The Maltese Management Company Passport

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03 May 2010 The Maltese Management Company Passport

An attractive feature of the Maltese asset management company (“ManCo”) is the ability to carry on business in other EU and EEA States through a simplified notification procedure and without having to go through the intricacies of application and incorporation in the host state, saving on time and costs while achieving the same end result and without being subject to an additional minimum capital requirement in the host state. These passporting rights are made available through the Undertakings for Collective Investment in Transferable Securities and Management Companies Regulations, 2004 (the “Regulations”) which implement the provisions of Directive 2009/65/EC of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (recast) (the “UCITS Directive”) into Maltese law.

 

Licensing in Malta

The management of collective investments constitutes a licensable activity in Malta and requires a license from the Malta Financial Services Authority (the “MFSA”). The licensing process is a straightforward procedure during which the MFSA conducts its due diligence and fit and proper tests and takes approximately 8 weeks from the date of the submission of the application documents.

 

Passporting Criteria

Passporting is not an automatic right, but one which is conditional upon an essential condition, namely that the ManCo’s business must consist in the management of UCITS funds alone, or together with other collective investment undertakings which are not covered by the UCITS Directive and for which the ManCo is subject to prudential supervision but which cannot be marketed in other Member States or EEA States under the UCITS Directive.
In other words, in order to passport:

  1. A portion of the funds being managed by the ManCo must be UCITS funds – a ManCo wishing to engage in the sole management of non-UCITS funds cannot make use of passporting;
  2. In managing such non-UCITS funds, the ManCo must be subject to prudential supervision; and
  3. The ManCo cannot benefit from the simplified marketing procedures envisaged under the UCITS Directive in respect of such non-UCITS funds.

 

Passporting Procedure

Once the ManCo has been fully authorised and incorporated in Malta and satisfies the passporting criteria described above, the ManCo has two options to carry on business in another EU / EEA State. The ManCo may either establish a branch in the host state, or it may simply provide services therein without establishing a branch.

Establishment of a Branch

Prior to proceeding with the formalities of the notification procedure, the ManCo must engage in
an in depth planning process. This involves identifying the host state within which it intends to open a branch, the activities it intends on carrying out therein, the instruments in which it shall invest, the safe-keeping and compliance arrangements and the identification / employment of the persons to be operating from such branch. It should also have made arrangements for the purchase or rent of the necessary office space.
Once the planning process has been completed, the ManCo may proceed with the first stage of the establishment process. This involves the submission to the MFSA of a Notification Form. The MFSA then has a three month period within which it will review the Notification Form and the activities envisaged to be carried out in the host state and unless it has reason to doubt the adequacy of the administrative structure or the financial situation of the Maltese ManCo, it will proceed to send the competent financial regulator in the host state a “consent notice”. The MFSA will then notify the Maltese ManCo of its approval.
At this stage, the ManCo should finalise all arrangements for the opening of the branch in the host state, but may not, however, commence business. It is only once one of the following events take place that the branch can open its doors for business:

  1. Either the financial regulator in the host state notifies the Maltese ManCo of the host state rules with which the Maltese ManCo will be required to comply when conducting business through the branch; or
  2. Two months have elapsed from the date on which the MFSA has given the consent notice without receipt of any communication from the financial regulator in the host state.

 

Our Experience

lecocqassociate provides a full range of financial regulatory, corporate and commercial advice in relation to the structuring and incorporation of entities.This newsletter is for information purposes only. It does not constitute professional advice or an opinion. Please contact Mr. Dominique Lecocq on *protected email* for any questions.