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Jersey
has an extremely well-developed legal and financial
infrastructure for trust management. With such
a large established base of trusts, and a growing
reliance on corporate work, the volume of trust
litigation is becoming significant.
Although
trusts have been a headline 'product' for Jersey
for many decades, in June 2009, Jersey's Privy
Council approved an order allowing Foundations
to be set up in Jersey, with an eye to the island's
Continental markets. Foundations have a long history
in continental Europe. In medieval times they
were used for charitable or religious purposes.
They are now commonly used for wealth management,
and residents of jurisdictions like the Middle
and Far East are more familiar with foundations
than with trusts, which do not exist in their
legal systems. Jersey was the first of the Crown
Dependencies to bring in a genuine foundation
product.
The
regulations permit foundations to migrate in and
out of Jersey. They also provide for existing
Jersey companies to convert to foundations. Foundations
sit alongside existing vehicles such as companies,
trusts and limited partnerships for use in financial
planning and private wealth management strategies.
Whilst
similar in design to Foundations in other jurisdictions,
the Jersey structure has mandatory requirements
for one member on its council to be licensed as
a Qualified Person by the Jersey Financial Services
Commission and for the Foundation to have a ‘guardian’,
who has a duty to supervise the council’s
activities. In addition, the flexibility of the
Jersey structure allows it to be tailored to suit
a broad range of needs.
Alan
Binnington, Private Client Director at RBC Wealth
Management, noted that whilst Jersey is first
and foremost a trust jurisdiction, with many years
of experience in the administration of trust structures,
there are many countries in which the trust is
an unfamiliar concept. Consequently the ability
to create a more familiar vehicle such as the
Foundation will be of interest to clients from
areas of the world where the trust is not well
understood, and will likely encourage more HNWIs
to do business with Jersey, he noted.
Commenting
on the detail of the new legislation, Binnington
said: “Unlike a trust, which is essentially
a relationship between the trustees and the beneficiaries,
rather than a legal entity, the Foundation has
a separate corporate personality, similar to a
company, and this may be more attractive to clients
who are uncomfortable with the trust concept."
Commenting
on the use of foundations in other jurisdictions,
Alan Binnington noted: “The new law enabling
the migration of a Foundation from another jurisdiction
to Jersey will be of interest to those with existing
structures who wish to move their foundation to
a jurisdiction that is on the OECD’s ‘white-list’.
The new law is an example of Jersey’s commitment
to being at the forefront of wealth structuring,
whilst at the same time ensuring that any new
structures are subject to its full regulatory
regime.”
The
level of interest in foundations was immediately
demonstrated when five were established by Jersey
firms on July 17, 2009, the same day that the
law came into force. In addition, more than 40
registrations to allow practitioners to establish
Foundations were approved in the first week after
the law was introduced, reflecting the scale of
demand for such structures for wealth management
and financial planning purposes.
Giles
Corbin, partner at Mourant du Feu & Jeune,
said: "Mourant du Feu & Jeune are delighted
to be involved in establishing the first foundation
in Jersey. There has been significant interest
in Jersey foundations for some time and this firm
has seen a steady flow of enquiries and instructions
over recent weeks, particularly from wealthy clients
in civil law jurisdictions where the trust concept
is not readily recognised. In fact, the potential
flow of work could be considerable and we have
further foundations in the pipeline."
"Due
largely to Jersey’s reputation as a well-regulated
jurisdiction, and its ‘white list’
status, we have experienced a flight to quality
in terms of the administration of trusts moving
to the island and we expect to see a similar effect
in relation to foundations."
Robert
Kirkby, Technical Director, Jersey Finance, commented:
“It is particularly encouraging for the
future of Foundations that practitioners are reporting
a steady flow of enquiries, many from wealthy
individuals in civil law jurisdictions where the
concept of the trust is not so familiar. The option
to migrate structures from certain other jurisdictions
to Jersey is also prompting a great deal of interest,
underlining the attractive nature of their flexibility
and Jersey’s reputation as a well-regulated,
transparent, ‘white-listed’ international
finance centre.
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