Private Foundations in Malta and generally speaking represent a flexible and efficient wealth management vehicle regulated by the Second Schedule of the Maltese Civil Code (Chapter 16 of the Laws of Malta). The administrators of the foundation have fiduciary obligations and must be licensed by the Malta Financial Services Authority (MFSA). The partners at BSDM Advocates have been among the first to be approved as licensed administrators of Private Foundation.

Characteristics of Foundations

A foundation consists in the dedication of a fund to a specified object with an appropriate organization for its administration. Upon registration with the Registrar of Legal Persons, a foundation is bestowed with legal personality and hence constitutes a juridical person in terms of law.

Distinct Fund

Although both trusts and foundations necessitate the assignment of property for the purpose of achieving the aims intended by the founder or settlor, in the case of a foundation, the assignment is accompanied by the creation of a new, distinct juridical entity in which property will vest. The Second Schedule to the Civil Code (Chapter 16 of the Laws of Malta) as amended by Act XIII of 2007 has codified the law regulating foundations thus providing foundations with a written legislative legal framework. Foundations have existed in Malta for many years, but there are few private foundations, as opposed to the numerous charitable foundations. Through the implementation of Act XIII of 2007, the features of private foundations have been clarified rendering private foundations a highly attractive entity. Most civil law jurisdictions have treated the civil law institute of foundations in a similar manner to Maltese law and one such example is Italy where the law of foundations is regulated by the Italian Civil Code. A foundation in Malta is treated like a corporation and taxed at 35%. Alternatively, a foundation may elect to be treated as a trust for tax purposes.

A private foundation is set up for the benefit of beneficiaries by means of a public deed drawn up by a Public Notary. The constitutive elements of the Private Foundation are the deed, statute and beneficiary statement. The deed and statute must be registered with the Registrar of Legal Persons while the beneficiary statement and the instructions therein contained remain in the possession of the Notary and may only be viewed by the Notary himself, the administrators and any founder or his delegate. The beneficiary statement lays down the individuals who are to benefit from the fund of the foundation and the manner in which they are to benefit.

Distinction between Trusts and Foundations

A foundation is the civil law counterpart to the common law institute of trust. Trust is not contemplated in a civil law framework since the concept of ownership in a trust is foreign to civil law. The laws, powers and institutions regulating the two entities are however exceedingly similar and based on the same concept which is the assignment of property for the purpose of achieving the aims intended by the founder or settler. There are three major differences between trusts and foundations. The first is that although foundations and trusts are very similar in concept the former has legal personality while the latter does not. The new law on foundations seeks to maintain the rules regulating both entities the same. It has been commented that while the law of foundations in many countries does not address beneficial interests in any particular detail, the new Maltese law of foundations is an exception to the rule. The rights of the beneficiary are laid down in detail in the Second Schedule to the Civil Code. The second difference is that in foundations the beneficiaries of a foundation are known only to the administrator and the public notary holding the beneficiary statement. The third difference is that certain trusts may perform particular commercial transactions while foundations may not. Commercial transactions are defined in the Trust and Trustees Act as follows:

“commercial transaction” means the following transactions and any transactions connected or ancillary thereto:

(a) securities offerings, whether to the public or for private placement, portfolio management and custody of investment instruments;

(b) the securitisation of assets;

(c) the grant of real or personal security interests including hypothecs, mortgages, privileges, pledges and guarantees;

(d) collective investment schemes;

(e) employee benefit or retirement schemes or arrangements;

(f) syndicated loan agreements and other multi-creditor banking facilities;

(g) insurance policies and the payment of proceeds thereunder;

(h) timeshare and multi-property structures, and

(i) such other commercial transactions as may be prescribed in a Notice issued by the Minister

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