On the 2nd May 2014 the MFSA issued a circular to persons authorised in terms of the Trusts and Trustees Act in connection with the coming into force of the Trusts and Trustees (Amendment) Act (Act XI of 2014) published on the 25th April 2014. The Trusts and Trustees (Amendment) Act reflects amongst other provisions, the various responses and reactions of the industry to the proposed amendments which were outlined in the consultation document dated 14th December 2012 issued by the MFSA, with the industry being given until 28th February 2013 to provide submissions.
The main amendments being introduced in the Act are, inter alia, the following:
- Revision of Article 1 – Applicability: This article has been revised to clarify that persons acting as trustees, but not required to obtain authorisation in terms of Article 43 and Article 43A, are subject to the provisions of the TTA, except for those provisions relating to authorisation or registration of trustees. Therefore all trustees are required to comply with the duties and obligations imposed by the TTA, apart from any other laws or regulations which such trustees may also be subject to.
- Revision of Article 9 – Rights of beneficiaries: This amendment clarifies that an heir of a beneficiary cannot advance a claim with regard to a beneficial entitlement, unless expressly provided for in the terms of the trust. Furthermore, an additional amendment to this article clarifies the concept that when a beneficiary wishes to disclaim his/her entire interest in a trust, this can be done irrespective of whether the beneficiary has received any benefit or otherwise.
- Revision of Article 12 – Duration of Trusts: The perpetuity period applicable to a trust is being extended to 125 years.
- Introduction of Article 14A – Settlor Reserved Powers: The introduction of Article 14A provides for specific circumstances wherein the settlor may reserve powers under the terms of the trust. The introduction of such a provision does not give rise to the possibility of the trust being considered a sham, despite the settlor having retained control over the trust assets.
- Revision of Article 18 – This amendment aims at streamlining the processes which are applicable in the case of death or insolvency and winding up of a trustee respectively.
- Introduction of Article 24B and 24C – Introduction of the office of ‘Enforcer’ – One of the main amendments to the Act is the introduction of the office of enforcers in the case of trusts set up for a charitable purpose. In a traditional trust, the beneficiaries usually enforce the trust. However in the case of trusts set up for a charitable purpose, where there are no beneficiaries, it will be the role of the enforcer to monitor the trustee and ensure that the latter carries out his obligations vis-à-vis the trust.
- Amendments to Article 43 – A number of amendments have been made to this article. The most significant are the following:
- The introduction of a minimum capital requirement of €15,000 for both trustees and mandatories, whether individuals or body corporates, which capital must be maintained on an on-going basis;
- The introduction of a requirement for both trustees and mandatories, whether individuals or body corporates, to maintain insurance cover at all times;
- The introduction of specific provisions which set out the requirement for persons intending to act as mandatories, or to act as an administrator, trustee, director or similar functionary of a private foundation, to obtain authorisation, as well as the applicable conditions to obtain such authorisation;
- The introduction of the possibility of fiduciaries other than trustees as well as notaries to act as “qualified persons”;
- Amendment of Article 43A – A number of amendments were made to this Article, mainly relating to the duties of notaries in the context of private trustees.
- Introduction of Article 43B – This article introduces the concept of ‘Family Trusts’ and trustee companies set up to act as trustee only in relation to such family trusts. The introduction of this concept serves to align the TTA to international legislations on trusts and trustees, and to provide for a less stringent regulatory regime applicable to such trustee companies.
- Introduction of Article 43C – This article introduces the duty of an auditor of a trustee to report to the Authority certain issues or facts which he may become aware of in his capacity of auditor, including any facts which could lead to a serious qualification in the auditor’s report or which constitutes a material breach of the legal and regulatory requirements applicable to trustees.
- Introduction of Article 46B – Introduction of a power to the authority to protect the public interest, including the power of the Authority to appoint a person to assume control of the assets of the trustee.
It is important to note that authorised trustees and other fiduciary services providers are required to comply with the following new requirements as set out in Act XI of 2014 within the following time-frames from the coming into force of the amendments (25th April 2014):
|New Requirements||Transitory Period|
|Minimum Share Capital Requirement||2 years|
|Professional Indemnity InsuranceCompliance Officer||6 months6 months|
|Auditor reporting requirements||6 months|