fees for establishing a fund in Malta and for fund administration services are considerably lower than in a number of other jurisdictions.

Malta also has a comprehensive Double Tax Treaty network.

What are the Taxation Advantages of Establishing a Fund in Malta?

Funds in Malta enjoy a number of specific tax advantages, including:

  • No stamp duty on the issue or transfer of shares.
  • No tax on the net asset value of the scheme.
  • No withholding tax on dividends paid to non-residents.
  • No taxation on capital gains on the sale of shares or units by non-residents.
  • No taxation on capital gains on the sale of shares or units by residents provided such shares/units are listed on the Malta Stock Exchange.
  • Non prescribed funds enjoy an important exemption, which applies to the income and gains of the fund.

A Self Managed Maltese UCITS Scheme and Dixcart and Fund Administration

A UCITS is one type of fund that can be organised in Malta and a self managed Maltese UCITS scheme can be established as an investment company.

The investment function can be delegated to a manager based in Malta or in another recognised jurisdiction. The administrator should preferably be based in Malta and the custodian or depository must be based in Malta. A Maltese UCITS can apply for listing on the Malta Stock Exchange.

The Dixcart office in Malta holds a fund licence and can therefore provide the appropriate fund administration services.

Additional Information

If you require any further information regarding the benefits of establishing a fund in Malta please speak to Sean Dowden at the Dixcart office in Malta:  advice.malta@dixcart.com.