The legal implications of SICAVs

Abstract

The purpose of this thesis is to give a comprehensive account of the legislative and regulatory regime existing in Malta for the investment company with variable share capital, usually known by its French abbreviation 'SICAV'. The SICAV is probably the most widely used and most favoured legal structure available for an investment fund/collective investment scheme on the Continent. This thesis provides an extensive guide to two of the three main issues relevant to fund promoters considering establishing a SICA V in Malta. When deciding on a location for setting up a fund, prime consideration is given by promoters to such factors as the legal regime and the regulatory process in the domicile. This includes the capability of the relevant financial centre to deal with new products being launched onto the market. Also the ease with which a product can be legally formed and receive clearance from the relevant regulatory agency will affect the choice of domicile since sponsors will often opt for a jurisdiction which has the least bureaucratic regulatory process making the product easier to form and sell. At the same time, they will be concerned about the centre's reputation for securing effective investor protection, since this attracts investors. All these issues are dealt with in Chapters 2 to 4. Equal importance is given by promoters to the fiscal regime in the domicile. Malta has a very favourable tax regime for funds and promoters and operators thereof Any detailed analysis of the fiscal incentives and benefits offered by Maltese law falls outside the scope of this thesis. Chapter 1 contains a general description of the SICA V. The purpose of this Chapter is to make the reader familiar with this legal entity, which is relatively new to Malta. The SICAV is considered from two different angles, namely as a limited liability company on the one hand and as a collective investment scheme on the other. A general classification of collective investment schemes is made with a view to distinguish the SICAV from other types and forms of schemes which may be set up under our law. The Chapter ends with a description of the economic rationale and advantages of collective investment schemes in general, and SICAV s in particular. Chapter 2 gives an indicative list of the special types of funds which may be set up as SICAVs. STCAVs may be differentiated from each other by, for example, their status under company law, their share structure, or their investment policies and objectives which may be either general or specific. Chapter 3 deals with the regulation of the SICAV under the Companies Act, in other words, the regulation of the formation process and operation of the SICA V as a limited liability company. This Chapter contains a detailed analysis of the 'special' provisions in the Act relating to the SICA V, as well as the exemptions from a number of provisions applicable to companies generally which were deemed inappropriate to such type of company. These 'special' provisions and exemptions were rendered necessary by the unique nature and capital structure of the SICA V, which make of such company a 'special' type of company. In the course of this Chapter, we have pointed out further provisions, clarifications and exemptions which should have been made in the Act and were not. Chapter 4 then deals with the regulation of the SICA V under the Investment Services Act, namely the regulation of the business and operation of the SICA V as a collective investment scheme. The Act does not regulate the SICA V specifically, but regulates collective investment schemes in general. The Chapter, therefore, contains a detailed analysis of the definition of "collective investment scheme" as found in the Act, with a view to establish whether and how the SICA V fits within such definition. This exercise is followed by an in-depth examination of the provisions of the Act, and of the rules and regulations made thereunder, regulating collective investment schemes (including SICAVs) and their operators, both at the licensing stage and thereafter.