‘Family Trusts’ : Proposed Regulations

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Nearly six years ago, back in 2009, the Malta Financial Services Authority (MFSA)  initiated  a  review  process  of the  Trusts  and  Trustees  Act (TTA), culminating in the Trusts and Trustees (Amendment) Act, published in April 2014. Such amendments were targeting the improvement of Malta’s legislative framework regulating trusts governed by the law of Malta, and trustees resident or operating in or from Malta.

The salient amendments to the TTA, inter alia include, the introduction of new provisions dealing with powers of the settlor, the extension of the permitted duration of Maltese law trusts by 25 years (or to 125 years, hence bringing duration of trusts governed by Maltese law in line with English law trusts), amendments to the duties of trustees, inclusion of provisions relating to the office of enforcer, increasing the MFSA’s powers to take certain measures in view of further protecting the public interest, and most notably, the introduction of the ‘Private Trust Company’ (PTC) for family trusts in the new Article 43B.

For the purposes of this new addition to the TTA, the term “family trusts” refers to those trusts created to hold property settled by the settlor or settlors for the present  and  future  needs  of  family  members  or  family  dependents  who  are definite and can be ascertained.

If a trustee set up as a company-

  1. whose object and activities are limited to acting as a trustee in relation to a specific settlor or settlors and providing administrative series in respect of a specific family trust or trusts; and
  2. which does not otherwise hold itself out as a trustee to the public; and
  3. which does not act habitually as a trustee, in any case in relation to more than five settlors at a time,


then authorisation shall not be required in terms of the TTA, but such trustee shall be required to apply for registration by the MFSA.

The aim of this novel concept is undoubtedly that of incentivising the use of Private Trust Companies in Malta (in the context of family trusts), by virtue of facilitating the authorisation procedure in view of the fact that such are characteristically devised around the needs of a specific family and in any case would not be offering services to the general public. One must acknowledge the fact that PTCs offer quite attractive prospects for high net worth individuals and families who favour trustee solutions tailor-made for their requirements, and the design of which they can actively take part in comparison to the conventional trustees.

The aforementioned amendments to the TTA also included an amendment to Article 52 relating to the Authority’s power to issue relevant rules. The latter amendment now enables the Authority to issue rules regulating trustees which are subject to a registration procedure in terms of Article 43B.

The Rules being proposed by the Authority in this respect (hereinafter referred to as the “proposed Rules”), seek to regulate the activities of trustees which are eligible for registration in terms of Article 43B. A brief outline of the salient provisions of the proposed Rules will follow.

Despite a reference to the term “family dependants” had already been included in the Article 43B addition to the TTA, the latter article fell short of providing how such terminology should be interpreted, and the implications thereof, and left it up to the Authority to clarify its meaning by virtue of Rules that may be issued in terms of Article 52. As a matter of fact, Regulation 4 of the proposed Rules now provides  a  definition  of  the  term,  stating  that “family  dependants”  shall  be deemed to refer to an individual who is related to the settlor, by consanguinity or affinity in the direct line up to any degree, whether ascendant or descendant, or in the collateral line up to the fourth degree inclusively.

Regulation 5 then indicates the conditions that the applicant must satisfy in order for such trustees to be eligible for registration in terms of Article 43B:

  1. The trustee must be a company registered in Malta;
  2. The applicant shall submit a request in the form and manner prescribed by  the  Authority  for  inclusion  in  the register of Trustees for Family Offices;
  3. The Memorandum and Articles of Association of the applicant shall limit the company’s objects and activities to acting as trustee in relation to a specific settlor or settlors and providing administrative services only in respect of a specific family trust or trusts;
  4. The applicant shall maintain the requisite insurance cover at all times;
  5. The Board of Directors of the applicant shall be composed of at least three directors, and all directors shall be collectively responsible for the proper administration of the trustee company, including the fulfilment of the relevant duties of trustees;
  6. A qualified director must be authorised and must be independent from the settlor or settlors setting up the family trust;
  7. All  other  directors,  other  than  the  qualified  director,  must  be individuals.


Once the Authority would be satisfied that the above-mentioned conditions and requirements have been met, then the registration of the trustee would ensue.

The proposed Rules further provide a wide-ranging list of the main duties, responsibilities and  functions which should  be  attributed  to  the  ‘qualified director’, who shall be responsible for the proper operation and management of the trustee company. The following functions and duties of a qualified director have been proposed to be included among the set of regulations:

  1. ensuring constant supervision of the trustee company;
  2. the power to veto decisions taken by a majority of members of the Board of Directors;
  3. taking on the function of a ‘qualified person’ in those cases where trustees registered in terms of Article 43b and are holding upon trust either securities or interests in or issued by commercial partnerships registered in Malta, or immovable property;
  4. upon submission of a request to the Authority for registration of the trustee company as a trustee for family trusts,  providing the Authority with a declaration containing inter alia information such as the name of the trustee company, the name and addresses of the shareholders and directors thereof, and the number of family trusts administered by the trustee company;
  5. annual submissions of a Certificate of Compliance;
  6. ensuring  that  the  trustee  company  keeps  accurate  accounts  and records of its administration of the family trust;
  7. notifying the Authority in the event of his resignation, termination of his engagement;
  8. notifying  the Authority of any change or circumstance which would have a bearing on the trustee company’s eligibility of registration.


Other regulatory measures projected to be included by the proposed Rules relate to the dealings of such trustees and  the  cooperation  between  them  and  the relevant regulatory authorities. The proposed Rule 7 imposes the obligation on a trustee registered in terms of Article 43B to deal openly and in a spirit of cooperation with the Authority and any other relevant regulatory authorities. It shall have in place arrangement for all records and accounts of its administration of family trusts, which records shall be easily accessible. Furthermore, the trustee so registered shall also keep at the disposal of the Authority, records relating to the administration of family trusts for a period of at least five (5) years.

The structure of the trustee company’s board should ideally be able to ensure a balance between, on the one hand, the family retaining a degree of control (albeit limited) over the trust and the comfort in knowing that the estate of the family is not in the hands of persons completely unrelated to such family, and, on the other hand, the approved person bringing to the family trust a sense of objectivity and expertise.