Funds & Investment Services: Redomiciliation of Funds

Malta’s practical and accessible rules concerning the redomiciliation of funds are undoubtedly part of the reason why Malta has attained such success as an EU fund domicile. Malta also has other features in its favour, such as a secure legislative and regulatory framework and a workforce filled with a number of competent professionals ready to assist in the setting-up and maintenance of investment funds.

The Malta Financial Services Authority (MFSA) also deserves its share of praise as it is a stable regulatory body which allows for a reasonable degree of flexibility within its firm principles, depending on the individual requirements of the clients.

An added bonus for applicants who choose to domicile their funds to Malta is that the compliance costs in Malta are relatively lower than jurisdictions elsewhere in Europe, while simultaneously retaining the high standards of the Maltese service-providers.

In the case of a current fund, it could make more sense, rather than opening a new fund within Malta’s jurisdiction, to simply redomicile a present fund, together with its existing assets and liabilities, to Malta’s jurisdiction.

Redomiciliation of funds to Malta involves the movement of the fund from one domicile of choice, to another, with the result that the investment fund would then fall under Maltese law, including EU Directives and Regulations. The investment fund would then be obliged to seek authorization and obtain an MFSA licence.

The MFSA calculated for this possibility by introducing “Guidelines on redomiciliation of Offshore Funds to Malta”, in order to collate the information about the regulatory process required for investment funds that decide to redomicile in Malta.

The general procedure for redomiciliation to Malta is the following:

•  Application for a licence, including all required relevant documentation in draft form;
•  Contact must be made with the Registrar of Companies (part of the MFSA);
• The MFSA would then request certain due diligence and vet the documentation submitted as well as the structure of the existing fund;
• If there is an ‘in principle’ approval the Authorisation Unit of the MFSA would then liaise with the Registrar of Companies so that licensing would occur simultaneously with authorisation.

One marked advantage to redomiciling an existing 3rd country investment fund rather than starting afresh, is the fact that the assets of the fund would remain untouched, with no need for any adjustment. Any custody or brokerage agreements could also remain in force, as Malta allows for the possibility of the service-providers being based outside Malta.

Redomiciliation is allowed from all EU, EEA and OECD member states, as well as other jurisdictions including the Bahamas, Bermuda, the British Virgin Islands, the Cayman Islands, Gibraltar, Guernsey, the Isle of Man, and Jersey.

Redomiciliation to Malta offers another marked advantage, in that this transfer would not affect the fund’s prior listing arrangements in alternate jurisdictions. There also exist cost-effective tax-planning possiblities for the fund, as well as for its investors and service-providers, which are aided by Malta’s long-established taxation framework, as well as its double-taxation treaties with over sixty states.