Malta has emerged as a favourable jurisdiction for investment funds, leveraging its strategic location and robust regulatory framework. The use of Protected Cell Companies (PCCs) and Incorporated Cell Companies (ICCs) has become particularly popular, offering unique benefits and flexibility for fund managers. This article delves into the structure and advantages of PCCs and ICCs, explores the regulatory landscape governed by the Malta Financial Services Authority (MFSA), and highlights other fund structures such as Notified Alternative Investment Funds (NAIFs) and private collective investment funds. By understanding these options, fund managers can make informed decisions that align with their investment strategies and regulatory requirements

Protected Cell Companies (PCCs) and Incorporated Cell Companies (ICCs) in Malta

A PCC or ICC differs from a SICAV in that it is a multi-cell structure designed to segregate assets and liabilities between distinct compartments, either statutorily (PCC) or through separate legal entities (ICC), whereas a SICAV is a single open-ended investment company with variable capital and sub-funds that are not legally separate. While SICAVs focus on investor entry and exit at NAV, PCCs and ICCs provide enhanced structural protection and flexibility for multi-strategy or multi-manager platforms.

Structure and Benefits

Protected Cell Companies (PCCs): A PCC is a single legal entity composed of a core and multiple cells. Each cell is legally ring-fenced, meaning the assets and liabilities of one cell are segregated from those of other cells and the core. This structure provides a high level of asset protection and flexibility, allowing for the efficient management of multiple investment strategies within a single entity.

Features of PCCs:

• Each cell may operate its own investment strategy, appoint different service providers, and maintain separate investor bases.
• Legal protection ensures that the liabilities of one cell cannot be satisfied out of the assets of another, creating firewalls suitable for multi-strategy or umbrella fund operations.
• PCCs are well-suited to Professional Investor Funds (PIFs) and Alternative Investment Funds (AIFs), offering a regulatory shortcut to sponsors seeking scale without establishing multiple legal entities.

Incorporated Cell Companies (ICCs): Unlike PCCs, ICCs consist of a core and several incorporated cells, each of which is a separate legal entity. This structure offers even greater protection, as each cell can enter into contracts and hold assets independently. ICCs are particularly advantageous for fund managers seeking to offer distinct investment products with varying risk profiles.

Features of ICCs:

• ICCs are ideal for white-labelled platforms or third-party manager sub-funds where clear legal separation is required.
• Cells may be structured as limited partnerships, SICAVs, or unit trusts, depending on the investment strategy and target investor base.
• A cell of a PCC can therefore, in practice, function as a SICAV-like fund, for example, with variable capital but would not have a legal personality. A cell of an ICC, however, can also formally be a SICAV and be fully independent. Both options allow fund promoters to combine variable capital flexibility with legal or statutory segregation — a unique offering in Malta’s EU-compliant framework.
• ICCs are more administratively burdensome than PCCs but offer stronger legal certainty and independence.

Regulatory Aspects

Both PCCs and ICCs are regulated by the Malta Financial Services Authority (MFSA). The MFSA ensures that these entities comply with the Investment Services Act and other relevant regulations. The Maltese regulatory framework provides a robust environment for investor protection while allowing fund managers the flexibility to innovate and diversify their offerings.

The EU regulatory framework on investment funds continues to apply on Malta-based funds, and as such PCCs/ICCs can benefit from the advantages of the AIFMD regime, such as European passporting, and the AIFMD threshold increase from EUR100m to EUR500m for an unleveraged fund with a lock-in of five (5) years.

Notified Alternative Investment Funds (NAIFs)

Malta’s regulatory landscape also includes Notified Alternative Investment Funds (NAIFs). NAIFs are a streamlined fund structure that allows for quick market entry. They are not subject to direct regulatory approval by the MFSA but must be managed by a licensed Alternative Investment Fund Manager (AIFM). This approach significantly reduces the time to market, making NAIFs an attractive option for fund managers seeking efficiency.

Features of NAIFs:

• The primary advantage of NAIFs is their expedited setup process, which allows NAIFs to be launched within ten working days of notification to the MFSA, significantly reducing the time required to establish a fund.
• NAIFs also offer flexibility in terms of investment strategies and asset classes, making them attractive to a broad range of investors.

Restrictions on NAIFs:

• NAIFs may not invest in non-financial assets, originate loans, or invest in non-EU AIFs.
• They are unsuitable for complex strategies such as credit funds, art funds, or fund-of-funds with non-EU exposure.

Private Collective Investment Funds

Private Collective Investment Funds are typically limited to a small number of investors and are not marketed to the general public. They benefit from a lighter regulatory touch and require only a notification to the MFSA, not formal licensing, provided they meet specific criteria set by the MFSA. This makes them suitable for high-net-worth individuals and institutional investors seeking bespoke investment solutions.

Advantages of Private Collective Investment Funds:

• Private collective investment funds offer customization and privacy, appealing to investors with specific investment goals and risk appetites.

Restrictions on Private Collective Investment Funds:

• Limited to 15 participants, all of whom must be close associates (e.g., family members or longstanding business partners).
• Cannot be publicly promoted or marketed.

Conclusion

In conclusion, Malta’s investment fund landscape offers a diverse array of structures and regulatory frameworks that cater to the needs of fund managers and investors alike. The strategic use of PCCs, ICCs, NAIFs, and private collective investment funds, coupled with the AIFMD regulatory thresholds and passporting, positions Malta as a competitive and innovative jurisdiction within the EU.

If you are considering structuring an investment fund in Malta or other European jurisdictions, contact LINDEMANNLAW for expert legal advice and cross-border structuring support. Our team of international fund lawyers is equipped to advise on every stage of fund formation, authorisation, and operation.