Draft Regulations on Recognised Incorporated Cell Companies in Terms of the Companies Act 1994

The Malta Financial Services Authority (MFSA) has published a consultation document on draft Regulations that would govern the proposed introduction of Recognised Incorporated Cell Companies (RICCS) as an alternative to the Société d'Investissement À Capital Variable (SICAV) incorporated cell company form.

The draft Legal Notice is accompanied by a Draft set of Investment Services Rules that will apply to Recognised Incorporated Cell Companies.

The RICC Regulations build on the “cellular” concept, taking into account international developments and setting out a framework for a new type of vehicle in Malta – Recognised Incorporated Cell Companies (“RICCs”). The cellular concept provides for the establishment of a cluster of cell companies group under an incorporated cell company structure. Assets and liabilities are attributed either to the cell company itself, or to a particular separate cell of the cell company.

The launch of the ICC SICAV in February 2011 generated a lot of interest across the fund sector generally with the consequence that the MFSA started receiving enquiries based on business models that due to their particular nature it was not able to entertain under the ICC SICAV regime. Most of the demand revolved around a ‘platform’ model that would involve an ICC providing administrative services to any number of Incorporated Cells licensed as collective investment schemes.

As a result the MFSA is considering introducing a new Recognised ICC framework with a specific set of conditions that will cater for the above mentioned business models. The new framework is being proposed in the form of a legal notice and will be regulated by a separate set of Rules so that it will not be confused with the ICC SICAV regime.

A Recognised Incorporated Cell Company may only provide services of an administrative nature for which it is issued with a Recognition Certificate in terms of article 9A of the Investment Service Act. The services that may be permitted are those listed in the Schedule to the proposed regulations.

The new RICC structure proposed in the draft Regulations provides promoters with a structure that may be used as a vehicle to achieve various objectives including the setting up of a fund platform. Unlike the SICAV ICC, the Recognised Incorporated Cell Company must be established as a limited liability company and may not carry out any licensable activity.

The ICC will require a memorandum of association restricted to the provision of administrative services to its incorporated cells and must be issued with a Recognition Certificate by the MFSA

An RICC may establish an incorporated cell by virtue of a resolution of its board of directors. The RICC framework is structured to allow incorporated cells to migrate in and out of the ICC they share with other incorporated cells and either relocate to another ICC or establish themselves as a separate independent schemes. The RICC itself may also undergo transformations excluding a transformation into a SICAV.

Please read more on the following link http://www.mfsa.com.mt/Files/Announcements/Consultation/Documents/11_11_2011%20-%20Consultation%20Procedure%20on%20the%20Proposals%20for%20Recognised%20Incorporated%20Cell%20Companies%20Regulations.pdf