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SICAVs & INVCOs
Investment companies are by far the most common form of vehicle utilised for the formation and registration of Collective Investment Schemes in Malta. Such investment companies may take one of the following forms:
1. a SICAV or an investment company with variable share capital (commonly referred to as “open-ended” schemes), or
2. an INVCO, an investment company with fixed share capital (commonly referred to as “closed-ended”).
The provisions of the Companies Act require that the object of a SICAV Malta are restricted solely to the “collective investment of its funds in securities and in other movable and immovable property, or in any of them”; those of an INVCO to the investment of its funds “mainly in securities”.
In both cases, such business must be conducted with the aim of spreading investment risk and giving shareholders of the company the benefit of the results of the management of its funds.
Besides, the activities of an INVCO are further restricted by the following requirements:
1. the company’s holdings in any other company not being an investment company with fixed share capital, does not exceed 15% by value of its investments;
2. distribution of the company’s capital profits is prohibited by its memorandum and articles of association; and
3. the company does not retain more than 15% of the income derived from securities.
These restrictions have caused the INVCO to become a less popular form of investment company in Malta when compared to the SICAV.
In the case of “open-ended” schemes, the value of funds pooled into the scheme fluctuates as investors buy and sell their units in such schemes. A “closed-ended” scheme, on the other hand has a fixed number of units in issue throughout its duration. The primary feature distinguishing an open-ended from a closed-ended scheme is that whereas in the former case the value of a unit in the scheme reflects the net asset value of the scheme, the value of a unit in a closed-ended scheme depends on supply and demand in the same manner as for any other ordinary company.
SICAV companies may be constituted as an “umbrella” or multi-fund company whereby the share capital may be divided into different classes of shares, where one class or group of classes of shares constitue a district sub-fund of the company. In this way, the scheme may operate a number of separate sub-funds having different investment objectives and policies.
Furthermore, in such structures it is possible for the Memorandum and Articles of Association to provide that the assets and liabilities of each sub-fund are treated as a patrimony separate from the assets and liabilities of each other sub-fund of the company. In such scenarios, the directors of an umbrella company are required to hold separate records, accounts, statements and other documents to evidence the assets and liabilities of each sub-fund of the company. Thus the shareholders in each individual sub-fund will benefit from varying dividend returns, depending upon the performance of each particular sub-fund.
A Maltese SICAV may also be established as a Recognised Incorporated Cell Company (RICC), enabling each sub-fund within the structure to be established as a separate incorporated cell (IC) having separate legal and juridical personality from the other sub-funds. The RICC regime accommodated the demand for a ‘platform’ type model comprising an incorporated cell company providing standardised administrative services (largely consisting of routine contractual matters and start-up support) to any number of ICs, with each IC being duly licensed as a collective investment scheme in its own right.
The RICC provides promoters with a flexible structure that may be used as a vehicle to achieve various objectives including the setting up of a fund platform. The RICC platform does not require a CIS Licence, but is required to obtain a Recognition Certificate from the MFSA.
Each IC of a RICC is constituted as a collective investment scheme and must obtain a licence to operate as such from the MFSA. An incorporated cell is endowed with separate legal personality and is not a subsidiary of its RICC solely by virtue of the fact of it being an incorporated cell of its RICC.