By CECILE FONTES, founder of FINANCIAL ART STRATEGY MONACO SARL & Nathalie TANZI, founder of TEMPEST LEGAL SERVICES MONACO SARL.
One of the prime benefits of the Principality of Monaco is to provide an ideal framework for the safety of persons living or working there.
Regarding assets and particularly works of art, it appears that Monaco has recently developed instruments allowing such people to ensure the safety of their assets, adapted to meet their wishes, in a favourable legal and tax framework. This is the case of the bonding services offering for works of art, collector’s items and antiques of Monaco Freeport (Société d’Exploitation et de Gestion des Entrepôts de Monaco).
Monaco Freeport makes a contribution to a secure environment for works of art deposited by users for an indefinite period. In this way the deposit function is created around the tangible asset which is the work of art.
Monaco Freeport thus ensures the deposit function, and has become one of the linchpin players in the setting up and proper functioning of an art fund. It provides guaranteed protection and preservation of the fund’s assets in a secure environment. It can thus be of support to Monaco banking establishments which are in turn responsible for the more traditional deposit functions laid down by the September 2007 legislation on Monegasque investment funds (Law 1.339 on mutual funds and investment funds).
What are the other components for the proper functioning of an art investment fund in Monaco ?
Firstly, an independent valuer is required to make the connection between the physical depositary of the work of art and the bank which is the depositary of the fund’s assets.
The independent valuer’s role is to perform audits of the expert assessment and origins of the works of art underlying the assets of the funds. He or she can thus give a value which is correlated to the changes in the art market.
This valuation is made independently in an exhaustive manner by market professionals, thus allowing a ‘mark to market’ valuation of the assets of the fund.
The depositary bank can then take on its control duties for management decisions and ultimately for the valuation, in a secure environment.
Added to this - due to the global nature of the art market and its actors - is a legal and regulatory component consisting of mandatory ‘compliance’, to allow all the fund parties to exist in a secure legal environment. Thus, it is both required and possible, in accordance with the Monaco legal framework, to conduct all legal due diligence on identification of the ownership of the works, methods of transfer, payment and delivery, and implement contracts ensuring protection of the works; all the contractual and regulatory ingredients for the existence of an art fund are grouped together: prospectus, specifications of the depositary, contracts with the different business partners, types of control conducted by the depositary and the external auditor of the fund: all this can be set up very quickly, under the control of an independent regulator - the Commission for the Control of Financial Activities (CCAF) - to the overall advantage of the fund holders and the consignees of the works.
A choice solution for family offices based in Monaco or which to set up there, allowing them to diversify management and protection solutions for their holdings. Or for providing art-oriented associations and foundations with a new vehicle which meets their needs.
