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Malta Consults On New ICC Structures

Tuesday, November 22, 2011

The Malta Financial Services Authority (MFSA) has published a consultation document on draft Regulations that would govern the proposed introduction of Recognised Incorporated Cell Companies (RICCS) as an alternative to the Société d'Investissement À Capital Variable (SICAV) incorporated cell company form.

In an ICC structure, an entity is structured with incorporated cells, which are considered separate entities from one another for legal purposes. These cells may hold assets, sue and be sued in their own name. As a result, there is legal ring-fencing within an ICC structure which provides a stronger degree of certainty and protection of the assets of other cells.

According to the MFSA, the launch of the Incorporated Cell Company form of the SICAV in February 2011 generated a lot of interest across the fund sector generally with the consequence that the MFSA received many enquiries from companies with business models that due to their particular nature were not able to form structures under the ICC SICAV regime.

“Most of the demand revolved around a ‘platform’ model that would involve an ICC providing administrative services to any number of Incorporated Cells licensed as collective investment schemes,” the MFSA said. “As a result the MFSA is considering introducing a new Recognised ICC framework with a specific set of conditions that will cater for the above mentioned business models. The new framework is being proposed in the form of a legal notice and will be regulated by a separate set of Rules so that it will not be confused with the ICC SICAV regime.”

Conditions that will apply to the operation of a Recognised Incorporated Cell Company will include that companies under the regime may only provide services of an administrative nature for which it is issued with a Recognition Certificate in terms of article 9A of the Investment Service Act. The services that may be permitted are those listed in the Schedule to the proposed regulations.

The new RICC structure proposed in the draft Regulations provides promoters with a structure that may be used as a vehicle to achieve various objectives including the setting up of a fund platform. Unlike the SICAV ICC, the Recognised Incorporated Cell Company must be established as a limited liability company and may not carry out any licensable activity.

An RICC may establish an incorporated cell by virtue of a resolution of its board of directors. The RICC framework is structured to allow incorporated cells to migrate in and out of the ICC they share with other incorporated cells and either relocate to another ICC or establish themselves as a separate independent schemes. The RICC itself may also undergo transformations excluding a transformation into a SICAV.

The MFSA says that an ICC could be established either as:

  • A SICAV ICC that operates as a collective investment scheme under a CIS licence in accordance with the Companies Act (SICAV Incorporated Cell Companies) Regulations already in force.
  • An RICC that provides purely administrative services to incorporated cells within the platform structure. In this case, the ICC will not have to obtain a CIS Licence. The ICC however will still be required to submit to the Authority an application to obtain a recognition certificate to operate as a pure platform not carrying out any activity amounting to licensable activity.