Fit and Proper Test in Malta Fiduciary Oversight

Fit and proper: the unresolved concerns around fiduciary oversight in Malta – Michael Kyprianou Services Ltd!

Malta’s regulatory system has long rested on the principle that persons entrusted with fiduciary responsibilities must meet strict standards of probity, competence and financial soundness. These standards are embodied in the “fit and proper” test which underpins the authorisation of trustees and corporate service providers under the Trusts and Trustees Act, Chapter 331.

Yet recent events involving Michael Kyprianou Services Ltd (C 98540) raise troubling questions about whether this principle is being consistently enforced.

This article examines the sequence of corporate filings, resignations and legal measures connected to the company. It highlights the gap between the scale of the issues revealed and the continued holding of an authorisation to provide fiduciary services.

The concern is not about attributing fault to individuals, but about whether the regulatory framework is sufficiently robust to address situations where confidence in governance should be tested.

The freezing order

The most striking element in this case is the reference to a €32 million freezing order imposed against former director Dr David Joe Meli. This order, according to documents on record, extended not only to his personal assets but also to companies in which he was a director or shareholder.

Michael Kyprianou Services Ltd falls into this category, raising a direct regulatory question about the ongoing suitability of the company’s officers.

The fit and proper test requires that any person directing or controlling a licensed entity must demonstrate integrity and sound financial standing. A freezing order of this magnitude inevitably casts doubt on whether these criteria are met. It is difficult to reconcile the continued authorisation of the company with the spirit of the legislation, which is intended to protect clients, creditors and the wider financial system from exposure to unacceptable risk.

Corporate reshuffling

In the wake of the freezing order, corporate filings show a cascade of resignations. On 3 May 2024, Dr Meli resigned from all his positions within Michael Kyprianou Services Ltd, including as director, company secretary and judicial representative. He was replaced by Adrian Mallia, who assumed these roles.

Yet this proved temporary: on 14 February 2025, Mallia himself resigned from all positions in the company, including director, legal and judicial representative and secretary.

This sequence of events is noteworthy for two reasons.

• First, it suggests a period of instability in the company’s governance at a time when stability would normally be paramount.
• Second, Mallia subsequently left the group altogether and took up a new position at WH Partners, another Maltese law and corporate services firm.

This swift turnover of senior officers underscores the fragility of the company’s governance structure following the freezing order.

Further changes followed. By July 2025, the role of secretary had been vacated by Dr Michael Flores Martin. At present, the positions of director, judicial representative and legal representative and company secretary are recorded as held by two Cypriot nationals, Lambros Soteriou and Tonia Antoniou.

The current structure therefore places the effective management of the Maltese entity in the hands of individuals based in Cyprus.

 Auditor resignation and appointment issues

The company’s filings reveal another area of concern. On 19 October 2023, a Form F(1) was filed notifying the removal of auditor Dylan Busuttil with effect from April of that year. What is missing is a subsequent Form F(3), which would ordinarily be filed to appoint a new auditor.

Despite this absence, the current public register shows Beacon Finance Limited as the company’s auditors. Without a corresponding appointment form on record, there is an apparent procedural gap that requires clarification. The integrity of the audit process is central to the oversight of corporate service providers, particularly those with fiduciary responsibilities. An incomplete audit trail risks undermining the assurance that stakeholders and regulators rely on.

The warrant of seizure

Compounding these developments, the Registrar of Companies has also been notified of a warrant of seizure (reference number 480/2025) in respect of shares held by Michael Kyprianou (Malta) Ltd in Michael Kyprianou Services Ltd. The presence of such a warrant again raises questions about the stability of ownership and the security of client interests.

For a company entrusted with fiduciary duties, such encumbrances on its shareholding structure are a material issue that should not go unexamined by regulators.

 

Timeline of events relating to Michael Kyprianou Services Ltd (C 98540)

Date	Event	Individual/Entity	Notes
Oct 2023	Auditor removed	Dylan Busuttil	Form F(1) filed, removal effective from April 2023. No Form F(3) on record for new auditor.
May 2024	Director,       Secretary,                      Judicial Representative resigned	Dr David Joe Meli	Resigned all roles after €32m freezing order noted.
May 2024	Secretary appointed	Adrian Mallia	Took over roles following Dr Meli’s resignation.
Feb 2025	Director, Secretary, Legal & Judicial Representative resigned	Adrian Mallia	Resigned all roles, left MK Group, he later joined WH Partners.
Feb 2025	Warrant of seizure notified	Michael Kyprianou (Malta) Ltd shares	Reference 480/2025, affecting shares in Michael Kyprianou Services Ltd.
July 2025	Secretary resigned	Dr Michael Flores Martin	Secretary resigned by filing.
Current (2025)	Directors,     Judicial      &                     Legal Representatives	Lambros    Soteriou    and                  Tonia Antoniou (Cypriot nationals)	Effective management now based in Cyprus.
Current (2025)	Auditors shown	Beacon Finance Ltd	Listed as auditor, though appointment form not visible in filings.

The fit and proper test in theory and practice

The Maltese regulatory system places significant emphasis on the fit and proper assessment. In principle, it is designed to ensure that anyone involved in fiduciary or trust services are honest, financially sound and competent.

The test is not a one-off hurdle at the point of licensing, but an ongoing obligation that must be maintained throughout the life of the entity.

In practice, however, the case of Michael Kyprianou Services Ltd suggests that the application of this standard may be inconsistent. The combination of a €32 million freezing order against a director, repeated resignations of officers, an unresolved audit appointment and a warrant of seizure of shares would ordinarily trigger serious scrutiny.

Yet the company continues to be listed as authorised to provide fiduciary services under article 43(12)(a).

The regulatory question is not whether any wrongdoing has occurred within the company. Rather, it is whether the circumstances are compatible with the high level of integrity and soundness expected of those holding fiduciary licences. A failure to act in such cases risks eroding confidence in Malta’s regulatory framework.

Regulatory responsibility

The authority responsible for these authorisations is the Malta Financial Services Authority (MFSA). Under the Trusts and Trustees Act, the MFSA is tasked with ensuring that licensees are fit and proper, both at authorisation and on an ongoing basis. This duty includes monitoring the suitability of directors, shareholders and officers.

If a director is subject to a major freezing order or if there are unresolved issues with audit filings and ownership stability, the MFSA has the power to suspend or withdraw a licence. The absence of visible regulatory action in this case raises difficult questions about the consistency of supervision. Stakeholders are entitled to clarity about how the MFSA applies its own standards in practice.

Broader implications

The implications of this case extend beyond one company. Malta’s financial and fiduciary sector relies heavily on international confidence. The presence of robust and credible oversight is critical to attracting legitimate business while deterring misuse of corporate structures. If the fit and proper test is perceived as selectively applied, the jurisdiction risks reputational damage and the erosion of trust by investors and partners.

This is particularly significant in the context of recent international scrutiny of Malta’s financial regulation. Weaknesses in the enforcement of fiduciary oversight could provide further grounds for concern among supranational bodies and foreign regulators.

Final Thoughts and Conclusion

The case of Michael Kyprianou Services Ltd provides a revealing test of Malta’s commitment to enforcing the fit and proper principle. The facts on record (a €32 million freezing order, multiple high-level resignations, incomplete audit filings and a warrant of seizure) should at the very least have triggered a transparent regulatory response. Yet the company continues to be authorised to provide fiduciary services under article 43(12)(a).

This situation does not in itself demonstrate misconduct within the company. What it does demonstrate is a gap between the standards set out in legislation and their practical enforcement. If the fit and proper test is to retain meaning, it must be applied rigorously and consistently, particularly in cases where confidence has been publicly shaken.

Malta’s reputation as a financial centre depends on the credibility of its oversight. Ensuring that fiduciary service providers meet the highest standards is not optional, it is essential to maintaining the trust of clients, partners and international regulators. The case of Michael Kyprianou Services Ltd should therefore be a call for reflection on whether current procedures are sufficient or whether reform is urgently needed.

FAQs

What is the “fit and proper” test in Malta?
The fit and proper test is a regulatory requirement under the Trusts and Trustees Act in Malta, ensuring that individuals or entities providing fiduciary services are honest, financially sound, and competent.

Why is the fit and proper test important for fiduciary services?
It protects clients, creditors, and the wider financial system by ensuring only trustworthy and financially stable professionals manage fiduciary responsibilities.

What triggered concerns about Michael Kyprianou Services Ltd?
Concerns arose after a €32 million freezing order against a former director, multiple resignations of officers, incomplete auditor filings, and a warrant of seizure of shares.

Who imposed the €32 million freezing order and on whom?
The freezing order was imposed against Dr David Joe Meli, a former director of Michael Kyprianou Services Ltd, and extended to companies where he held roles.

How did corporate governance change after the freezing order?
Several directors and secretaries resigned, with rapid turnovers in leadership, leaving management in the hands of Cypriot nationals rather than Maltese-based officers.

What issues were identified with the company’s audit process?
The auditor was removed in April 2023, but no official filing appointing a new auditor was recorded, despite a new auditor being listed in the registry.

What is a warrant of seizure, and how did it affect the company?
A warrant of seizure freezes or restricts control over shares. In this case, it applied to shares held in Michael Kyprianou Services Ltd, raising concerns about ownership stability.

What role does the Malta Financial Services Authority (MFSA) play?
The MFSA is responsible for ensuring fiduciary service providers are fit and proper, monitoring directors, officers, and shareholders, and taking action if standards are not met.

Why is this case significant for Malta’s financial reputation?
It highlights potential inconsistencies in regulatory enforcement, which could undermine investor confidence and damage Malta’s credibility as a financial hub.

Does this case prove misconduct by Michael Kyprianou Services Ltd?
No. The article does not allege misconduct but raises questions about whether regulatory oversight has been sufficiently robust in this situation.