Our Guernsey and Jersey investment funds teams have identified some key issues for consideration in the context of the current global coronavirus (COVID-19) pandemic. This update provides guidance on: the points to consider regarding holding board meetings in Guernsey and Jersey; key island-wide authorities and functionaries; execution of documents; Force Majeure and MACs; and questions for fund directors.

Can we still hold our board meetings in the Channel Islands?

Holding board meetings when there are potential location and attendance issues can be concerning – here are a few pointers to consider:

Telephonic or electronic attendance

In the current climate, it is expected that there will be a preference for board meetings not to be held in person. The articles of association or incorporation of a Jersey or Guernsey company (the 'Articles') should be checked to ensure board meetings may be held other than in person and what the requirements are (if any). Articles often allow meetings to be held via telephone or other electronic means (such as video conference) as long as every director can hear what is said by each of the other directors.

Location

In the absence of anything to the contrary in the Articles, the place of a board meeting will be deemed to be where the chairperson is. If meetings are required to be held in Guernsey or Jersey, for economic substance purposes or otherwise, a director who will be present in Guernsey or Jersey should be appointed as the chairperson. In Jersey it is possible for the Articles to be amended to provide that board meetings will be deemed to be held in Jersey, notwithstanding the location of the chairperson.

Written board resolutions

As an alternative to holding a meeting, written resolutions can be passed by the directors (provided, in the case of a Guernsey company, this is provided for in the Articles). The Articles should state whether all directors are required to sign written resolutions or if they can be passed by the majority of directors who would have been able to pass the resolutions at a meeting.

Economic substance

The Jersey Comptroller of Revenue has taken a practical and helpful approach by confirming that if companies have to adjust their operations as a result of the coronavirus (COVID-19) outbreak the Comptroller will not determine that a company has failed the economic substance test under the Economic Substance Jersey Law (ESJL). This treatment extends only to any required adjustments made to the company's normal practice in order to mitigate threats of the virus - for example, if virtual board meetings need to be held while directors are prevented from travelling due to restrictions being in place.

The Guernsey International Business Association (GIBA) has had a number of discussions with the Revenue Service in Guernsey on this matter and we understand that they will be taking a similarly pragmatic approach to their Jersey counterparts, which has been endorsed by the Chief Minister of Guernsey.

See below for more guidance:

The impact of the coronavirus (COVID-19) on economic substance and tax residency in Guernsey and Jersey

The Jersey Comptroller of Revenue's statement

GIBA's statement: Measures to Combat Coronavirus and Complying with Substance Requirements in Guernsey

Other considerations and further guidance

Key island-wide authorities and functionaries

So far, both the Jersey and Guernsey Financial Services Commissions have issued statements to alleviate concerns as to their operations, as well as give advice on Business Continuity Planning. We receive regular updates from both Commissions and steps are being taken to ensure operations continue to run smoothly. The process and timing to incorporate companies, establish limited partnerships or any other entities and to apply for any regulatory consents remain the same. Should any practical difficulties arise, the Commissions are flexible and we expect any necessary adjustments will be made. Other offices such as the Viscount's Department of the Royal Court of Jersey have also stated that they remain open for business, particularly as the search for whether or not an entity has been declared "en désastre" is a key service provided by them.

Execution of documents

There are no special signing formalities in Jersey and Guernsey (beyond witnessing for individual powers of attorney) unless it relates to Jersey immoveable property or a Jersey will. Powers of attorney signed by individuals also need to be witnessed in Jersey.

The directors of a Jersey or Guernsey company may, subject to the Articles, execute documents in such manner as is approved by the board of directors. In this regard, subject to any specific requirements under the governing law of the document, directors can approve electronic signature of documents or authorise a specific person (who may not be a director) to sign a document if a director is not available.

In addition, most Jersey and Guernsey law governed documents may be signed electronically by a party with the intent to be bound, which includes approval of a document via email as long as the signatory can be identified from the email address in that email.

Check your prospectus

This would be a prescient time to check whether a prospectus needs to be updated e.g. are risk factors to cover global crises such as the spread of COVID-19 included and what are the likely follow-on consequences of the investment strategy (near and mid term)? Investors may require reassurance and thought should be given to being on the front foot with investors from both an investor relations and regulatory perspective.

Force Majeure and MACs

Our banking colleagues have recently written some guidance on how Jersey courts would construe this pandemic in terms of Force Majeure and 'material adverse change' (MAC).

As a director on a fund board, what questions should I be asking?

For boards of regulated managers and funds, it is now common practice to ask all service providers and retained advisers to complete an annual survey, including in terms of their operations, governance and oversight, regulatory status and insurance.

It is now time to dust down, review and stress test those responses. Most fund service providers routinely conduct resilience testing on their systems. Have firms implemented their Business Continuity Plans? What's working and what needs to be improved?

Without having dialogue with your service providers it will be difficult to understand their business risks, which could well become the fund's issues too. There is no doubt that regulators and auditors will be expecting boards to have undertaken their own resilience testing and due diligence.

Carey Olsen has taken proactive steps to mitigate the impact of COVID-19 on our operations and we will continue to provide our clients with excellent uninterrupted service.

Coronavirus (COVID-19) resources

Our teams are liaising with the regulators and authorities in each of our jurisdictions to produce legal guides and briefings to assist you in assessing and mitigating the extensive challenges presented by the coronavirus.

This content is housed in a dedicated coronavirus (COVID-19) resources hub and includes legal guidance in relation to workplace disruption and employment law best practice, immigration, restructuring and insolvency, economic substance requirements and considerations for directors and lenders.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.