MALTA Trends and Developments Contributed by: Josef Cachia Fenech Gonzi and Cherise Abela Grech, GTG Legal
Funds may also be licensed as Professional Investment Schemes (PIFs), a local licensing regime for funds providing significant flexibility and lower regulatory requirements for funds tar - geting professional investors. This comes at the cost of the fund not being able to be passported throughout the EU. The setting up of a VC fund requires that a spe - cific application is submitted to the MFSA, which must include an offering document, investor disclosures and a detailed account of internal policies. Funds would also need to identify key individuals or service providers involved in the operation of the funds, in addition to their board of directors and shareholders, and submit spe - cific documentation on each of those individu - als. Where the applicant is applying for an AIF, EU passporting has greatly aided this process, as Malta-licensed fund managers are able to market their services to professional investors across the EU as a whole. This is a significant advantage afforded to investors. From the regulatory compliance perspective, VC investors and start-ups are obliged to com - ply with certain requirements. It is imperative, to this end, that efficient AML procedures are put in place and that reporting obligations are adhered to. Moreover, Malta has been at the forefront of the introduction of new legislative instruments, such as the Notified AIF framework. This facilitates the process of launching AIFs which specifi - cally target professional investors, even where they do not hold an MFSA licence. Under this framework, the MFSA is notified of such fund by means of an existing AIFM. The MFSA’s perspective and approach, while strict, is known to be prudent, in an effort to
encourage fund structures with innovative ide - as and help them flourish, but also ensure that compliance is attained and that investors are adequately protected. Another development of note is the update to the Investment Services Rulebook, with rules on marketing and manage - ment of VC funds. One of the more important changes implemented by the said amendments is the aligning of local legislation with the EU’s Cross-Border Distribution of Funds Directive on procedures relating to pre-marketing. There are several advantages offered by the legal and fiscal regimes in Malta. As mentioned previously, the corporate law framework in Malta aims to be business-friendly and efficient, allow - ing the fast incorporation of corporate structures and offering a variety of corporate forms suit - able for start-ups (with the most popular being private limited liability companies). Tying in with this, regulatory and AML compliance regulations follow the EU model, and start-ups may benefit from various sandbox regimes offered by the MFSA and the MDIA, especially in the realms of fintech and similar. This affords businesses the opportunity to put their projects to the test, while under oversight from the MFSA. From a purely fiscal point of view, Malta does not levy capital gains tax on sales of shares when carried out by non-residents, provided, however, that certain conditions are satisfied. This is advantageous for foreign investors. Moreover, fund vehicles are typically structured in a tax-neutral manner. For instance, it is cus - tomary for a limited partnership to be treated in a transparent manner for the purposes of taxa - tion. More so, SiCAV ( Société d’Investissement à Capital Variable ) funds are often granted tax- exempt status on both their income and gains, with distributions being taxed at the level of
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