A Malta foundation constitutes a legal entity merging the benefits attributable to both a company and a trust. The role of foundations has developed from the traditional fields of estate planning and wealth management, albeit they still play a fundamental role in these spheres. Nevertheless, there are also other uses to consider. One such example is their use of special purpose vehicles (SPVs) to assist in financial restructuring and asset-backed securitization transactions. Foundations may be used in a wide variety of situations, including:

• tax planning
• asset protection
• asset management
• confidentiality
• provision for children/grandchildren/others;
• provision for the disabled; and
• inheritance planning.

It is fundamental to note that a Malta foundation cannot have a commercial purpose. Still, it may be the passive owner of a retail business, commercial property, or another commercial asset. This differs substantially from a company. Given that foundations have a separate juridical personality, they are recognized by legal systems that do not recognize trusts, particularly civil law jurisdictions.

A Malta foundation can be set up as a private or purpose foundation. Formed by incorporation in the same way as a company, a Foundation has an entirely separate existence from the founder and the management committee. While the foundation does not have shareholders, it may have beneficiaries or objects in a manner that is analogous to the private or purpose trust. The management committee is duty-bound to administer the foundations' assets following the terms of the Foundation documentation and for the benefit of the foundation's objects.

The founder sets up a Malta private foundation for the personal benefit of one or more persons or a defined class of persons in which the beneficiaries must be confident. It is mainly used in estate planning and may only be set up for a maximum period of 100 years. On the other hand, a purpose foundation is set up for a particular purpose, provided that it is a lawful purpose including a charitable, philanthropic or other social purpose and without having beneficiaries. Contrary to the private foundation, a purpose foundation may be set up for an indefinite period and may be registered as a Voluntary Organisation.

Important Maltese law provides that foundations can be established with 'Segregated Cells' allowing distinct groups of assets and liabilities to be separated and insulated from each other. Moreover, foundations can be converted from an existing trust to preserve legal continuity (they can also be converted into a trust if required).

Trusts vs Foundations

Promethean can assist you with the following services:

• Pertinent planning and in relation to your needs and requirements in the establishment of a Malta trusts and foundations;
• Registration of Malta trusts and foundations;
• Trust and foundation formation;
• Statutory maintenance (filing of pertinent tax returns and other compliance forms) of trusts and foundations;
• Membership of the Foundation management committee.