MFSA Proposes New Framework for Collective Investment Schemes as Limited Partnerships Without Legal Personality

The Malta Financial Services Authority (‘MFSA’ or ‘the Authority’) has taken an important step with regard to Collective Investment Schemes (‘CISs’), setting up a proposed framework which would allow them to be established as Limited Partnerships without Legal Personality (‘LPF’).

The process started with a consultation document issued last February. Since then, work has been ongoing and the regulator is now finalising the required legislative proposals to implement the framework. These will include a new subsidiary legislative instrument (the Investment Services Act (Limited Partnership Funds) Regulations).

Until now, CISs could be set up as a Limited Partnership with separate legal personality, under the Companies Act, with general partners having unlimited liability and limited partners having their liability limited up to the amount of their contribution as long as they do not exercise acts of management. Limited partners are then allowed ‘safe harbour’ activities – which may be exercised by limited partners without losing their status as limited partners.

The MFSA identified a potential gap in Malta’s regulatory toolbox, leading to the development of - a framework for CISs without a separate legal personality. The proposed framework will be solely available for schemes which are authorised by the Authority. The main features of the framework, as proposed, are largely similar to those of that under the Companies Act – having a collective investment scheme established through a Partnership Agreement, with at least one general partner and at least one limited partner. As the terminology implies the main distinguishing feature is the absence of separate legal personality. Moreover, the LPF registration and authorisation process will be entirely administered by the MFSA.

In the absence of separate legal personality, it would be the general partner who will be responsible for the management of the partnership’s business and liable for its debts and obligations. Any legal action against the LPF, would also have to be instituted against the GP/s individually.

The next step, once amendments to the proposed legislation are finalised, will be for the MFSA to publish its Feedback Statement, after which other details can be finalised, such as rules and other supporting documentation which are necessary for the implementation of the framework.

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