Jersey: Types of Company
Although Jersey law has its roots in the Norman law (a 'Roman' or 'Civil' law code), the Trusts (Jersey) Law 1984 codified an entirely 'Anglo-Saxon' body of trust law, resolving many uncertainties and increasing protection for beneficiaries. Subsequent amendments included the recognition of 'purpose' trusts in 1996 (the normal form of Jersey trusts is 'discretionary'). This has led to an increase in corporate use of Jersey trusts.
The most significant amendment to the 1984 law came into force on October 27, 2006. This introduced settlor-reserved powers, which provide greater statutory certainty regarding the level of control and influence a settlor may exercise, in appropriate circumstances, over the ongoing administration of assets placed into trust. The powers that may be reserved by the settlor include the power to appoint and remove trustees, to amend or revoke the terms of the trust and to appoint or remove an investment manager or investment adviser. The amendments also permit a trustee to delegate any of his or her trusts or powers if permitted by the terms of the trust. Other amendments include conflict of law provisions which will mean that the validity of a trust governed by Jersey law will not be affected by any rights conferred on anyone under a foreign law, and a proposal that will remove the existing automatic ‘personal guarantor’ provisions for directors of corporate trustees, thereby making it more attractive to establish private trust companies in Jersey.
Jersey is a party to the Hague Convention on the Law Applicable to Trusts and Their Recognition. Jersey trust law explicitly excludes foreign inheritance laws and does not recognize foreign judgements. The creation of a trust is free from Government duty and there are no registration or audit requirements as such in Jersey, although the tax authorities of beneficiaries' jurisdictions (eg the UK) may require annual reports.
Jersey trusts may 'migrate' to other jurisdictions by changing trustees and the applicable law of a trust; likewise, foreign trusts may migrate to Jersey.
A Jersey trust is governed by the law of Jersey. In the case where the beneficiaries of a Jersey trust are nonresident, income arising from sources outside Jersey is not liable to income tax in Jersey, nor are distributions to the beneficiaries. Interest on bank deposits made by the trustees of a nonresident trust is not taxed because of a government concession. The trustees of a nonresident trust are not required to make returns or provide accounts of the trust to the Comptroller of income tax. Trust accounts must be kept but do not require auditing.
In 2008, the Economic Development Department issued a consultation paper reviewing Jersey’s trusts law. The consultation paper covered ten 'discrete' areas of possible reform, with proposals and questions for respondents to consider in each case. The consultation closed in September 2008.
The Jersey Financial Services Commission launched a consultation in March 2010 on proposed changes to trust company business exemptions with regard to persons undertaking the activity of a director under the Financial Services (Jersey) Law (FS(J)L) 1998.
The Commission said that the proposed changes would affect in particular:
- Individuals that act as directors, on a professional basis, of companies that they do not beneficially own; and
- Individuals that are currently relying on ‘the connected persons exemption’.
The Consultation Paper proposed the following two changes in respect of Trust Company Business exemptions:-
- To present a new exemption that introduces “de minimis” provisions which will allow an individual to hold a maximum of six directorships (in addition to any that would otherwise be exempt) before the need to register under the FS(J)L is triggered.
- To restrict the scope of the ‘Connected Persons’ exemption contained in the note to paragraph 1 of the Schedule to the Financial Services (Trust Company Business (Exemptions No 4)) (Jersey) Order 2000.
The Financial Services (Trust Company Business) (Exemptions Amendment No. 2) (Jersey) Order 2010 came into force partly on November 24, 2010, when the "de minimis" provision was introduced. The remainder of the Order, dealing with the 'Connected Persons' exemption came into force on February 17, 2011.
There are no special provisions in Jersey law covering Unit Trusts, which are therefore treated in the same way as ordinary Jersey trusts, and have the same tax regime.