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.
A unique legal entity, the Jersey foundation is often referred to as a hybrid structure because it blends the attractive features of both companies and trusts. Its structure is also its main line of defence, limiting its susceptibility to abuse for money laundering or terrorist financing purposes. These attributes make it a sophisticated and popular private wealth product.
The structure of a Jersey foundation
The principal components of a Jersey foundation's structure are:
- Founder: The founder is the person upon whose instructions a Jersey foundation is incorporated. A founder need not endow assets upon the Jersey foundation and (unlike a trust) it can come into existence without assets.
- Constitutional documents: A Jersey foundation's constitutional documents are its charter (which is registered and open to public inspection) and its regulations (which are not registered and are therefore private). The Foundations (Jersey) Law, 2009 prescribes certain information which must appear in the charter and regulations. However, anything required to appear in the regulations can instead be included in the charter (and so be open to public inspection if that is desired) and additional material can be included in both the charter and the regulations to accommodate particular structuring objectives.
- Objects: A Jersey foundation's objects can be charitable or non-charitable (or a combination of both), and can be either to benefit a person or class of persons, or to carry out a specified purpose (or to do both).
- Council: A Jersey foundation has a council, which is similar to a company's board of directors. The council's function is to administer the Jersey foundation's assets and to carry out its objects. The council can have one or more members, with one member being a "qualified person" with the appropriate regulatory licence pursuant to the Financial Services (Jersey) Law 1998: this member is known as the qualified member. Council members are required to act honestly and in good faith with a view to the Jersey foundation's best interests, and to exercise the care, diligence and skill that reasonably prudent persons would exercise in comparable circumstances. These duties are similar to the statutory duties of a Jersey company's directors.
- Guardian: Every Jersey foundation must have a guardian whose role is to take such steps as are reasonable in all the circumstances to ensure that the council carries out its functions. The founder and the qualified member (but not others) may fulfil a dual role as both council member and guardian. There is no regulatory requirement in relation to the office of guardian and there is considerable flexibility as to who should be the guardian. The guardian can be an individual or a corporate entity, and there is no requirement for the guardian to be resident in Jersey.
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.