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:

Alternatively, please speak to your usual Dixcart contact.

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