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FinanceMalta investor guide series trusts & foundations
Creation of a foundation
Drafting of the foundation deed
Termination: Except when foundations are used as collective investment vehicles or in securitisation transactions or in the case of purpose foundations (which may be established for an unlimited term), foundations are valid for a maximum term of 100 years from their establishment. Founder: Rights of the founder: • The founder may exercise supervision over administration of the foundation, obtain copy or copies of accounts, inventory and descriptive notes of property; • He/she may intervene in court proceedings concerning the appointment of administrators or the disposal of assets. Conditions for the founder: • The founder may also be an administrator; • The founder may be a beneficiary during his lifetime, but cannot then act as sole administrator of the foundation. Administrator: Duties of the administrator: • The administrators (whether natural or legal persons) are responsible for maintaining possession and control of the property of the foundation, safeguarding such property and ensuring compliance with the statute of the foundation and the law; • They are bound by fiduciary obligations stipulated in the Civil Code. Any fiduciary who breaches such obligations shall be bound to return any property, together with all other benefits derived by him, whether directly or indirectly, to the person to whom the duty is owed. Conditions for the administrator: • The administrator can be based outside Malta; however, a person resident in Malta must be appointed to act as the local representative of the foundation in this case; • The administrator may be the founder; however, in such situation, the founder cannot be the sole administrator. Supervisory Protector: The deed can provide for a supervisory council or the office of protector. They usually exercise supervision over the acts of the administrators and may be vested with powers of appointment or removal of administrators.
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Registration of the deed with the Office of the Registrar of Legal Pensions
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A new legal person is created which is distinct from its founders and administrators
Main Advantages: • Assets and liabilities are held by a legal person separate from the founders or the administrators. Thus, any potential debt and other liability that a foundation might have can only be enforced upon its patrimony and not beyond, except to the extent that the promoters and members expressly agree to be so liable or as expressly provided by law; • They may be taxed as companies with the same potential benefits such as an effective 5 per cent or nil tax rate; or they can opt to be taxed as a trust, in which case they will be tax neutral in Malta as regards non-residents; • Foundations can be converted into trusts and vice versa; • Although a foundation needs to be registered, only a minimum of information in relation to a private foundation is available to the public, therefore confidentiality is guaranteed; • A foundation would hold title to its assets; • A foundation may have more than one founder and the founder(s) may be an individual or a legal person; • Protectors and a supervisory council can be appointed, and thus, independent persons can be appointed to supervise the acts of the administrators; • Beneficiaries can be individual, legal persons or even other foundations; • Maltese law also allows the creation of segregated cells, which segregate assets and liabilities from other assets and liabilities, within a foundation. Main Uses: • Foundations are used for similar purposes as trusts. Common uses include: tax and estate planning, asset protection planning or assistance to charities. • Foundations are prohibited from trading. However, a foundation may be endowed with commercial property or a shareholding in a company or other asset which gives rise to income, as long as the foundation is only the passive owner of such assets.