MALTA Law and Practice Contributed by: Rosanne Bonnici and Rebecca Diacono, Fenech & Fenech Advocates
6. Roles and Responsibilities of Fiduciaries 6.1 Prevalence of Corporate Fiduciaries The Trust and Trustees Act regulates both corporate and private trustees, as defined. Corporate trustees are typically regulated by the local financial services authority and regularly act as trustees of local trusts. The Act also caters for private trustees, providing that it is only an individual that may act as a private trus - tee and then only if they are related to the settlor, by consanguinity or affinity in the direct line up to any degree or in the collateral line up to the fourth degree inclusively or if they have known the settlor for at least ten years and in either case provided the individual is not remunerated for their role as trustee (except as permitted by the financial services authority) and does not habitually hold themselves out to be a trustee. Along similar lines, under the Civil Code, administra - tors of foundations may be both corporate entities (if operating locally, regulated by the local financial services authority) and natural persons. In terms of standards, while the Civil Code generally regulates the rights and obligations of fiduciaries, both sets of laws governing trusts and foundations specifi - cally stipulate the respective rights and obligations of trustees and administrators, setting high standards of behaviour for each type of fiduciary. 6.2 Fiduciary Liabilities Both the local trusts law and the law regulating foun - dations include provisions to the effect that trustees and administrators, respectively, cannot negotiate their way out of liability for a breach of trust arising from their own fraud, wilful misconduct or gross neg - ligence in the case of trustees or arising from wilful misconduct, gross negligence or breach of duty in the case of administrators of foundations. 6.3 Fiduciary Regulation Maltese law does not prescribe any particular invest - ment approach that trustees or administrators are obliged to follow when investing and administering trust and foundation assets, respectively. Both sets of laws require these fiduciaries to act in matters of investment like a bonus paterfamilias – ie, as a respon -
sible head of a family would in investing that family’s wealth. In the absence of provisions to the contrary in the trust or foundation documentation concerned, it follows that the fiduciary is obliged to invest the assets of the trust or foundation prudently. 6.4 Fiduciary Investment As indicated in 6.3 Fiduciary Regulation , Maltese law does not set any particular investment approach that trustees or administrators are obliged to take when investing and administering trust and foundation assets; both sets of laws require these fiduciaries to act in matters of investment like a bonus paterfamilias – ie, as a responsible head of a family would in invest - ing that family’s wealth. It would therefore be prudent to ensure diversification in terms of investment in principle. It is, however, per - missible for a settlor or founder to allow the trustees/ administrators to administer the trust or foundation funds without ensuring diversification if, for example, the key/sole significant asset of the trust or foundation is to be the family business. Following up on the duty imposed on fiduciaries to act as a bonus paterfamilias, it would be prudent for the fiduciary to source the required expertise by engag - ing a qualified investment manager or adviser to fulfil said duties. Under the law, both trusts and private interest founda - tions may be used as commercial vehicles, although in the latter case certain restrictions apply. However, neither is used very often, with the trust or founda- tion concerned typically setting up a special purpose vehicle (SPV) through which to undertake activity. The family business may be so held, with the settlor/ founder and/or their children normally retaining man - agement-level positions thereafter. 7. Citizenship and Residency 7.1 Requirements for Domicile, Residency and Citizenship Domicile Domicile is a private international law principle based on the concept of a permanent home – ie, the place
400 CHAMBERS.COM
Powered by FlippingBook