MALTA Law and Practice Contributed by: Dr Josef Cachia Fenech Gonzi and Cherise Abela Grech, GTG Legal
wide variety of investment strategies, making it a popular choice for Maltese funds. • Investment company with fixed share capital (INVCO): INVCOs are far less popular that SICAVs due to its fixed share capital, often referred to as “close-ended” structure. INV - COs also have various restrictions on their activities, allowing the SICAV to be by far the most popular investment structure. SICAVs also allow for a great level of flexibility that alternative legal forms do not provide. Pri - marily, SICAVs can be structured in an umbrella fund structure, which allow for multi-funded investment vehicles and sub-funds under the primary fund. A SICAV can also be established as a Recognised Incorporated Cell Company (RICC), which allows each sub-fund under the primary fund structure to be set-up as separate incorporated cells, which have their own sepa - rate legal patrimony. The law also allows for funds to be structured into Partnerships, Unit Trusts, and Common Contractual Funds, however, they are rarely used as structure for a fund. As for the regulatory structure, professional funds are either regulated under the Europe - an-wide Alternative Investment Fund Manag - ers Directive (AIFMD), with funds being legally recognised as Alternative Investment Funds (AIFs), or under the local fund regime for profes - sional investors, where such funds are known as Professional Investor Funds (PIFs). Retail fund structures are excluded from these frameworks. PIFs serve as a flexible and efficient vehicle for VC investments as they are primarily designed for professional or qualifying investors, ben - efiting from a regulatory framework that allows fund managers to adopt innovative and tailored
investment strategies. They offer a cost-effec - tive and tax-efficient structure, making them an attractive option for VC firms looking to invest in start-ups and high-growth companies. PIFs have less regulatory requirements than AIFs but are not subject to the single market pass - port and hence cannot be marketed outside of Malta without obtaining the necessary regulatory licence. As for the corporate documentation, each fund will have a statute, the form of which will depend on the fund’s legal structure. A SICAV or INVCO will have its own Memorandum and Articles of Association (MAA), which are often supple - mented by a separate shareholders agreement. The fund will then issue an offering memoran - dum, which will list the key details of the fund, its investment objectives, investment strategy and other key terms. Lastly, investors will enter into a subscription agreement with the fund. The agreement sets out the terms of the investment. 2.2 Fund Economics In Malta’s VC landscape, Fund Principals – comprising initiators, managers and principals – engage economically with the funds they over - see through a combination of management fees, performance incentives, and personal capital commitments. • Management fees: Fund Principals typically receive an annual management fee, which is a percentage of the fund’s committed capital. This fee compensates for operational expenses, including salaries, due diligence and administrative costs. The exact percent - age can vary based on the fund’s size and the management team’s expertise. • Performance incentives (carried interest): in addition to management fees, Fund Principals often receive carried interest, a share of the
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