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Trusts & Escrow

The primary legal vehicle for resilient tax planning is the creation of a discretionary trust. Without trusts, many companies that are directly owned by private clients or corporate groups will not provide adequate tax efficiency sought. Our trust services available include discretionary trusts, fixed interest trusts, accumulation and maintenance trusts and revocable trusts.

Legal Frameworks

The Trust and Trustees Act Malta (Chapter 331 of the Laws of Malta) specifically provides for the regulation of trustees in Malta, the role of which can be maintained by natural or legal persons alike, provided that the necessary authorisations laid down by law is obtained.

Formation and Constitution

Trusts may be established unilaterally through written or oral declarations, instruments in writing, wills, or even by operation of law. A trust exists where a person (called a trustee) holds, as owner or has vested in him property under an obligation to deal with that property for the benefit of persons (called the beneficiaries), whether yet ascertained or in existence, which is not for the benefit only of the trustee, or for a charitable purpose, or for both such benefit and purpose aforesaid.

A very important feature of a trust is that the trust property constitutes a separate fund from that owned by the trustee, which is distinct and separate from his personal property and from any other property held by the trustee under any other trust. The TTA states that the holding of property under trusts has the following legal effects:

(a) That personal creditors of the trustee shall have no recourse against the trust property;
(b) That the trust property shall not form part of the trustee’s personal estate upon his insolvency or bankruptcy; and
(c) That the trust property shall not form part of the matrimonial property of the trustee or his spouse nor part of the trustee’s estate upon his death.

Upon settlement in trust the trustee acquires all rights in the property and inter alia becomes entitled to appear or act in his capacity as trustee before any court, any notary or any person acting in an official capacity. Where the trustee desires to register property, movable or immovable, or documents of title to them, he is entitled to do so in his capacity as trustee or in such other way that the existence of the trust is disclosed.

Trust Management & Administration

The way trustees are obliged to carry out their fiduciary duties is the core of the trust. The trustees owe duties to the beneficiaries in relation to the trust fund. The Trusts and Trustees Acts, provides for limited situations in which trustees who are incapable of performing their duties can be removed from office and other trustees may be appointed in their stead. There are various duties a trustee may owe during his tenure in office, and the terms of the trust must always be taken into consideration when administering and managing a trust. The core duties of a trustee in the administration and management of a trust thereof include inter alia:

(1) The duties on acceptance of office relating to the need to familiarise oneself with the terms, conditions and history of the management of the trust.
(2) The duty to obey the terms of the trust unless directed to do otherwise by the court.
(3) The duty to safeguard the trust assets, including duties to maintain the trust property, as well as to ensure that it is applied in accordance with the directions set out in the trust instrument.
(4) The duty to act even-handedly between beneficiaries, which means that the trustees are required to act impartially between beneficiaries and to avoid conflicts of interest.
(5) The duty to act with reasonable care, meaning generally a duty to act as though a prudent person of business acting on behalf of someone for whom one feels morally bound to provide.
(6) Duties in relation to trust expenses.
(7) The duties of investment, requiring prudence and the acquisition of the highest possible rate of return in the context.
(8) The duty to distribute the trust property correctly.
(9) The duty to avoid conflicts of interest, not to earn unauthorised profits from the fiduciary office, not to deal on one’s own behalf with trust property on pain of such transactions being voidable, and the obligation to deal fairly with the trust property. (self dealing)
(10) The duty to preserve the confidence of the beneficiaries, especially in relation to Chinese wall arrangements.
(11) The duty to account and to provide information.
(12) The duty to take into account relevant considerations and to overlook irrelevant considerations, failure to do so may lead to the court setting aside an exercise of the trustees’ powers.

The identity of shareholders of Malta companies is publicly available at the public Register of Companies. However, shares may also be held confidentially on behalf of an undisclosed beneficiary by our trust and fiduciary company which is duly authorised by the MFSA (Malta Financial Services Authority) to provide trust and fiduciary services – Fides Fiduciary Limited.

Fiduciary Services

While the offshore concept of a nominee shareholder has been removed from Maltese law, licensed trust companies are able to hold shares in the name of ultimate beneficiaries under the Civil Law institute of Mandate. By virtue of our trustee licence, a Fides Fiduciary Limited, may be entrusted to hold of shares on a fiduciary basis on behalf of our clients, provided that full KYC is provided on our clients and his Source of Funds (SOF) and Source of Wealth (SOW).

Fides is also able to provide or procure local directors through our corporate services provider – Fides Fiduciary Limited to ensure that the effective management and control is properly carried out from Malta when necessary. We may offer such a service on a case-by-case assessment of the general business that would pass through the Malta company.

Escrow Agent Services

An escrow agent can enhance the safeguarding aspects of a business transaction, playing a crucial role in mitigating commercial risks for all involved parties. This risk mitigation is accomplished by the escrow agent ensuring that conditions precedent to the transaction are met by all parties before a secure escrow payment facilitates the exchange of funds, goods, and/or services.

Moreover, the independent third party such as Fides Fiduciary Limited, acting as the escrow agency, adds an additional layer of security for all parties involved. This is achieved by the escrow agency receiving and holding the funds related to the transaction in an escrow account. These funds are only released when confirmation is received that all terms of the agreement have been fulfilled.

The escrow agent may personally verify the fulfilment of conditions, or in certain industry-specific transactions, parties may opt for independent experts, such as engineers, to confirm the order/service and its conditions within the transaction context.

Fides’ clients requiring trust services can benefit from the services of our licenced trustee, Fides Fiduciary Limited which delivers a flexible and responsive trust service that meets the needs of a wide range of clients.

What Sets Us Apart

Tailored Solutions

We understand that every business is unique. Our team works closely with clients to tailor solutions that align with their specific goals and challenges.

Expertise Across Industries

Whether you are a startup, a multinational corporation, or anything in between, we have the expertise to navigate the complexities of various industries.

Integrity and Compliance

At Fides, we operate with the highest standards of integrity and are committed to ensuring that our clients are fully compliant with local regulations and international best practices.

Crafting your vision into a reality.

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