Most businesses in Malta are family-owned, making estate and succession planning crucial for preserving legacies. Yet, it's a sensitive topic, as many struggle to relinquish control. This stems from a cognitive bias that, if tackled through education, could help more family businesses endure the test of time.

Kristian Camenzuli, CFA, is Managing Director of Dominion Fiduciary Services Malta, part of the global Dominion Group. Operating since 2009 in Malta, the firm serves high-net-worth clients with wealth, pension, trust, and corporate services across Europe, the US, and the UK.

The Dominion Group also specialises in the administration of Private Trust Companies (PTCs) that are designed specifically for succession planning to ensure that high-value family assets are passed on from one generation to the next.

In Malta, succession typically involves splitting company ownership into different share classes; one with voting rights (held by the patriarch) and another without (held by the heirs).

Facebook Co-Founder Mark Zuckerberg, for example, owns approximately 13 per cent of Meta's total shares. However, through his Class B shares, he controls about 61 per cent of the company's total voting rights.

When a patriarch wants to transfer some rights to his children, he does so through contracts that carve out specific rights from the shares. A share is a chosen action comprising a bundle of contractual rights. It is possible to carve out part of these rights via a contract.

Alternative methods may be more advantageous depending on the patriarch’s goals. One strong alternative to traditional succession planning is the use of a PTC. A PTC not only provides the benefits typically secured through contractual arrangements but also offers additional advantages which are not available with the conventional method. These include promoting sound corporate governance and preserving the patriarch’s legacy within the family for future generations; something achievable only through a trust structure. Unlike contracts, which cannot impose long-term restrictions on inheritance (such as preventing an heir from selling shares in the family business), a trust deed within a perpetual trust can enforce such limitations effectively.

The setup of a PTC offers an effective solution for the patriarch to achieving his objective by maintaining ownership till death whilst passing on the baton to his heirs at his own pace and under his supervision.

This is a perfect solution. This is possible because the PTC (of which the patriarch will be the shareholder) will be the trustee of the express trust which sits beneath it. The shares in the family business will be placed within the trust and how the family business will operate going forward will all be laid out in the trust deed governing the trust.

Dominion’s main roles is to advise the patriarch on the setup of the PTC and assist in drafting the trust deed governing the trust in the PTC, as well as to offer its directorship services as a member of the board of the PTC. This is necessary because a PTC needs a member on the board who holds a trustee license. The trustee will also help in writing the succession plan and make sure the wishes of the patriarch are included in the trust deed. An additional advantage of having a trustee on the board is to make sure that corporate governance best practices start being adhered to within the family business.

How the baton is passed on and at what pace will all be determined in the trust deed set out by the patriarch himself with the help of Dominion and assisted by his business advisors.

How can the patriarch be sure the law is on his side? 

“At Dominion, we’re a team of specialists who go beyond basic trust services. We create tailored solutions under both Maltese and international trust law, choosing the best legal framework for each client. It’s not about a one-size-fits-all structure; it’s about cross-border expertise with cost-effective administration,” Kristian says.

“If a patriarch wants to retain ownership while gradually handing over control to his heirs, a Maltese trust under local law won’t allow it. However, by using the proper law of another jurisdiction within a Malta-based trust, this can be achieved. Maltese law, aligned with the Hague Convention, allows settlors to choose a governing law. While some powers can be reserved under Maltese law, like appointing trustees or investment managers, these are limited. Broader control requires applying a more flexible foreign law,” Kristian explains.

He therefore urges looking at establishing a trust which is subject to the proper law forum of a country which expressly legislates for wider reserved power trusts. Guernsey law offers far greater flexibility, allowing settlors to reserve or delegate business-related powers without undermining the validity of the trust. Dominion offers clients the ability to navigate these options by creating a trust in Malta governed by Guernsey law. This is only possible thanks to the firm’s international expertise.

Clients are also concerned whether a trust will eventually be wound up. Under Maltese law, a trust lasts up to 125 years before assets must be distributed. But if the goal is to preserve assets indefinitely, we look to jurisdictions that allow perpetual trusts like Jersey or Guernsey. Knowing which legal systems provide this flexibility is where Dominion’s expertise truly comes in.

Stamp duty is also a major concern for heirs when it comes to shares being passed onto them. Without proper planning, heirs may face hefty duties on multi-million businesses, sometimes forcing them to sell just to cover the tax, ending the family legacy.

If shares remain with the patriarch and are transferred into a trust during his lifetime, no stamp duty applies. If shares are passed to his heirs before or after death, whether in a trust or not, stamp duty will apply.

The advantage of a trust setup as opposed to the conventional approach is stamp duty deferral. This can be achieved if shares are passed to a class of beneficiaries within the trust rather than to a named beneficiary. Stamp duty is paid on the initial transfer from the patriarch to the class objects (such as the issue of the patriarch). However, future transfers between the same class can avoid immediate stamp duty, deferred until the trust ends, if ever.

Malta’s forced heirship rules must be considered if the shares make up most of the estate. That’s why Dominion works closely with the patriarch’s advisors, lawyers, and auditors to craft the best succession plan beyond conventional methods.