The MFSA has recently issued a consultation document on the Proposed Establishment of a Framework for Collective Investment Schemes (hereinafter “CISs”) structured as Limited Partnerships without legal personality. This document aims to close the gap between local and foreign markets in relation to setting up CISs, since the proposed changes are already present in foreign jurisdictions.

The framework which would allow and hence, establish such option, is being referred to as the Limited Partnership Funds (LPF) framework (hereinafter “Framework”). This Framework is foreseen to cover a present gap in the local regulatory framework within the Investment Services Act. It is also being proposed that the LPF would fall under the remit of the MFSA without the involvement of any other entities.

The main features of the proposed Framework are:

• Formation of the LPF – the formation process shall be governed by the proposed new regulation under the Investment Services Act. The framework will solely be available to CISs which have been licensed, recognised by, or notified to the MFSA;
• Legal Personality –LPFs will not be afforded legal personality;
• LPF partners and liability – general partners (hereinafter “GP”) shall be responsible for the management of the partnership’s business and liable for its debts and obligations, and the proposed Legal Notice would allow a GP to be able to enter into contracts on behalf of the partnership. This would in turn alter the procedure of third parties seeking damages and as proposed, create additional safeguards in favour of investors, and alter the liability of partners;
• Limitation of Object – the proposed framework would require any LPF to limit its object to collective investment of its funds in the partnership deed; and
• Accounting and Reporting – by virtue of its nature, the LPF would be subject to specific reporting requirements as established in the applicable rulebook. Moreover, its nature necessitates that any income, gains, or losses which arise owe accountability to each partner without having to pass through the additional layer of limited partnership.

The aforementioned rulebook is being prioritised on the basis that the concept of LPFs require specific rules, and since there is the similar notion pertaining to distinct legal personality, to avoid duplication of provisions.

Investor eligibility to who shall be allowed to invest in schemes whilst being set up as an LPF is still being assessed by the MFSA, with specific reference to whether the framework shall be limited to professional investors.

Moving forward, the MFSA is requesting comments and feedback in relation to the general features of the Framework, the proposed Legal Notice, and views on the rulebook and investor eligibility. Stakeholders are able to do so by not later than 21^st March 2024.