Amidst changing political landscapes and the economic shifts which have been occurring globally, the need for one to structure a lifetime’s wealth within a secure and reliable environment is becoming increasingly important to individuals and families alike. Families are looking to stable and legislated countries in the European Union (EU), and other highly regulated jurisdictions, as a means to safeguard their assets and their wealth for times to come. However, one of the main challenges that most families face in making this important decision is exactly how and to what extent they would like to retain control over the administration of the family’s assets.
Various countries around the world have a sophisticated and stable trust regime that is primarily led by professional trustees. When families want to continue being involved to some extent in the administration of their family wealth, however, then they might want to also look at other options for the protection of their assets. All of us have a strong sense of ownership which comes from an innate feeling that we need to collect our assets and take possession of what is ours. It is therefore quite common to find that some clients will feel the need to maintain some sort of influence over the safeguarding of their wealth, and will not be willing to fully relinquish control over their prized family assets. Nonetheless, ownership of such assets may not always be the best option for the protection of family wealth and retention for future generations to come. Alternative options might need to be considered and these can include a corporate structure (namely holding companies), as well as a foundation or a private trust company, amongst other options. Various jurisdictions have put in place legislation in order to allow the administration of family trusts through such Private Trust Companies. Malta and Jersey are two of these countries that afford such a possibility. In Malta, the competent regulator is the Malta Financial Services Authority (MFSA) which has been praised for its flexible yet secure regulatory initiatives within the financial sector. Jersey is also a very popular jurisdiction for protecting family wealth with a trust law framework in place. This article aims at shedding more light on the Private Trust Company (PTC) by examining particular aspects of it under both Malta and Jersey law.
What is a Private Trust Company?
A Private Trust Company or PTC is a corporate trustee that is privately owned, and which acts as the trustee responsible for the assets of the family in question. Such structures are usually the method of choice for High Net Worth Individuals (HNWIs) where the cost of setting up a dedicated trust company is more than justified by the advantages that may be obtained. The main matter, which in my experience clients would be looking at, is the element of control which a PTC can afford families. The PTC is designed to do exactly this - to strike a balance between complete detachment from the ownership of assets but balancing this with the family’s inclusion in the decision-making process regarding how these assets will be dealt with.
The board of directors of a PTC usually comprises of members of that family (also potentially including different generations) as well as their advisors. In this way, the family maintains control of its wealth in that the members of the family in question itself are able to take decisions on the administration of a trust, as opposed to employing an outside professional trustee. This becomes especially attractive when one of the assets under administration is a family business.
A comparison of Jersey and Malta PTCs
Jurisdictional Aspects and Regulation
Malta has been a full member of the European Union for 15 years. The island has managed to diversify its solutions portfolio and has a very strong and growing local economy which is not solely dependent on foreign direct investment. Malta’s current government is known for being business friendly and pro-active, achieving equilibrium between attracting investment, and retaining through the MFSA, and other authorities, a very high level of regulation and supervision. Malta is a civil law jurisdiction that has welcomed certain common law institutes such as the trust. The Maltese model
for PTC’s achieved regulatory clarity when the MFSA issued guidelines for Trustees of Family Trusts in 2016 and therefore they have been used for these last three years.
A closer look into the framework of Jersey showcases that the state, being a Crown Dependency, enjoys near total autonomy and self-governance. Although it is not considered to be a member of the European Union and hence is not bound by EU directives, regulations and treaties, it does share a special relationship with the Union, outlined in Protocol 3 of the UK’s 1972 Accession Treaty. This is evidenced by the island’s access to the common market, while its interests are also promoted in Brussels by the Channel Islands Brussels Office (CIBO). However, any potential weakness of the regulatory environment of Jersey’s trusts industry is the fact that laws are not codified. Hence, solving any sort of legal issue surrounding trust companies in Jersey may prove to be challenging and lead to litigation in Court unless resolved through alternative dispute resolution methods.
Understanding the structure of a PTC is an intrinsic part of deciding the best wealth planning framework for one’s family and its assets, as it provides an insight into the regulation that constitutes the structure itself. Looking towards Malta, Malta PTCs do not have to be authorised by the Malta Financial Services Authority (MFSA), however, Maltese law mandates that these entities are registered as Malta companies with the Registry of Companies, as well as registered with the MFSA as trustees of family trusts.1 Whilst all PTC’s and Trustees had to be registered with the Jersey Financial Services Commission (JFSC) prior to the year 2000, since then, these companies are exempt from registering under Article 4 of the Financial Services (Jersey) Order 20002. It is also important to note that this assumes certain conditions which are outlined in the same Article3.
In addition, Article 3 of the Malta Rules for Trustees of Family Trusts4 requires that if the PTC is to administer a trust which is already in existence, then a copy of the trust deed is required to be lodged with the Authority. Jersey law, on the other hand, does not have this requirement in place.
In terms of requirements under anti-money laundering rules, it is also important to consider that Maltese law stipulates that one of the PTC’s executive directors or other senior officer must take on the role of Money Laundering Reporting Officer (MLRO) – in accordance with the Prevention of Money Laundering and Funding of Terrorism Regulations. However, the Proceeds of Crime (Jersey) Law 1999, Jersey’s primary anti-money laundering legislation, expressly excludes PTC’s from applicability. Therefore, Jersey PTC’s are not required to have a dedicated anti-money laundering officer.
Although PTC’s do not require authorisation, they do require registration in both jurisdictions. In Malta, PTCs are entered onto the Register of Trustees for Family Offices held by the MFSA5, whilst in Jersey, a notification for an exemption needs to be filed directly with the JFSC notifying them of the PTC’s name.
What does this mean?
As is evidenced by these facts, it becomes clear that both jurisdictions have their strong and weaker points and it is important that a family obtains professional guidance as to which jurisdiction suits their needs better. This would largely depend on the family’s background, their past experiences and their priorities, as well as their outlook at planning for future generations to come.