With 2019 marking the tenth anniversary of the introduction of Jersey foundations into Jersey law, in a series of articles Grant Barbour, Managing Director - Private Client breaks down their key features, components and use-case.
Introduced in July 2009, the Foundations (Jersey) Law 2009 (the "Law") brought a new form of incorporated vehicle into Jersey's legal landscape, the Jersey foundation.
In the decade since their inception, there has been significant change within the private wealth sphere, both locally in Jersey and internationally. Geopolitical tensions and unrest such as that seen in the Middle East has pushed wealthy individuals and families to seek out jurisdictions that are stable and secure. There has also been a sizeable shift towards greater transparency and more stringent reporting standards; evident in the Common Reporting Standard and Foreign Account Tax Compliance Act. As a result, Jersey's robust infrastructure and range of sophisticated private wealth products make it an attractive jurisdiction for wealthy families wanting to safeguard their wealth and assets.
A unique offering
Not an exact equivalent or copy of a foundation established in any other jurisdiction, the Jersey foundation is a highly flexible vehicle that can be adapted for a variety of purposes. However, the following three broad categories of use are the most popular: for succession planning, as orphan structures for specified purposes, and for philanthropy. As families become more complex, internationally mobile and more cognisant about the transition of wealth between generations, the Jersey foundation continues to provide a dynamic option that can accommodate a family's evolving priorities.
Before examining the components of the Jersey foundation and how it is being used as a modern incorporated vehicle, it is important to outline its principal features, underlining why it is a popular, flexible option.
Key features of the Jersey foundation include:
- Incorporated vehicle: Differing from a trust, a Jersey foundation is an incorporated vehicle which is brought into existence following the completion of a registration process.
- Legal personality: A Jersey foundation is a separate legal entity which holds assets, and enters into contracts in its own name. By contrast, as a trust is not an entity in its own right, transactions in relation to a trust are entered into in the names of the trustees, rather than in the name of the trust.
- Public record: A Jersey foundation's existence can be determined as a matter of public record, by conducting a search of the register of foundations. The entry of a Jersey foundation's name in the register is conclusive evidence that the foundation has been incorporated and that the requirements of the Law in that regard have been complied with.
- No ultra vires: The doctrine of ultra vires does not apply and a Jersey foundation can exercise all the functions of a body corporate, save only that it cannot directly (a) acquire, hold or dispose of immovable property in Jersey or (b) engage in commercial trading that is not incidental to the attainment of its objects. However, both of these restrictions can be overcome by interposing an underlying company, so that the relevant activity is not undertaken directly by the Jersey foundation.
- Orphan vehicle: A Jersey foundation does not have shareholders or any other form of owner.
- Indefinite existence: As with Jersey trusts, Jersey foundations can continue to exist for an indefinite period.
In part two of the four part series, we will examine the structure of a Jersey foundation.
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.