Jersey Forms of Company

Jersey Private Company Limited by Shares

Companies incorporated in Jersey are governed by the Companies Law 1991 which is based largely on the English 1948 Companies Act. Jersey companies are limited by shares; there are no forms comparable to those of English companies limited by guarantee or unlimited companies. A private company is any company that is not a public company.

Shelf companies are not available in Jersey; however the formation process is quick and inexpensive provided that a new company does not intend to carry on business on Jersey itself. There is an incorporation fee of GBP200 and an annual return fee of GBP150. In August, 2010, the Economic Development Department of Jersey together with the Financial Services Commission published a green paper proposing an increase of the annual return fee to GBP250 with a guarantee of no further increase within three years. The deadline for comments on the proposal was September 24, 2010. A company must have a registered office in Jersey. Accounts need not be audited, but have to be filed with the Jersey revenue authorities.

A company wanting to do business as such on the island will need to provide a great deal of information to the authorities in order to obtain the necessary consents and licenses; in fact the authorities actively discourage new business activity in most cases in order to conserve scarce resources.

Jersey Exempt Private Company

NB As a result of the introduction of the 'zero/ten' corporate tax reform in January 2009, no new Exempt Companies could be formed in Jersey after June 3, 2008. Exempt companies formed prior to that date are treated as resident for tax purposes, and are charged corporate tax at either 0% or 10%. See Domestic Corporate Taxation for further details.

A private company limited by shares applied to the Comptroller of Income Tax to be exempt; the application cost GBP600 and was subject to the following conditions (this is a simplified statement):

Jersey residents could not have any direct interest in the shares of an exempt company, but could have owned shares in a company which did;
The exempt company's beneficial owners were required to disclose to the Financial Services Commission;
The company must not have failed to pay income or corporation tax in a previous year;
The company could not have been exempt in a previous period separated from the current period by one year or more, unless there had been a substantial change of ownership.

Exempt status was applied for each year and lasted for one year; see Offshore Legal and Tax Regimes for details of the tax situation of exempt companies; the main advantage was that foreign income remained untaxed.

Jersey Public Company Limited by Shares

A public company is one which has more than 30 members or which declares in its Memorandum of Association that it is public. Public companies are required to file audited accounts with the Registrar of Companies. Only a public company may issue a prospectus and offer its shares for subscription to the public.

Jersey Branch of Overseas Company

If a foreign company intends to trade within Jersey using its own name or to establish a branch or a permanent place of business on the island, it is subject to the same consents and license requirements that apply to resident companies; and it will be taxed as if it was a resident company. However, not being a Jersey company, it will not be required to register its corporate details or to file annual returns. A branch of a foreign company used to be able to apply to be an International Business Company.

Jersey International Business Companies

NB In accordance with Jersey’s commitment to the ‘Rollback’ provisions of the EU Code of Conduct for Business Taxation, the International Business Company vehicle was abolished to new entrants with effect from 1st January, 2006. Benefits for existing beneficiaries of the International Business Company regime will be progressively extinguished by no later than December 31, 2011.

The status of International Business Company can be held by an incorporated Jersey company or the branch of a foreign company. An IBC is resident in Jersey for tax purposes but the rates of tax are very low on non-Jersey income (see Tax Regimes). Jersey residents may not hold shares in an IBC. Prior to the legislative changes, an annual advance tax payment of GBP1,200 must have accompanied an application for IBC status. As for private companies in general, beneficial ownership has to be disclosed, but is not kept on the public record.

Jersey General Partnerships

There is no legislation in Jersey governing ordinary partnerships; the law for General Partnerships is similar to English law as in the Partnership Act 1890. Partnership is between persons (which can include companies) and the liability of each partner is unlimited. There is no requirement to register details of a partnership. Resident partners are liable for tax on world-wide profits.

Jersey Foreign Partnerships

If the control and management of a partnership is carried on abroad, it is deemed to be resident outside Jersey, even if some of the partners are resident in Jersey. Tax will however be due on business profits earned through activities on the island and can be assessed on the resident partners.

Jersey Limited Partnership

Limited partnerships are governed by the Limited Partnerships Law 1994, supplemented by the Limited Liability Partnerships (Jersey) Law 1997 and the Limited Liability Partnerships (Insolvent Partnerships) (Regulations) 1998, putting Jersey LLP law on a very advanced basis for this useful form. Companies may be limited or general partners. Limited partnerships are often used in ownership structures for funds, real estate and leveraged financing packages. To form a limited partnership a declaration must first be lodged with the registrar, giving the names of the general partners, but not of the limited partners. The partnership agreement need not be filed. A registration fee of GBP500 is payable, but there is no annual registration fee. The tax treatment of limited partnerships is the same whether they are registered in Jersey or abroad. Each of the partners is separately assessed to tax on their partnership income and gains; resident partners on worldwide partnership income, and non-resident partners only on Jersey income.

In June 2006, the Jersey authorities published new proposals to amend the jurisdiction's Limited Partnership Law, in an effort to improve the competitiveness of the island's offshore financial services industry. One of the main aims of the proposals was to allow a Jersey limited partnership to have a legal personality, bringing the island into line with Guernsey, which amended its relevant legislation in 2001 allowing limited partnerships to elect to have legal identity.

Two new limited partnership laws were adopted by the States on May 25, 2010, follwowing a consultation published by Jersey’s Economic Development Department in September 2009.

The two laws are the draft Separate Limited Partnerships (Jersey) Law 2011 and the draft Incorporated Limited Partnerships (Jersey) Law 2011. These provide respectively for the establishment of Separate Limited Partnerships (SLPs) and Incorporated Limited Partnerships (ILPs). Establishment of an SLP was made possible from April 20, 2011 and for an ILP from May 24, 2011.

The SLP will have legal personality but without being a body corporate (as is already the case for a Scottish limited partnership), whereas the ILP will be a body corporate.

Heather Bestwick, technical director of Jersey Finance, said: ”The new Separate Limited Partnership and Incorporated Limited Partnership will be attractive additions to the Jersey Limited Partnership regime.

Jersey Trusts

Local Trusts

Although Jersey law has its roots in the Norman law (a 'Roman' or 'Civil' law code), the Trusts (Jersey) Law 1984 codified an entirely 'Anglo-Saxon' body of trust law, resolving many uncertainties and increasing protection for beneficiaries. Subsequent amendments included the recognition of 'purpose' trusts in 1996 (the normal form of Jersey trusts is 'discretionary'). This has led to an increase in corporate use of Jersey trusts.

The most significant amendment to the 1984 law came into force on October 27, 2006. This introduced settlor-reserved powers, which provide greater statutory certainty regarding the level of control and influence a settlor may exercise, in appropriate circumstances, over the ongoing administration of assets placed into trust. The powers that may be reserved by the settlor include the power to appoint and remove trustees, to amend or revoke the terms of the trust and to appoint or remove an investment manager or investment adviser. The amendments also permit a trustee to delegate any of his or her trusts or powers if permitted by the terms of the trust. Other amendments include conflict of law provisions which will mean that the validity of a trust governed by Jersey law will not be affected by any rights conferred on anyone under a foreign law, and a proposal that will remove the existing automatic ‘personal guarantor’ provisions for directors of corporate trustees, thereby making it more attractive to establish private trust companies in Jersey.

Jersey is a party to the Hague Convention on the Law Applicable to Trusts and Their Recognition. Jersey trust law explicitly excludes foreign inheritance laws and does not recognize foreign judgements. The creation of a trust is free from Government duty and there are no registration or audit requirements as such in Jersey, although the tax authorities of beneficiaries' jurisdictions (eg the UK) may require annual reports.

Jersey trusts may 'migrate' to other jurisdictions by changing trustees and the applicable law of a trust; likewise, foreign trusts may migrate to Jersey.

A Jersey trust is governed by the law of Jersey. In the case where the beneficiaries of a Jersey trust are non resident, income arising from sources outside Jersey is not liable to income tax in Jersey, nor are distributions to the beneficiaries. Interest on bank deposits made by the trustees of a nonresident trust is not taxed because of a government concession. The trustees of a non resident trust are not required to make returns or provide accounts of the trust to the Comptroller of income tax. Trust accounts must be kept but do not require auditing.

In 2008, the Economic Development Department issued a consultation paper reviewing Jersey’s trusts law. The consultation paper covered ten 'discrete' areas of possible reform, with proposals and questions for respondents to consider in each case. The consultation closed in September 2008.

The Jersey Financial Services Commission launched a consultation in March 2010 on proposed changes to trust company business exemptions with regard to persons undertaking the activity of a director under the Financial Services (Jersey) Law (FS(J)L) 1998.

The Commission said that the proposed changes would affect in particular:

Individuals that act as directors, on a professional basis, of companies that they do not beneficially own; and
Individuals that are currently relying on ‘the connected persons exemption’.

The Consultation Paper proposed the following two changes in respect of Trust Company Business exemptions:-

To present a new exemption that introduces “de minimis” provisions which will allow an individual to hold a maximum of six directorships (in addition to any that would otherwise be exempt) before the need to register under the FS(J)L is triggered.
To restrict the scope of the ‘Connected Persons’ exemption contained in the note to paragraph 1 of the Schedule to the Financial Services (Trust Company Business (Exemptions No 4)) (Jersey) Order 2000.

The Financial Services (Trust Company Business) (Exemptions Amendment No. 2) (Jersey) Order 2010 came into force partly on November 24, 2010, when the "de minimis" provision was introduced. The remainder of the Order, dealing with the 'Connected Persons' exemption came into force on February 17, 2011.

Unit Trusts

There are no special provision in Jersey law covering Unit Trusts, which are therefore treated in the same way as ordinary Jersey trusts, and have the same tax regime.

Jersey Protected Cell Companies

Jersey's Companies (Amendment No.8) (Jersey) Law 2006, introduced advances to cell company investment structures.

The legislation permits the creation of cell companies in Jersey and includes innovative features which extend the scope of their use for investment purposes.

Jersey legislators have introduced the concept of an Incorporated Cell Company (ICC), alongside an enhanced version of the traditional Protected Cell Company (PCC), to provide investors with greater flexibility when choosing a cell structure to meet their investment objectives.

The new ICC involves the formation of separate, legally recognised cells within the overall structure, with each cell established as a separate incorporated Jersey company. This is in contrast to the traditional PCC where all the cells combined create one legal entity and each cell is not treated as a separate legal personality.

The measures, which Island practitioners describe as the first significant advance from the original PCC model, are expected to provide a boost generally to the Island’s investment capabilities in the institutional market, particularly for the insurance sector and in support of international capital markets activity.

Foundations

In June 2009, Jersey's Privy Council approved an order allowing Foundations to be set up in Jersey.

Foundations have a long history in continental Europe. In medieval times they were used for charitable or religious purposes. They are now commonly used for wealth management, and residents of jurisdictions like the Middle and Far East are more familiar with foundations than with trusts, which do not exist in their legal systems. Jersey is the first of the Crown Dependencies to bring in a genuine foundation product.

The regulations will permit foundations to migrate in and out of Jersey. They also provide for existing Jersey companies to convert to foundations.

The approval of the Jersey Foundations Law by Jersey’s Privy Council was welcomed by Jersey Finance as a hugely positive step in affirming the island as a centre of excellence for private wealth management business.

Foundations sit alongside existing vehicles such as companies, trusts and limited partnerships for use in financial planning and private wealth management strategies.

A foundation must have regulations. These regulations must:

Establish a council to administer the foundation’s assets and to carry out its objects;
Provide for the appointment, retirement, removal and remuneration (if any) of its members;
Set out how the decisions of the council are to be made and, if any decision requires the approval of any other person, specify the decisions and that person; and
Set out the functions of the council, and, if they must or may be delegated or exercised in conjunction with any other person, the extent to which this must or may be done.

In particular, the regulations of a foundation must set out a procedure that ensures that a qualified person is appointed to be the qualified member of its council as soon as reasonably practicable if its qualified member dies, retires, or otherwise ceases to act or to be able to act.

Whilst similar in design to foundations in other jurisdictions, the Jersey structure introduces the concept of a ‘guardian’ with oversight over the council’s activities in relation to the foundation and ensures that it achieves the broad objectives outlined in its constitutive documents.

A foundation must have a council to administer the assets of the foundation; and to carry out its objects. The council of a foundation may have one or more members and must include a qualified person. However, although the council of a foundation may include more than one qualified person it may not have more than one qualified member at any one time.

An act of a member of the council of a foundation is valid despite any defect that may afterwards be found in the appointment of the member; or the member’s qualifications.

A beneficiary under a foundation has no interest in the foundation’s assets; and is not owed by the foundation or by a person appointed under the regulations of the foundation a duty that is or is analogous to a fiduciary duty. However, if a beneficiary under a foundation becomes entitled to a benefit under the foundation in accordance with the charter or the regulations of the foundation; and the benefit is not provided, the beneficiary may seek an order of the Royal Court ordering the foundation to provide the benefit.

The beneficiary must seek the order within the period of three years from the time when the beneficiary became aware of his or her entitlement to the benefit, provided they have reached the age of 18.

Jersey foundations are expected to be a particularly attractive option for wealthy clients in civil law jurisdictions where the concept of a trust vehicle is not so familiar.

The Foundations (Jersey) Law 2009, entered into force on July 17, 2009.

Offshore law firm Mourant du Feu & Jeune announced on July 21 that it had established the first two foundation structures in Jersey. The two foundations were established on the first day the new law came into force in Jersey.

A registration fee of GBP200 is payable.

Lowtax Jurisdictions