Earlier this month, the States of Jersey approved the Draft Limited Liability Companies (Jersey) Law (the "Draft LLC Law"), paving the way for the establishment of limited liability companies ("LLCs") in Jersey.
LLCs have been extremely popular in the United States for some time, and it is expected that the introduction of a vehicle that is familiar to the US market will increase the attraction of Jersey as a jurisdiction for US business, in addition to catering to the circa £170bn of North American assets and funds currently administered in Jersey. The popularity and flexibility of the LLC as a vehicle has also resulted in LLCs being introduced in the Cayman Islands and Bermuda in recent years.
Some of the key features of the proposed Jersey LLC include:
- a separate legal personality but not a body corporate, and therefore the ability to hold assets and enter into contracts in its own name;
- the choice between appointing managers to manage the LLC or vesting management with the members;
- it is governed by the terms of a private "LLC agreement", which would be binding on the LLC, each member and each manager (if appointed);
- limited liability for the members of the LLC as per a limited liability company;
- a high degree of contractual freedom when determining the terms of the LLC Agreement, including the ability to determine the parameters of the duties owed by managers and members (subject to a minimum duty of good faith for managers);
- the ability to create segregated series, each of which would have a legal identity separate from that of the LLC (and potentially different members and/or managers from other series), and therefore the ability to contract and hold assets in its own name; and
- the expected ability to elect to be taxed as a company or treated as tax transparent.
The above features will make the Jersey LLC an extremely flexible vehicle combining various features of both limited companies and partnerships. In other jurisdictions, LLCs are used in a variety of roles including portfolio holding vehicles, joint venture vehicles, general partners, management vehicles, and carried interest vehicles.
The Draft LLC Law is expected to come into force in the next 12 months.
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