Jeffrey Giovannoni of Voisin’s Commercial team reviews the Jersey foundation, whose introduction has been welcomed as a versatile alternative to trust and company structures.
It has now been over a year since the concept of Jersey foundations was introduced by the Foundations (Jersey) Law 2009. Since then, a considerable number of Jersey foundations have been established and we have seen the first migration of a Liechtenstein Stiftung into Jersey. The popularity of Jersey foundations will no doubt continue to increase as the concept of Jersey foundations becomes better known with industry practitioners in civil jurisdictions. Voisin and Volaw recently presented the concept in Zurich to a wide-ranging audience of private bankers, tax advisors and local administrators with considerable success. The conference generated a great deal of interest with discussions focusing on the uses of Jersey foundations for Latin American, Russian and European clients.
A Jersey foundation is a Jersey body corporate of potentially infinite duration. It is able to hold its own assets, sue and be sued, and transact with third parties provided this is incidental to its objects. A Jersey foundation could be described a form of hybrid structure which blends the most useful aspects of Jersey trusts and Jersey companies. The most notable features of a Jersey foundation, none of which are particularly surprising to an industry practitioner, are as follows:
1. the Founder (whose role may be similar to that of a settlor in a trust);
2. the Council (whose role is similar to that of the board of directors in a company);
3. the Guardian (whose role is similar to that of the enforcer in a non-charitable purpose trust or the protector of a discretionary trust);
4. the Qualified Member provided by a Jersey service provider regulated to carry out foundations work (who, at the very least, has an administrative role);
5. the Charter (a public document similar to the memorandum of association of a company); and
6. the Regulations (a private document similar to the articles of association of a company).
The Foundations (Jersey) Law 2009 allows for great flexibility in the drafting of its Charter and Regulations. A Jersey foundation can therefore be tailored to meet the needs of the client by, for instance, allowing active participation in the decision making process by the Founder or providing for virtually no participation should the Founder so wish. Similarly, the Guardian may be granted substantial rights, or very few, subject always to the Guardian’s overriding duty to take such steps as are reasonable in all the circumstances to ensure that the Council carries out its functions. The concepts of the Guardian and Qualified Member appear to be well regarded by potential clients who appreciate that Jersey has introduced these safeguards.
Jersey offers many benefits to those considering establishing a foundation in Jersey or moving an existing foundation from another jurisdiction. Apart from its flexible legal framework for the operation of foundations, Jersey is a stable political and economic environment easily accessible from London and Europe with a large and expert pool of finance professionals. Jersey continues to benefit from a high reputation internationally demonstrated by being on the OECD “white list” of jurisdictions that have substantially implemented internationally agreed tax standards.
A notable feature of the flexibility of Jersey foundations is the introduction of subsidiary legislation in the form of the Foundations (Continuance) (Jersey) Regulations 2009 and the Foundations (Mergers) (Jersey) Regulations 2009.
Jersey companies and certain types of foreign “recognized entities” are able to continue as Jersey foundations under the Foundations (Continuance) (Jersey) Regulations 2009. The Minister for Economic Development has designated as “recognized entities” Panama Private Interest Foundations, Bahamas Foundations, Liechtenstein Stiftungs, Liechtenstein Anstalts, St Kitts Foundations, Nevis Multiform Foundations and Malta Private Foundations. All these, together with Jersey companies, may continue as Jersey foundations subject to satisfying a number of conditions including solvency requirements.
A Jersey company or a “recognized entity” which wishes to continue as a Jersey foundation must first publish a notice of its intention to continue as a Jersey foundation and a copy of this notice must be sent to all creditors owed more than £5,000 by the entity seeking continuance as well as to the Registrar of Companies in Jersey. It must contain specific information on the entity type, current jurisdiction, a statement of solvency, as well as a statement permitting any aggrieved person to apply to the Royal Court of Jersey for an order to restrain the proposed continuance within 28 days of the first publication of the notice.
The application to continue as a Jersey foundation must be made to the Jersey Financial Services Commission (“JFSC”) by a “qualified person” which is a regulated organisation registered under the Financial Services (Jersey) Law 1998. In practice, this qualified person will invariably be the Qualified Member. Various documentation must be submitted with the application including: a copy of the proposed Charter to be adopted by the new Jersey foundation; a certificate certifying (inter alia) that the interests of creditors will not be unfairly prejudiced; the name and business address of the Qualified Member; confirmation of approval of the Regulations; confirmation that a Guardian has been chosen and will take office upon the incorporation of the Jersey foundation; confirmation that the law of the jurisdiction of the migrating entity (in the case of a recognized entity) allows its migration and that permission to do so has been granted, if the law so requires; and, finally, confirmation that once incorporated in Jersey the migrating entity (in the case of a recognized entity) will cease to exist in the former jurisdiction. The qualified person will also submit a fee of £500.00 to the JFSC for considering the application.
In limited circumstances, a recognized entity may be allowed to migrate to Jersey as a Jersey foundation even though it is insolvent provided that the Royal Court of Jersey has determined that the proposed migration would not be prejudicial to its creditors.
An application may be refused if the JFSC deem that the objects of the proposed foundation are unlawful or may be harmful to Jersey's integrity as an international finance centre, however the applicant can appeal to the Royal Court.
Once the JFSC has accepted the application, it instructs the Registrar of Companies to incorporate the migrating entity as a Jersey foundation. The Registrar will record the name of the foundation shown on its charter, its former name in the jurisdiction it migrated from, the former jurisdiction and the business address of the Qualified Member in Jersey. The foundation is given a registration number which is communicated to the Qualified Member with confirmation of incorporation. The Registrar also confirms the incorporation to the authorities of the former jurisdiction.
The property and rights of the migrating entity continue with incorporation as a Jersey foundation, as do its civil and criminal liabilities, contracts, debts and any other obligations, and legal proceedings it faced before migration may be continued against the new foundation.
The flexibility and hybrid nature of the Jersey foundation is sure to appeal to many people unfamiliar with the trust concept, particularly those from civil law jurisdictions, as well as those wishing to retain control over assets and maintain privacy.
The flexibility of Jersey foundations is further enhanced by the Foundations (Mergers) (Jersey) Regulations 2009 which allows a Jersey foundation to merge with one or more foundations or other corporate bodies incorporated in or outside of Jersey and to continue either in or outside of Jersey.
For further information about the formation and administration for Jersey Foundations, please contact Alicia McGinney (email@example.com) or Mark Healey (firstname.lastname@example.org) of V