As a partner in Viberts’ commercial department I’m often asked to outline the types of business structures and asset holding arrangements available under Jersey law.
I think it’s helpful first to consider how such arrangements are being used and then what they actually consist of.
There are three main uses to be kept in mind, being arrangements for:
- commercial planning; and
- personal or estate planning.
Let’s look at each in turn.
The best way to think of a fund is as the narrow part of an hour glass. Above the fund are lots of different investors with differing, but broadly consistent, priorities and concerns. Below it are a range of potential targets for investment. The fund is the narrow, highly regulated gateway through which the investors’ money is funnelled to and from the target investment.
Funds can build this gateway, and regulate when and how it opens, using Jersey companies, Jersey partnerships and Jersey trusts.
Certainly this generally involves people coming together to invest but typically it is also used to collaborate in running a business to which they also contribute their expertise. The company with its limited liability, separate personality and the distinction between the rights and duties of directors and shareholders is ideally adapted to this sort of activity.
However, sometimes an enterprise may wish to ring fence some of its assets… for example to provide a safe harbour for the employee’s pension money. In such circumstances a business may well create a trust.
Traditionally some professionals , for example lawyers doctors accountants and architects, were not allowed to trade with limited liability so for them company formation was out. Instead creating a partnership was the way forward.
Partnerships are an area of Jersey law that’s recently blossomed and now offers an almost bewildering variety of options. Just like a company these partnerships include limited liability, separate personality and corporate status and that leaves our clients with an important decision to make: which to choose? The familiar company or the more flexibly regulated partnership?
Personal or estate planning
Finally there is personal or estate planning, which for obvious reasons I avoid describing as family planning!
Throughout human history having personal wealth has brought challenges as well as benefits. It can distort domestic relationships and attract unwelcome attention from the dishonest. This is where the trust or the foundation or family partnership can be so useful. It allows a person or family to expect, or to hope to enjoy, certain assets without actually being the owner of them. You can imagine how this lack of ownership impacts on divorce negotiations or motivating idle children or keeping the extent of one’s fortune discreetly out of the public eye.
Consider also how setting up a family partnership could gradually manage a transition by the younger generation from the enjoyment of assets, as a sleeping partner, to a role in the assets’ administration as a managing partner. And I’ve not even mentioned tax – traditionally, but now far less, tax has been a driving force behind the making of such arrangements.
So what are the Jersey law options for people considering how to address these issues?
Bit by bit Jersey has built a comprehensive range of options:
- We have had company law since 1861 but updated it in 1991;
- We introduced trusts legislation in 1984 and a Foundations Law In 2009; and
- Since 1994 Jersey has also introduced a flurry of new laws allowing different sorts of partnership.
Regular amendments keep these laws in line with best practice elsewhere in the Commonwealth and they’re interpreted in Jersey’s highly regarded courts.
With so many options to choose from you might find it reassuring to secure advice from a lawyer with expertise in the creation and uses of all these arrangements. At Viberts we frequently provide advice of this sort and I would be very pleased to hear from you.