A Malta foundation constitutes a legal entity merging the benefits attributable to both a company and a trust. The role of foundations has developed from the traditional fields of estate planning and wealth management, albeit they still play a fundamental role in these spheres. Nevertheless, there are also other uses to consider. One such example is their use in conjunction with special purpose vehicles (SPVs), so as to assist in financial restructuring and asset-backed securitisation transactions. Foundations may be used in a wide variety of situations including:
- tax planning
- asset protection
- asset management
- provision for children/grandchildren/others;
- provision for the disabled; and
- inheritance planning.
It is fundamental to note that a Malta foundation cannot have a commercial purpose, but it may be the passive owner of a commercial business, commercial property or other commercial asset. This differs substantially from a company. Given that foundations have a separate juridical personality they are recognised by legal systems that do not recognise trusts, particularly civil law jurisdictions.
A Malta foundation can be set up as a private or purpose foundation. Formed by incorporation in the same way as a company, a Foundation has a completely separate existence from the founder and likewise from the management committee. Whilst the foundation does not have shareholders, it may have beneficiaries or objects in a manner that is analogous to the private or purpose trust. The management committee is duty-bound to administer the foundations’ assets in accordance with the terms of the Foundation documentation and for the benefit of the objects of the foundation.
A Malta private foundation is set up by the founder for the private benefit of one or more persons or a defined class of persons in which the beneficiaries must be certain. It is mainly used in the context of estate planning and may only be set up for a maximum period of 100 years. A purpose foundation on the other hand is set up for a particular purpose, provided that it is a lawful purpose including a charitable, philanthropic or other social purpose and without having beneficiaries. Contrary to the private foundation, a purpose foundation may be set up for an indefinite period and may be registered as a Voluntary Organisation.
Important Maltese law provides that foundations can be established with ‘Segregated Cells’ allowing distinct groups of assets and liabilities to be separated and insulated from each other. Moreover, foundations can be converted from an existing trust in order to preserve legal continuity (they can also be converted into a trust if required).
Trusts vs. Foundations
|Separate legal personality||No separate legal personality|
|Created by public deed / will||In most cases does not require creation by public deed/will|
|Assets belong to the foundation||Assets are legally owned by the trustee for the benefit of the beneficiaries|
|Administrator has the duty to administer the foundation’s property – subject to the fiduciary obligations||Trustee is subject to fiduciary obligations and requires authorisation from MFSA|
|Founder may have significant degree of control over the administration of the property||Settlor has little or no say in the administration of the trust assets – may lead to a sham trust|
|Minimum endowment of €1,165||No minimum settlement|
WDM International can assist you with the following services:
- Pertinent planning and in relation to your needs and requirements in the establishment of a Malta trusts and foundations;
- Registration of Malta trusts and foundations;
- Trust and foundation formation;
- Statutory maintenance (filing of pertinent tax returns and other compliance forms) of trusts and foundations;
- Membership of the Foundation management committee.