In late 2012, a consultation document was prepared by the Malta Financial Services Authority (MFSA) which included proposals to amend the Trusts and Trustees Act (Cap. 331 of the laws of Malta).
Most of these proposals have recently been enacted and below is a brief outline of some of the main major amendments to the Trusts and Trustees Act which have now entered into force:
Duration of Trusts
In line with what is happening in other jurisdictions, the amendments extend the 100 year perpetuity period of trusts to 125 years.
Settlor Reserved Powers
A new article has been introduced in the Trusts and Trustees Act specifically dealing with settlor reserved powers. This article expressly provides that the reservation or grant by the settlor of any beneficial interest in trust property or of any of the powers to appoint, add or remove trustees, protectors or beneficiaries and of any powers to appoint an investment adviser or manager, shall not affect the validity of a trust.
Duties of Trustees
A general express duty of trustees to avoid conflicts of interest, and an obligation on authorised trustees, which obligation currently applies to private trustees only, to draw up an inventory of the trust assets has been included.
Another new article has been introduced which enables the terms of a trust set up for a charitable purpose to provide for the appointment of an enforcer, with the duty to ensure that the trustee administers the trust in accordance with its terms and its charitable purpose, and to take action against the trustee for any breach of trust.
Furthermore, with regard to charitable trusts, the Trusts and Trustees Act now provides the courts with the power to vary the terms of these trusts where the charitable purpose has ceased to be charitable or has ceased in any other way to provide a suitable and effective method of using the trust property. In such cases it is being proposed that the courts may declare that the trust property shall be held for such other charitable purpose as the courts considers to be consistent with the original intention of the settlor.
Limitation of Actions
The limitation of 30 years within which action can be taken against trustees for fraud or for the recovery of trust property has been removed, thus making it clear that an action brought against a trustee (a) in respect of any fraud to which the trustee was a party or to which he was privy; or (b) for the recovery from the trustee of trust property in his possession or control or previously received by the trustee and converted to his use – shall not be barred by prescription.
Minimum Capital and Professional Insurance
The Trusts and Trustees Act has introduced a minimum share capital requirement of €15,000 applicable to corporate trustees and corporate mandatories. Corporate trustees shall now also be obliged to hold a suitable professional insurance cover commensurate to the activities provided by the trustee.
New Auditor Reporting Duties
Another new article has been introduced dealing with the duty of auditors of authorised trustees, corporate mandatories, and corporate administrators of foundations to notify the MFSA of specific circumstances which they become aware of in their capacity as auditors.
Unit Trusts and Sub-Trusts
The Trusts and Trustees Act now includes within the scope of the provision which regulates the Minister’s power to make regulations or rules, regulations providing for the use of sub-trusts in pensions and investments; (the scope of sub-trusts being that of creating separate funds within the same trust and governed by the same trust deed which are segregated one from the other).
Private Family Offices
Through these set of amendments, a new article has been introduced by virtue of which a trustee set up as a company for the purposes of acting as a trustee to specific settlors and in respect of specific family trusts, does not require authorisation, but is only required to apply for registration with the MFSA. This registration procedure will apply to the extent that the trustee does not otherwise hold himself out as trustee to the public and does not habitually act as such, and in any case not in relation to more than five settlors.
Some of the other amendments aim to simply clarify the current provisions, such as those dealing with the termination of a trust and the appointment of successor trustees.