Long established as an investment vehicle for segregated and incorporated cell structures offering unparalleled flexibility, SICAVs have become the most popular investment fund structure for crypto fund managers and security token issuers looking to domicile in Malta. Likewise, they have been the most popular legal fund structure in Malta for managers of traditional funds.
A form of open-ended investment company, SICAVs allow crypto fund managers to establish their fund as a limited liability company; offering a number of exclusive benefits compared to other fund structures. SICAVs are governed under the Companies Act (SICAV Incorporated Cell Companies) Regulations, 2010; administered and regulated by the Malta Financial Services Authority (MFSA).
Specifically, the Companies Act requires that SICAVs incorporated in Malta must have “collective investment of its funds in securities and in other movable and immovable property, or in any of them.”; offering the opportunity for fund managers to diversify into asset-backed security tokens either in part or as the entirety of their fund. Current security token offering regulation in Malta is analogous to that of traditional securities, hence why the SICAV has to date been the most popular choice for crypto fund managers.
Key Features of SICAVs
In addition to favourable security token offering regulation, there are other factors which have contributed to the popularity of SICAV fund structures for crypto funds looking to domicile in Malta, including:
- Public or Private Offerings – Those crypto fund managers using a SICAV fund structure may choose to form as a public or private company, with variable share capital.
- Double-Taxation Treaties – SICAVs benefit from double-taxation treaties, which have proved attractive with overseas crypto fund managers. Alongside SICAVs low running costs, this has increased their popularity with both domestic and international offerings.
- Recognised Incorporated Cell Companies (ICC) – SICAVs may be formed as an ICC, whereby incorporated cells within the fund may operate as fully independent legal entities, each with its own limited liability status. This effectively allows for each incorporated cell to function as a licensed collective investment scheme individually (subject to separate licensing from the MFSA).
- Umbrella Funds – Similar to ICCs, umbrella funds (also called Multi-fund SICAVs) offer crypto fund managers the opportunity to divide share capital into different share classes. As each class of shares represents a sub-class of the SICAV company, crypto fund managers may diversify their investment policies to a greater extent.
- Additional Investors – SICAVs allow additional investors to be onboarded into the CIS without having to liquidate existing holdings.
With such a large degree of flexibility, it’s easy to see why SICAVs have become such an attractive fund structure for crypto fund managers domiciled in Malta.
In comparison, other fund structures such as close-ended investment companies (INVCOs) – public companies with a fixed share capital, offer significantly less flexibility and are subject to more stringent regulation:
- Strictly Securities – INVCOs are restricted to investment predominately in securities as opposed to other asset classes.
- Capital Profits – Distribution of INVCO capital profits is prohibited under Maltese regulation.
- Income Restrictions – INVCO regulation specifies that the company may not retain over 15% income from their securities investment, rendering INVCOs less useful for crypto fund managers looking to invest in asset-backed security tokens.
Whilst both SICAVs and INVCOs are required to hedge against investment risk and provide company shareholders with the benefits of its managed funds; the greater regulatory requirement of INVCOs have subsequently resulted in their decreased popularity among crypto fund managers domiciling in Malta.
Other fund structures exist, such as limited partnerships, contractual funds and unit trusts, however, SICAVs are generally most suited to crypto fund managers. Regardless, our crypto fund and STO experts can identify the specific requirements of your fund and advise you on the most suitable fund structure for your needs. Likewise, our consultants are knowledgeable on the latest security token offering regulation in Malta, ensuring full compliance of your fund.
ICO Launch Malta’s expert consultants are experienced in assisting our clients form and register their CIS as a SICAV in Malta, from start to finish. Contact us to discuss your individual crypto funds requirements.