The term “Alternative Investment Funds” (AIFs) is defined in the Investment Services Act (Chapter 370) as a “collective investment scheme, including sub-funds thereof, which raises capital from a number of investors, with a view to investing it in accordance with a defined investment policy for the benefit of those investors, and which does not qualify as a UCITS Scheme in terms of the UCITS Directive”.

Based on this, the following are not considered as AIFs: a holding company; an institution for occupational retirement provision covered by Directive 2003/41/EC; employee participation/savings schemes; and securitisation special purpose vehicles.

What are the benefits of establishing an AIF in Malta?

  • EU passporting rights: AIFs established in Malta can be marketed in all EU/EEA member states.
  • Up-to-date regulatory framework: Malta is ranked one of the first for transposing EU directives into national law.
  • Flexible regulator: The MFSA combines a high standard of regulation with an efficient response to industry needs.
  • Non-prescribed AIFs are exempt from income and capital gains tax (excluding investment in immovable property) and they are registered as exempt without credit under Maltese VAT law.

AIFs may be established as European Venture Capital Funds and European Social Entrepreneurship, European Long-Term Investment Funds (ELTIFs) and they can be marketed to retail investors, professional investors and, where permitted to qualifying investors, depending on the type of AIF.

Type of Eligible InvestorQualifying Investor that fulfils the following criteria: invests a minimum of €100,000 or its currency equivalent in the AIF which investment may not be reduced below this minimum amount at any time by way of a partial redemption; anddeclares in writing to the AIFM and the AIF that it is aware of and accepts the risks associated with the proposed investment; andsatisfies at least one of the following: (a) is a body corporate which has net assets in excess of €750,000 or which is part of a group which has net assets in excess of €750,000 or, in each case, the currency equivalent thereof; (b) is an unincorporated body of persons or association which has net assets in excess of €750,000 or the currency equivalent; (c) is a trust where the net value of the trust’s assets is in excess of €750,000 or the currency equivalent; (d) is an individual whose net worth or joint net worth with that of the person’s spouse, exceeds €750,000 or the currency equivalent; or (e) is a senior employee or director of a service provider to the AIF.
Minimum Investment€100,000
AIF ManagerRequired. May be self-managed or may appoint a single external AIFM
Fund AdministratorOptional. If one is not appointed, the AIFM is responsible for the administration function
CustodianRequired MFSA consent required before appointment
Prime BrokersOptional  
Financial AuditorRequired  
External ValuerRequired Can be conducted by an external valuer or the AIFM
Compliance OfficerRequired (may also act as MLRO)  

Licensing Stages:

The MFSA is the authority responsible for issuing an AIF licence in terms of the Investment Services Act. When considering a fund licence application, the MFSA will consider:

  1. The protection of investors and Malta’s reputation
  2. The track record of all the parties involved (including directors, founder shareholders and promoters of the scheme); and
  3. The ongoing adherence to the fit and proper test (integrity, competence and solvency).

Initial Stage

The MFSA’s authorisation process is initiated through the submission of a statement of intentproviding a general outline of the applicant and the plans in submitting the licence application. The MFSA may request a meeting with the licence applicants. This meeting is intended to assist the MFSA in understanding the applicant’s strategy and business model and for the authority to explain its processes and requirements.

Pre-Authorisation Stage

The applicant is then invited to submit an application pack which contains the complete set of required documents in accordance with the licence application being sought. The MFSA will commence the application process once the complete application pack is submitted. The assessment here aims to ensure that the applicant is able to satisfy regulatory requirements in relation to the business model being applied for on an ongoing basis.

As part of the process, the MFSA will request clarifications and additional information through

feedback letters. Once the applicant’s replies are received these can be followed by further engagement through correspondence or meetings as may be required until the criteria for authorisation are satisfied.

Authorisation Stage

Once the MFSA’s assessments are satisfactorily concluded, a decision to proceed to authorisation is taken. Prior to formal authorisation, an applicant is notified of an in-principle decision and a list of conditions to which the authorisation will be subject. At this stage of the process the applicant will address matters such as incorporation and capitalisation of the company and provide confirmation that it will be in a position to comply with its conditions of authorisation.

Post Authorisation Stage

After the applicant proves he has satisfied all of the MFSA’s requirements, the certificate of authorisation is issued.

For more information or if you have any questions, please feel free to contact Dr Cherise Abela Grech

Disclaimer This article is not intended to impart legal advice and readers are asked to seek verification of statements made before acting on them.
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