A Jersey Foundation in overview
Jersey Foundations are unique and do not have an exact equivalent in other jurisdictions but do offer certain benefits of traditional companies and trusts, whilst being constructed to eliminate some of the key constraints. It is similar to a company in that it has separate legal personality and has a Council to administer its business, just like a board of directors.
Unlike a company, a Foundation does not have shareholders and contrary to the position of a trust, there are no beneficiaries who have an interest in the Foundation’s assets or who are owed a fiduciary duty. Consequently, a Foundation does not have any owners and is regarded as an ‘orphan entity’.
What are they used for?
Private wealth management structures/philanthropy
Over a third of those established so far are understood to have charitable purposes
Asset protection/succession planning
Families can use Foundations to ring-fence certain assets, avoid forced heirship rules or succession challenges and make provision for how family wealth should be disseminated
Maintenance of corporate control
Family businesses are often led by elder members of the family and it can be beneficial for succession planning purposes to ensure the continuity of the family businesses that they be held by independent vehicles, such as a Foundation
Ownership of private trust companies
As an alternative structure to family businesses being owned and directly held in a Foundation, the Foundation could instead own the shares in an SPV trustee company (“PTC”) which would, in turn, own the family businesses through a conventional trust arrangement. This may also assist with the tax status of the PTC
The Foundation is a useful option as an ‘orphan’ entity for structures that require an SPV with no connected ownership, including securitisation. Foundations are also registered and identifiable where required for third party certainty (as opposed to trusts which are unregistered)
The benefit of a Foundation in this area can be the ability to own assets in its own name but also not have to overlay trusts concepts to the holding of assets and beneficiaries
A Foundation will generally be taxed at 0% in Jersey and by concession, usually non-Jersey resident receiving an income distribution from a Jersey Foundation will not be taxed in Jersey. Tax may be payable by a Jersey resident individual who receives income from the Foundation. Tax advice should always be taken for individual circumstances.
Foundations do have certain restrictions as regards directly holding immovable property in Jersey or engaging in commercial trading that is not incidental to the attainment of its objects (albeit it could through an underlying company potentially) and advice is recommended in respect of those activities.