An Introduction to Maltese Foundations:
The Maltese law on Foundations was introduced on the 1st of April, 2008. In spite of the relatively recent implementation of the law on foundations, Malta enjoys an established jurisprudence on the law of foundations where the Courts have dealt with foundations set up for public purposes. 

Under Maltese law, a foundation may be set up by natural or legal persons, whether Maltese residents or not and irrespective of their domicile. There are mainly two types of foundations recognized by the law being:

• Public Foundations : usually set up for a specified lawful purpose,

• Private Foundations: ( see below)

Constitution of the Foundation:
Setting up a Malta Foundation starts by gathering all the due diligence documents (KYC exercise). Once verified, the foundation deed and statute is drafted and the beneficiary statement is laid down. The beneficiary statement is confidential and is kept in the records of the Notary and Administrators of the Foundation. The Registration process with the Registrar of Foundations is completed within 45 days of the documents being presented. 

The Cost for the Foundation is:

- The Drafting of deed and statute amounts to Euro 2500.00

- The Publication by the Notary amounts to Euro 400

- Registration Fees Euro 700

- The Administrators' Annual Fee amounts to Euro1200 – 

If the beneficiary gives the administrator special instructions which go beyond his normal duties, the work is charged at the rate of Euro 50 per hour or part thereof. 

- The Registered address: Euro350 per year

- The Minimum fund in the Foundation (money which belongs to the beneficiary, i.e. the client) amounts to Euro 1,200.

Private Foundations:
Private Foundations may act as nominee shareholders in a company. The foundation may hold as part of its fund, shares in a company. This implies that in the Memorandum and Articles of the company, the name of the ultimate beneficiary will not appear. Instead there will be the name of the foundation. The name of the ultimate beneficiary will only appear in the beneficiary statement which is kept confidential and may be viewed by no one but the Notary drafting the deed and the administrator of the foundation. All dividends in a company of which the Foundation is the shareholder will be transferred to the fund of the foundation and then in turn, distributed to the ultimate beneficiary, i.e. the client.  

Characteristics of Foundations:
A foundation consists in the creation or dedication of a fund to a specified object with an appropriate organization for its administration. A foundation has a legal personality.

Distinct fund:
Although both trusts and foundations necessitate the assignment of property for the purpose of achieving the aims intended by the founder or settler, the foundation assignment is accompanied by the creation of a new, distinct juridical entity in which property will vest. The Second Schedule to the Civil Code (Chapter 16 of the Laws of Malta) as amended by Act XIII of 2007 has codified the law regulating foundations thus providing foundations with a written legislative legal framework. Foundations have existed in Malta for many years, but there are few private foundations, as opposed to the numerous charitable foundations. Through the implementation of Act XIII of 2007, the features of private foundations have been clarified rendering private foundations a highly attractive entity. Most civil law jurisdictions have treated the civil law institute of foundations in a similar manner to Maltese law and one such example is Italy where the law of foundations is regulated by the Italian Civil Code. A foundation in Malta is treated like a corporation and taxed at 35%. Alternatively, a foundation may elect to be treated as a trust for tax purposes.  

A short description of a Private Foundation:
A private foundation is set up for the benefit of beneficiaries. It is set up by means of a public deed drawn up by a Public Notary and its instrument of constitution is composed of the deed, statute and beneficiary statement. The deed and statute must be registered with the Registrar of Legal Persons while the beneficiary statement and the instructions therein contained remain in the possession of the Notary and may only be viewed by the Notary himself, the administrators and any founder or his delegate. The beneficiary statement lays down the individuals who are to benefit from the fund of the foundation and the manner in which they are to benefit. The administrators of the foundation have fiduciary obligations and must be licensed by the Malta Financial Services Authority (MFSA). In order to be licensed, the administrator must be a lawyer or other professional dealing in fiduciary services as distinct from corporate or other commercial law. Experience in the field of administering third party money would be required as well as an approval process. 

Distinction between Trusts and Foundations:
A foundation is the civil law counterpart to the common law institute of trust. Trust is not contemplated in a civil law framework since the concept of ownership in a trust is foreign to civil law. The laws, powers and institutions regulating the two entities are however exceedingly similar and based on the same concept which is the assignment of property for the purpose of achieving the aims intended by the founder or settler. There are three major differences between trusts and foundations. 

The first is that although foundations and trusts are very similar in concept the former has legal personality while the latter does not. The new law on foundations seeks to maintain the rules regulating both entities the same. It has been commented that while the law of foundations in many countries does not address beneficial interests in any particular detail, the new Maltese law of foundations is an exception to the rule. The rights of the beneficiary are laid down in detail in the Second Schedule to the Civil Code. The second difference is that in foundations the beneficiaries of a foundation are known only to the administrator and the public notary holding the beneficiary statement. The third difference is that certain trusts may perform particular commercial transactions while foundations may not. Commercial transactions are defined in the Trust and Trustees Act as follows:

 "Commercial transaction" means the following transactions and any transactions connected or ancillary thereto:

(a) Securities offerings, whether to the public or for private placement, portfolio management and custody of investment instruments;

(b) The securitization of assets;

(c) The grant of real or personal security interests including hypothecs, mortgages, privileges, pledges and guarantees;

(d) Collective investment schemes;

(e) Employee benefit or retirement schemes or arrangements;

(f) syndicated loan agreements and other multi-creditor banking facilities;

(g) Insurance policies and the payment of proceeds there under;

(h) Timeshare and multi-property structures, and

(i) Such other commercial transactions as may be prescribed in a Notice issued by the Minister

The Fund of the Foundation and the due diligence exercise:
All funds endowed in the foundation must be reported to the Registrar of Legal Persons. Before the fund accepts any endowment, the following due diligence and KYC procedures must be complied with by the administrator/s of the Foundation. In order endow funds to the foundation, the founder or any third party making such endowment will have to provide a set of documents necessary for the due diligence and know your customer (KYC) procedures required by all entities receiving or involved in the transfer of funds. These documents would have to certify the origin of the funds as well as provide sufficient proof of the identity and permanent residence of the individual.