By Oliver Donagher Associate Director, Horizon Group
Like the foundations of a house, Jersey has in recent years been working on a law to strengthen its foundations as a world-class leader in the field of Offshore Financial Services.
The new Foundations (Jersey) Law came into force in July 2009. This new legal entity of a Foundation is a combination of a Trust and a Company and its characteristics can be summarised as follows:
- It can hold assets in its own name
- It can enter into a contract, it can sue and be sued in its own name
- It has a Council of Members to administer the business of the Foundation
- There are no shareholders, hence some refer to it as an Orphan Entity
- It can have one or more objects, which can be either charitable or non-charitable and/or be for the benefit of one or more beneficiaries
A Foundation is established in a similar way to a Company. Instead of Subscribers, a Founder is the person who calls for the Foundation to be incorporated. However, only a Qualified Person, someone who is registered with the Jersey Financial Services Commission (JFSC) to carry on Trust Company Business, can apply for the incorporation of a Foundation, but a Founder can instruct a Qualified Person to apply on the Founder's behalf.
The Qualified Person will be required to file a Charter with the Registrar at the JFSC. The Charter will have to specify the objects of the Foundation and unlike other jurisdictions, Jersey will not require a Foundation's objective to be non-profit making.
Many see the advantages of a Foundation as follows:
- It can be used for general commercial transactions provided that they are incidental to the attainment of its objects
- It can be seen as an alternative to Trusts, particularly in parts of the world where the concept of Trusts are unknown or alien
- Charities and Philanthropic organisations can use
Jersey Foundations as a vehicle for distribution In relation to taxation, Foundations are treated like Jersey Companies, i.e. liable for 0% tax under the new 0/10 system. However, the service provider is required to notify the Income Tax Department if there are any Jersey resident beneficiaries. The UK has no provisions for Foundations for any of its taxes.
As Jersey thrives in areas such as Wealth Management, clients seeking a viable alternative to a Trust or Company are finding that a Jersey Foundation just suits their needs.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.