Administrator of Private Foundations
A foundation is defined as an organisation consisting of a universality of things constituted in writing, whereby assets are destined to fulfill a specified purpose and/or for the benefit of named beneficiaries / class of beneficiaries. The Assets of a Foundation, once bequeathed to the Foundation, are entrusted to the administration of a designated person or persons namely the Administrator.
Assets may be endowed to the Foundation upon its constitution and also during its lifetime through additional endowments. Moreover, assets may be granted to their beneficiaries under a condition, for a fixed time or in accordance with express rules of the Foundation Statute.
What are the potential activities of a Private Foundation?
Having legal personality, a Foundation may be set up for several purposes, including, to control or establish other organisations of any legal form. A Foundation may not be established to trade or carry on commercial activities. However, a Foundation may be endowed with shares of companies, commercial property or a shareholding in a profit-making enterprise, a franchise, a trademark or other asset which gives rise to income. Furthermore, subject to required authorisations, a Foundation may be used as a collective investment vehicle and issue units to investors therein for the passive holding of a common pool
of assets, the management of which is delegated to a third party, including a pension or employee benefit arrangements.
A Foundation may also establish segregated cells within itself in order to achieve different purposes, with the added advantage of having the assets and liabilities of every cell deemed as distinct from all other assets and liabilities of the Foundation or other cells which may be established under the same Foundation.
How do you set up a foundation?
A Foundation must be constituted by means of a Public Deed or will with the said Public Deed having to be registered by a Notary with the Registrar for Legal Persons. That having been said, the Public Deed still remains confidential with the Registrar for Legal Persons obliged by law to ensure the privacy of Private Foundations.
The Beneficiaries are named in a separate document called the Beneficiary Statement which need not be registered with the Registrar for Legal Persons and remains secret and confidential.
In the process of setting up a foundation initial costs include Notarial fees, Registration fees, Initial Minimum Endowment and Administrators’ fees.
Why the option of a Foundation?
Foundations are useful in a vast number of scenarios particularly for high-net-worth clients wishing to structure and plan their finances. Foundations can be approached from an investment perspective to ensure the maintenance and separate personality of the property in question. They are also ideal mediums for estate planning especially when the founder wishes to ensure adequate provision for his descendants.
What is the legal framework of a Maltese Foundation?
The Maltese legal system has adopted a unique vehicle, based on a blend of civil law aspects, incorporated with the benefits provided by Anglo-Saxon jurisdictions, introducing a simplified regime with extensive flexibility. The Maltese legislation has applied the principle of separate legal personality of the Foundation once constituted, and thus a Foundation would be capable of holding assets for its own benefit and of incurring obligations, which Assets would be separate from the Administrator.
What are the advantages of a Maltese Foundation?
Maltese Foundations enjoy a number of key advantages including but not limited to:-
- Option to convert a trust into a Foundation and vice-versa
- A Foundation would hold title to its assets hence since patrimony of assets is being held by a legal person separate from the Founder or the Administrators. This separate legal personality means that a Foundation is burdened with its own obligations and sues or may be sued in its own name
- Customized solutions for each Foundation including “commercial” scenarios
- Subject to comprehensible legislation (Civil Code, Second Schedule) offering a great degree of certainty and a reliable jurisdiction
- Founder may reserve a degree of control and Beneficiaries’ involvement in the Foundation
- Protectors of any nationality and without authorisation by Malta Financial Services Authority (MFSA) can be appointed, and thus independent persons can be appointed to supervise the acts of the Administrators
- Attractive tax regimes regulating worldwide profits made by the Foundation which may benefit from exemptions and refunds
The role of the Parties in a Foundation
- May exercise supervision over the administration
- May be the only Beneficiary of a Private Foundation during his lifetime or the Founder may be Beneficiary with others that he designates in the Beneficiary Statement
- May add, substitute or remove himself and other Beneficiaries
- May freely amend the Deed which amendment must be done by means of another Public Deed. The Beneficiary Statement may be amended without any Public Deed with a Private Writing signed by the Founder being sufficient
- Administrators of Private Foundations are authorised and supervised by the Malta Financial Services Authority (MFSA)
- Owe fiduciary duties
- May be remunerated from the income or capital of the Foundation
- May be granted the power to add or remove Beneficiaries
- Persons not yet conceived at the time of creation of a Foundation may be named as beneficiaries but rights only arise once born viable
- Subject to the terms of the Foundation Deed, Beneficiaries may request information. Inversly the Foundation Deed may state that the Beneficiary should not be informed of the existence of the Foundation until the Founder decides so
- Benefit personal to the Beneficiary
- A person shall not enjoy any rights in relation to the Foundation or vis a vis the Administrator and shall not be considered a Beneficiary until appointed as a Beneficiary by the Founder or the Administrators or until the event to which is related the appointment as Beneficiary occurs
- Terms may be included in the Deed that contemplate the termination of the Beneficiary’s interest or restrict the alienation of the Beneficiary’s interest
- Deed may provide for the entrustment of one or more Protector
- Independent – having the power to supervise the acts of Administrators and to overview their activities
Acts or discretion of Administrators may be subject to the consent of the Protector
How can War Chest help?
War Chest is able to assist its clients with the setting up of a tailor-made Foundation to the Client’s needs. War Chest is also able to act as administrator to the Foundation whereby it would have the responsibility of keeping of records of the Foundation’s assets, liabilities, income and expenditure, maintaining possession and control of the Foundation’s property, safeguarding such property all the while ensuring compliance with the Foundation statute and any applicable laws.