Like trusts, foundations have been with us since mediaeval times. The concept of a trust probably developed when crusaders handed over their estates to friends to administer until they returned from their travels and the practice evolved into a structure recognised by common law jurisdictions. The foundation arose from the practice of mediaeval patrons making endowments to charities- usually religious houses - in perpetuity and the use of the word ‘foundation’ to describe a charity or charitable purpose has survived into modern day English. However, although mediaeval English patrons may have endowed charities in the same way as their continental cousins, the foundation, as a structure with a separate legal personality, developed as a civil law concept and is recognised by many civil law systems, which do not recognise trusts. The most famous foundation is the Liechtenstein stiftung which dates from 1926 and has enabled Liechtenstein, a tiny country, to create a finance industry in the heart of Europe. The stiftung formed the basis of legislation passed in 1995 to permit the creation of foundations in Panama, which has also greatly assisted expansion in the local finance industry. Other jurisdictions have followed Liechtenstein’s lead, such as the Bahamas, and the Isle of Man, where private foundations are structured as companies limited by guarantee.
On 25 November 2004, the Finance and Economics Committee of the States of Jersey launched a public consultation to consider whether Jersey should introduce the necessary legislation to enable foundations to be established in Jersey as an additional wealth management product to offer to clients who may not be able or willing to establish a trust, and the law is presently being drafted. It is proposed that the foundation will have a separate legal personality with a registered office in Jersey, and be subject to regulation by the Jersey Financial Services Commission (the "JFSC") the Financial Services (Jersey) Law 1998 (the "FSL"). The foundation will be governed by a charter, which will be a public document filed with the JFSC, and a set of rules which will remain private. The law will confirm certain details which must appear in the charter and the rules. The foundation will be managed and controlled by a council, one member of which must be registered under the FSL.
There are those who consider that, as a civil law structure, the foundation has no place in Jersey. Others think that Jersey should not introduce alien legal concepts simply to satisfy the requirements of the finance industry. However, Jersey has adopted structures in the past which may not have formed part of Jersey’s legal roots. Before 1984, there was doubt as to whether trusts-as a purely common law concept- formed part of Jersey law and nobody would deny that the States showed considerable acumen in passing the Trusts (Jersey) Law 1984, a move which has given incalculable benefit to the island. Other legislation has followed over the years, such as the Limited Partnerships (Jersey) Law 1994 and the various amendments to the Companies (Jersey) Law 1991 which introduced new concepts or fundamentally altered existing structures. Although the foundation is a civil law structure, it is not radically different from many of the existing structures introduced in recent years and we have both a regulatory regime and a skilled workforce who are capable of administering foundations for a worldwide clientele. I consider that the introduction of foundations is wholly within the innovative tradition of the island and, I hope, the Jersey foundation will soon be as recognisable and popular as the Liechtenstein stiftung or the Panamanian foundation.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).