The Private Trust Company:  Active arrangement of asset succession for wealthy families

The Private Trust Company: Active arrangement of asset succession for wealthy families

15 March 2020
Alternative to trustees and other asset managers

What is a PTC?

The Private Trustee Company (PTC) is a company form recognized in Malta since April 2016 having the legal nature of a limited liability company (LLC). As a trust, the purpose of the company is to manage family assets, including real estate, for the benefit of present and future generations. Similar to a will, it enables the settlement of estates up to fifth degree family relationships. It is irrelevant whether the heirs have already been born. The Private Trust Company thus assumes the role of a trustee and offers a real alternative to foundation and professional trust models. For wealthy families, it offers the opportunity to actively shape the succession of assets without giving up the power of decision.

How is a PTC organised

The PTC is managed by its (at least) three directors The directors may not be corporate entities and are collectively responsible for managing the PTC. Normally, the management consists of the settlors and other trustees who are experienced in managing trusts. But it´s not necessary that the settlors themselves perform the duties of the director. In particular, the settlors can arrange to be represented by other trusted persons who have legal knowledge and experience.

Requirements for setting up a PTC:

  • One of the members of the board of directors should have legal, accounting or financial experience. If this does not apply to any of the persons, an exception to the requirement can be made if the majority of the directors have relevant specific knowledge in the field.
  • The PTC must maintain a liability insurance cover. The amount of the coverage required varies and depends on the size of the PTC and its area of business.
  • The directors must be determined by the MFSA (Malta Financial Service Authority) to be “fit and proper” persons. This means that, in addition to professional qualifications, there is no doubt as to the director's personal suitability for such work.
  • One of the directors must take up the role as money laundering officer.
  • A registration must be carried out.

The advantages of a PTC:

The PTC is a serious alternative to professional trustees or administrators for several reasons:

  • The settlors (no more than 5) continue to have unlimited influence on the management of the family assets due to their position as managing directors. This influence is not only exercised indirectly through the influence on the trustee, but the settlors are directly involved in the decision making.
  • Being a member of the board of director creates short communication lines. This not only shortens the decision-making process, but also the subsequent implementation. Instead of a formal chain of command within a professionally organised trust company, the procedure in a PTC can be handled more informally. This also has the side effect that sensitive data remains better protected because fewer people are involved.
  • From a financial point of view administrative costs can be reduced by shortening the communication line and, due to the lack of specifications regarding the salaries of the managing directors, further expenses can be kept low.
  • Not to be neglected is the possibility of introducing the next generation to the management of family assets. By entrusting the next generation with more and more extensive tasks within the PTC, the handling of the assets can be practised early and step by step without having to give up the final decision-making authority.
  • In addition, the simplified registration procedure is proving to be a great advantage. The entire procedure at the MFSA can usually be completed within 2 months.
  • The PTC is also independent with regard to the composition of its assets, whereas professional trustees may refuse to manage assets including yachts, aircraft or works of art.
  • Finally, another important aspect is that it is easier and cheaper to replace the trustee compared to the foundation or other fiduciary relationships. Whereas in other trustee cases ownership must be transferred individually from the old trustee to the new trustee, which can be a lengthy and complicated process, especially in the case of immovable assets, especially as notaries sometimes have to be called in, this is simpler in the case of PTC. Here, only the director is replaced without having to transfer the assets individually.