Foreign Foundations may now Continue in Malta

Amendments made to the law regulating Foundations in Malta

Prior to the enactment of Act 36 of 2018 on the 6th November of 2018, persons wishing to continue their foundation in Malta were required to set up a Maltese foundation, transfer assets belonging to the foreign foundation to it and ultimately dissolve the foreign foundation. This created various obstacles, including adverse tax consequences which required the persons in question to proceed with the liquidation process, involving the distribution of assets to the beneficiaries. The amendments made within the Second Schedule of the Civil Code presents an opportunity for persons to continue their foreign foundation in Malta, without having to go through the burdensome process of liquidation. 

The New Laws

Article 22A of the Second Schedule of the Civil Code allows organisations formed and incorporated or registered through the laws of a State which is a member of the European Union or the European Economic Area, while holding a similar structure to a Maltese organisation, and allowed under its constitutive instrument or applicable law, to register with the Registrar for the continuation of same in Malta.

The same provision applies in the case of foreign organisations which do not originate from a European Union Member State or a country forming part of the European Economic Area as long as approved through a notice issued by the Minister responsible for Justice. Such notice shall list the jurisdictions which have been approved and such list will be reviewed periodically by the responsible Minister.

The provision stipulates that the structure which the organisation must hold in order for it to be recognised under Maltese law, must be similar in nature to an organisation which:

Is governed by the Second Schedule of the Civil Code; or

Is governed by a special law which does not, itself or within other regulations, provide for the continuation of the organisation.

Once the request to the Registrar has been made and the organisation has, thus, been successfully registered in Malta, such organisation shall maintain the legal form which it had under the law of the foreign country or jurisdiction, and which is ultimately the same as a form recognised under Maltese law. If this is not the case, the applicant would be requested to select a legal form as similar as possible to the one of the organization being continued in Malta. Such form would need to be designated by the same applicant.

The foreign organisation which would have officially been continued in Malta must comply with all the regulations set in place regulating organisations in Malta, particularly the Second Schedule of the Civil Code. It shall also have the duty to follow all the rules regulating the structure, procedure, formalities and requirements.

Malta’s leading position

Over the past decade Malta has made a name for itself within the international business hub, where it has identified itself as a leader within various industries. Most notably, Malta has been a trailblazer within the financial services sector. In fact, it was the first in the world to approve and put into action legislation regulating DLTs. It has also made significant steps towards bettering the areas of iGaming and Artificial Intelligence. By adopting a pro-active attitude towards the rapidly-developing industries, Malta is fostering innovation within an industry which is continuously growing and developing