Foundations are governed by the Second Schedule to the Civil Code which regulates legal organisations generally. The Second Schedule contains the following definition:

A Foundation is an organisation consisting of a universality of things constituted in writing, including by means of a will, by a founder or founders whereby assets are destined either –

  1. for the fulfilment of a specified purpose; and, or
  2. for the benefit of a named person or class of persons, and which are entrusted to the administration of a designated person or persons.

Generally speaking, whatever can be achieved by using a Trust, can also be achieved through the use of a Foundation, be it within the context of estate or succession planning as well as within the commercial sphere. Foundations governed by Maltese law however, have certain distinctive features that can make them the more preferred vehicle of choice depending on one’s needs.

A Foundation may only be constituted in writing, by means of a public deed made during one’s lifetime in front of a notary, or by a will. Unlike a Trust, a Foundation is granted separate legal personality, and therefore acquires its own patrimony of assets and liabilities, has its own rights and obligations and is separate and distinct from its founders, administrators and beneficiaries.

The Second Schedule to the Civil Code refers to two types of Foundations:

  1. Beneficiary Foundations – established for the private benefit of one or more persons or of a class of persons, i.e. beneficiaries, who enjoy such benefits and have legally enforceable rights against the Foundation. A Beneficiary Foundation may also be established exclusively for a public interest; and
  2. Purpose Foundations – established for the fulfilment of a specified purpose without beneficiaries, which may also be established for public benefit. Unlike Trusts however, Foundations may also be established for the fulfilment of any lawful purpose, whether this is in the public interest or otherwise and need not be charitable.

The administration of the assets of a Foundation is entrusted to a designated persons (the Administrator/s) who, in the case of a Beneficiary Foundation, administer the assets for the benefit of the beneficiaries.

In the case of Purpose Foundations, the assets are administered for the fulfilment of the purpose or purposes for which the Foundation has been set up; for example, a Foundation established for the purpose of conducting medical or other research. Since such purpose need not be for public benefit, as long as it is lawful, Purpose Foundations have also been used in certain commercial transactions, especially where there is a need for an ownerless special purpose vehicle e.g. in Securitisation transactions

Foundations are required to register with the Registrar for Legal Persons. When not established for a public benefit, Foundations require an initial endowment of money or property worth at least €1,164.69, nd, except in the case of Foundations used within the context of a commercial transaction, can be established for a maximum period of 125 years.

Beneficiaries of a Beneficiary Foundation can be indicated either in the Foundation deed itself, or alternatively in a separate document called a ‘beneficiary statement’ which is signed by the founder in the presence of the notary and is addressed to the administrator. The use of a beneficiary statement is not permitted when a Foundation is established for the benefit of public interest beneficiaries.

It is also possible for Foundations to have a supervisory council or a protector whose role is to supervise the acts of the administrators by being granted certain powers in the Foundation’s statute.

Foundations may also establish segregated cells to achieve particular purposes.

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