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Jersey Can Increase Your Wealth

Trust management, particularly for wealthy UK individuals, was Jersey's traditional business. Successive tightenings of UK anti-avoidance legislation have reduced the possibilities for UK citizens, but Jersey's trust business has continued to grow based on a more international clientele, and following the introduction of the purpose trust, a surge in corporate trust work. Many Collective Investment Funds are also of course based on Trusts. Total trust assets looked after on the island exceed GBP100bn.

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.

Jersey Industry Insight

E-Commerce, Opportunities in the Island of Jersey
by by Grant Twine, Director, Basel eBusiness Limited

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