Private Trust Company (PTC) rules & guidelines by the MFSA
On the 25th April 2014, the Trusts and Trustees Act (TTA) was updated by including Article 43B to the principal Act, which mentioned ‘Family Trusts’, which the TTA defines as a a trust created to hold property settled by the settlor or settlors for the present and future needs of family members and dependants. The TTA also very briefly outlined that a trustee, set up as a company, whose objects and activities are limited to acting as trustees in relation to a specific settlor and does not hold itself out to the public shall not require authorisation in terms of the Act but need only register with the Malta Financial Services Authority (“MFSA”).
Two years later, MFSA issued rules and guidelines for the trustees of such family trusts, which are also commonly referred to as a Private Trust Company (“PTC”).
Naturally, the rules issued by MFSA would only apply to trustees of Maltese trusts which are set up in line with article 43(B) of the TTA and whose objectives and activities are limited to:
- Acting as a trustee in relation to a specific settlor/s;
- Providing administrative services in respect of a specific family trust/s;
- Not holding out trustee services to the public;
- trustee does not habitually act as a trustee and does not do so for more than 5 settlors of a family trust at any given time.
It is important to note that although a PTC will be registered with MFSA, since it will be registered specifically in line with Article 43B, it will not be able to carry out any other activity that is regulated by the TTA, such as acting as a mandator or administrators of private Maltese foundations, like a professional trust company can. Further to this, a PTC will not be permitted to carry out any duties relating to a company service provider or any other activity that would require authorisation from MFSA.
For a PTC to be eligible for registration in terms of article 43B it must satisfy the following criteria both at application stage of the registration process and continuously thereafter:
- The trustee company (PTC) must be a limited liability company registered in Malta in line with the Companies Act (Cap. 386);
- The PTC shall submit a request in the form and manner prescribed by the Authority (MFSA) in order to be able to be included on the Register of Trustees for Family trusts. This register is kept by MFSA and will be available to the public;
- The memorandum and articles of association of the PTC shall limit the objects and activities to providing trustee services, including administrative services to not more than 5 settlors at a time;
- The PTC must keep insurance cover at all times which will be proportionate to the nature and size of the activites carried out by the trustee company;
- The board of directors of the PTC must be made up of at least 3 directors, who shall be responsible for the administration of the trustee company and who shall fulfil the relevant trustee duties;
- All directors must be individuals and determined by MFSA to be fit and proper individuals;
- Each director must submit a personal questionnaire which will enable MFSA to asses whether or not they are ideal for the role;
- At least one of the proposed directors shall possess the necessary knowledge and experience relating to the administration of trusts.
Having taken note of the above requirements, it would be beneficial to set up a PTC for a number of reasons, mainly:
- A PTC would give settlors and/or family members the opportunity to be involved in its day to day management (the board of directors may be constituted by a professional individual who has vast experience in the trust industry together with family members. A professional trust company will not be in a position to offer the Settlor the degree of flexibility and the speed of response that they require. Further to this, employees of a professional trust company will not be familiar with the business of companies owned by the family members. The advantage of having a PTC structure means that these problems would largely be avoided. Directors would be familiar with the business and can make instant decisions.
- The costs of setting up a trust and establishing a PTC are initially significantly higher than simply establishing a trust with a professional trust company. However, the ongoing costs may be lower than fees charged by third party professionals. This is particularly true where the trusts holds assets that are substantial in value as usually professional trusts charge a fee based off a percentage of the assets.