Malta Recognised Incorporated Cell Companies

Jonathan Pisani | 10 Sep 2012

Malta Recognised Incorporated Cell Companies

 

1. The introduction of the Companies Act (RICCs) Regulations

The launch of the Incorporated Cell Company ('ICC') SICAV in February 2011 generated a lot of interest across the funds sector.  Not all business models could be established under the ICC SICAV regime.  A demand grew for business models where an ICC could provide administrative services to a number of Incorporated Cells ('ICs') licensed as collective investment schemes ('CISs'). 
 
The introduction of the Companies Act (Recognised Incorporated Cell Companies) Regulations fills this void. 

2. Characteristics of RICCs

2.1. The legal entity 

An recognised incorporated cell company ('RICC') may be only be formed by a limited liability company, whether established immediately as an RICC or constituted as an RICC.  Once formed the RICC may issue ICs in terms of the Companies Act (Recognised Incorporated Cell Companies) Regulations (the ‘Regulations’) and provide administrative services to these ICs – administrative services should be understood in terms of the Schedule to the Regulation. 
That is, an RICC may only provide services of an administrative nature, in relation to which it must first be issued with a Recognition Certificate in terms of article 9A of the Investment Service Act ('ISA'). The remit of Administrative Services are listed in the Schedule to the Regulations.
 
As opposed to a SICAV ICC, an RICC may not carry out any licensable activity.
 

2.2. Authorisation

RICCs need to be recognised by the Malta Financial Services Authority ('MFSA') before they can provide ICs with administrative services.  An IC established by an RICC requires a licence to carry out the activities of CIS, granted in terms of S.4, ISA. 
 

2.3. Change of domicile

Foreign entities carrying on functions similar to those of an RICC may be continued in Malta as an RICC. 
A body corporate registered, incorporated or constituted under the laws of an approved country or jurisdiction outside Malta and carrying on the activity of a CIS which is similar in nature to a cellular or non-cellular company as known under the laws of Malta, may be continued as an incorporated cell of a recognised  incorporated cell company. Conversely, an RICC and/or IC may be continued outside of Malta as a body corporate similar in nature as recognised in the territory in which it is continued. In each case the prior approval of the MFSA is required.
 

2.4. Incorporation documents of RICCs

Memorandum of Association to state that company is a RICC.  Name of Company to include words RICC or 'Recognised Incorporated Cell Company'. 

3. Formation requirements of an IC 

  • To have a name separate to that of the RICC, may be similar to the RICCs name, although sufficiently similar such that it creates confusion;
  • Name to include words IC or Incorporated Cell;
  • To have its own M&As, entered into by an RICC and any other shareholder;
  • RICC to subscribe to at least one share in the IC;
  • M&As to state that entity is an IC;
  • IC may not own shares in a RICC;
  • An IC may own shares in another IC of the same RICC;
  • IC must have the same registered address as its RICC;
  • Company secretary of an RICC or an IC may be a body corporate;
  • IC may have RICC as its only member, and this would not trigger the provisions of the Companies Act regarding single member companies;  
  • Amendments to M&As of IC to be made by extraordinary resolution of the IC after the written approval of its RICC is obtained;

3.1. Characteristics of an IC

  • An IC is a limited liability company with separate legal personality;
  • Not a subsidiary of its RICC;
  • IC may not be a RICC;
  • An IC may be a SICAV or an INVCO;
  • An IC should use the standard form documents provided by its RICC, it should not amend such documents without the prior written approval of the RICC.  That being said, the Prospectus Directive and Directive 2004/109/EC on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market still apply to ICs.
  • RICCs and ICs by virtue of this status alone, cannot enter into transactions on behalf of each other;
  • Provisions of the Companies Act and of the ISA apply to RICCs and ICs;

3.2. Separation of assets and liabilities

Directors of the RICC and of the ICs should keep assets and liabilities of the RICC and ICs and between each IC separate at all times; -however, assets of RICCs, and ICs may be collectively managed by an investment manager.
 

3.3. Relocation of an IC from one RICC to another RICC

An IC may move from one RICC (the “Exiting RICC”) to another RICC (the “Recipient RICC”). A new certificate of incorporation is issued by Registrar once relocation is complete.
 

3.4. Expulsion of an IC from an RICC

An RICC may expel an IC provided that the MFSA gives its approval for the expulsion and only in so far as at least one of the grounds listed in the law apply.

4. Comparatvie table - RICC vs ICC SICAV vs Multi-fund companies 

Distinctive Features

ICC SICAV

RICC

Multi-fund

Applicable Regulations

Companies Act (SICAV Incorporated Cell Companies) Regulations, 2010

Companies Act (Recognised Incorporated Cell Companies) Regulations 2012

Companies Act (Investment Companies with Variable Share Capital) Regulations

Licensing requirement

The ICC is licensed as a SICAV CIS;

Each IC requires a CIS licence under the ISA, independently from the ICC

The RICC requires a Recognition Certificate;

Each IC requires a CIS licence under the ISA, independently from the RICC

The multi-fund is licenced as a SICAV CIS.  The creation of sub-funds requires the prior written approval of the MFSA.

Activity

The ICC to be formed as a SICAV and operate as a CIS

No licensable activity allowed. Only administrative services as outlined in the Regulations.

To function as a CIS

Legal form:

ICC

IC

SICAV

SICAV or investment company with fixed share capital

Limited liability Company

SICAV or investment company with fixed share capital

SICAV

Sub-Funds: SICAV or investment company with fixed share capital

Separate legal personality of ICC and Incorporated Cells

Yes

Yes

No. 

S. 9(2)(a)(ii) provides that (…) the sub-fund is not a company (…)

However, proceedings in relation to the company shall respect the of each sub-fund as a patrimony separate from the assets and liabilities of each other sub-fund of the company

in terms of this regulation.  Therefore in some cases a sub-fund is treated as though it is a distinct legal entity;

Mixed platform

The following mixed use ICCs are allowed:

 

 SICAVs/ Closed ended

 

 Listed/ non-listed

 

The following mixed use ICCs are not allowed:

 

 UCITS/Non-UCITS/PIFs;

 

 Managed/Self-Managed

 

The following mixed use ICCs are allowed:

 

 SICAVs/ Closed ended

 

 3rd party/ Self-managed

 

 Listed/ non-listed

 

The following mixed use ICCs are not allowed:

 

 UCITS/Non-UCITS/PIFs

 

Not specified

Can ICC issue principal prospectus and IC’s issue supplementaries based on it

No – each IC must issue its own prospectus, but IC may adopt principal prospectus issued by the ICC

No – each IC must issue its own prospectus, but IC may base its principal prospectus on standard model provided by the RICC

Not specified

Can an IC have sub-funds

No – (ICs may function as sub-funds of ICC)

yes

Since a sub-fund is not a separate person, it does not seem to be possible for it to establish its own sub-funds.  The multi fund company can establish new sub funds.

IC: Members on Board of Directors

May be same as ICC. At least on ICC Director to sit on the Board of each IC.

May be same as RICC. At least one RICC Director to sit on the Board of each IC.

Directors of Multi fund company control all sub-funds.

Service Providers/ Outsourcing

Would ordinarily be the same as the ICC unless otherwise authorised by the MFSA

Would ordinarily be the same as those identified by the RICC for its ICs and authorised by the MFSA

Not specified

Allowed transformations

 From a non-cellular company into an ICC or into an IC

 

 From an ICC or IC into a non-cellular company

 

 From a segregated multi-

fund company with no sub-funds into an ICC and vice versa

 

 Segregated multi-fund company with sub-funds into an ICC with ICs

 

 From a non-cellular company into an RICC or into an IC

 

 From an RICC or IC into a non-cellular company

 

 From a segregated multi-fund company into an IC

IC into a segregated multi-fund company

Not specified

IC: registered address

Same as ICC

Same as RICC

Same as multi-fund company

Redomiciliation

Yes

Yes

Yes

Quoted on the stock exchange

Yes

Yes

Yes

Licencing and supervision fees

ICC

IC

Same as CIS

Same as CIS

Same as Fund Administrator

Same as CIS

Not specified

 
 
 

 


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