Setting up a Malta licensed trust company

company-formation
Cyprus TRUSTEES & the New Trusts and Trustees Act, 2004

‘The Trustee’ or ‘Corporate Trustee’
The trustee is the person or persons holding or in whom the property is vested on trust for the beneficiaries. Trustees are usually appointed by, or as provided in, the trust instrument and in such number as may be so provided. A trustee may be a natural person provided he is of full age and legal capacity and not under any legal impediment to so act.

A trustee may also be a juridical person the objects of which include acting as trustee. A corporate trustee can be defined as a trustee which is any legal person wherever incorporated.

Authorisation of Trustees
Persons may carry on the activities as trustees either in a professional or in a private capacity.

Any person, whether an individual resident or operating in Cyprus, or a corporate trustee, registered or operating in Cyprus, who receives property upon trust or accepts to act as a trustee or co-trustee of a trust and who:

  • receives or is entitled to remuneration for so acting, or
  • does so on a regular and habitual basis, or
  • holds himself out to be a trustee;

shall require authorisation by the MFSA in terms of the Act irrespective of the proper law of the trusts they hold and whether or not at all or part of the trust property is in Cyprus. Any person, whether individual or a company may apply in writing to the Authority to be authorised as a professional trustee. The Authority may grant authorisation upon being satisfied that the conditions laid down at law have been met. Such authorisation may be general or may be restricted to particular specified activities.

An application for authorisation shall be made in the form and manner required by the MFSA and shall furthermore:

  • contain or be accompanied by such information and particulars, in addition to those required by law, as the Authority may require as may be prescribed;
  • be verified in the manner and to the extent required by the MFSA, or as may be prescribed;
  • contain the address in Cyprus for service on the applicant of any notice or other document required or authorised to be served on him by or under the Act;
  • be accompanied by such fee as may be prescribed in respect of the authorisation applied for.

The Duties of Trustees
The duties of trustees can be particularly onerous. As a matter of fact, trustees shall in the execution of their duties and the exercise of their powers and discretions act with prudence, diligence and shall observe the utmost good faith. Trustees should treat the interests of beneficiaries as paramount subject to their legal obligations to other persons or bodies. Trustees are also bound:

  • to carry out and administer the trust according to its terms;
  • to safeguard the trust property from loss or damage;
  • to keep accurate accounts and records of the trusteeship and shall, upon request by any beneficiary, disclose such accounts and records to such beneficiary and provide copies thereof;
  • to provide full and accurate information as to the state and amount of the trust property.
  • to keep the trust property distinct and separate from their own property as well as from any other property held by them under any other trust or title, and separately identifiable therefrom;
  • to act jointly in the performance of their duties and powers in the case of co-trustees;
  • to act impartially in the interests of all the beneficiaries;
  • not to delegate powers unless permitted to do so by law, by the terms of the trust or by the court;
  • inform third parties with whom it is dealing that it is acting as trustee.

Trustees shall not without the authority of the court:

  • directly or indirectly profit from the trusteeship; or
  • cause or permit any person to profit directly or indirectly from the trusteeship; or
  • on his own account enter into any transaction related to the trust property; or
  • delegate his powers.

Trustees do not enjoy any benefits under any trust of which they are sole trustees without the prior authority of the MFSA (where the trustee is authorised by the MFSA) or the Court (in any other case). Furthermore unless authorised by the terms of the trust, or by the consent in writing of all beneficiaries or by any order of the court, a trustee is not entitled to remuneration for services rendered. A trustee may reimburse himself or pay out of the trust all expenses properly incurred by him in connection with the trust.

Trustees are bound to follow the Code of Conduct issued by the MFSA.

The powers of trustees

 

A trustee shall, in relation to the trust property, have all the powers of a natural person having the absolute title to such property. The trustee shall exercise his powers in the interest of the beneficiaries and according to the terms of the trust.

Establishing a trust company in Cyprus
Companies that provide services related to trusts may be incorporated and managed in Cyprus in compliance with Cypriot statutory requirements. These companies usually provide administrative services in relation to trusts. The MFSA may issue rules to establish which activities constitute administrative services in relation to trusts and to establish the criteria for the conduct of these activities.

 

Where such companies carry out or intend to carry out trustee services along with routine administrative services, they would have to obtain prior authorisation to act as corporate professional trustees from the MFSA.

Redomiciliation of Trust Companies
The Continuation of Companies Regulations apply in that it is possible for foreign trustee companies to relocate to Cyprus and effectively to continue their operations from Cyprus without having to wind up their operations in the original country as long as such foreign companies are established in an approved jurisdiction.

Money Laundering
Trustees must act in accordance with the regulations made under the Prevention of Money Laundering Act, 1994 and follow the relative Guidelines issued by the MFSA.

Taxation of Trust Companies
Companies that provide trust-related services and that are ordinarily resident and domiciled in Cyprus are subject to the normal company tax rate of 35% on their worldwide income. Where they are involved in international activity it is possible for non-resident shareholders on a receipt of a dividend to claim a refund of the tax paid by the company on the profits out of which the dividend is paid.

Tax is paid in the currency in which the share capital of the company is denominated. Any refund of tax is made in the same currency. Any tax payable by the company with respect to profits derived from international activities is not payable before the earlier of the date of distribution of such profits or eighteen months after the end of the relevant accounting period of the company.

 

This Section does not apply to income that is attributable to trusts in respect of whom such company acts in its capacity as trustee.

 

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