Jersey companies will no longer be tied to profits when making distributions to shareholders. A significant relaxation of Jersey's capital maintenance regime will come into force on 27 June 2008 under Companies (Amendment No.9) (Jersey) Law 2008 (the 'Law') which was registered in the Royal Court of Jersey on Friday 20 June 2008.
Under the Law, distributions to shareholders may be made from any source of funds not just distributable profits, apart from nominal capital or capital redemption reserve in the case of par value companies. So Jersey companies may, for example, use their share premium account or (in the case of no-par value companies) stated capital accounts to make distributions.
The directors approving the distribution must make a specified solvency statement when making a distribution. In general the directors approving the distribution must state that in effect, they believe the company will still be solvent 12 months after the distribution. It is not necessary for all the directors of a company to approve the distribution or for all of the directors to sign a solvency statement.
Those directors signing a solvency statement are not now required to make 'full enquiry into the affairs and prospects of the company' before doing so. However, a director making such a statement without having reasonable grounds may be guilty of a criminal offence.
A solvency statement is not a public document. It is a private statement to be kept with the company's books and does not need to be filed with the Registrar of Companies in Jersey.
The Law also brings into force a number of other changes that may be useful for companies wishing to return funds to investors. Reductions of share capital will no longer require court sanction in Jersey provided the reduction in question can be classified as a distribution as referred to above. They will still require special resolutions of the shareholders.
Redemptions simplified
Similarly, redemptions and purchases of own fully paid shares by both par value and no par value Jersey companies will be permitted from any source provided the directors make the necessary solvency statement. A redemption or share buy back will not now necessitate an equivalent transfer to a capital redemption reserve.
There are other helpful changes in the law including:
- Public limited companies will be allowed but not
compelled to have a name ending with 'PLC',
'plc' or 'public limited
company';
- Public companies may, like private companies, waive the
holding of annual general meetings subject to obtaining the
consent of all their members;
- The notice period for annual general meetings, or any
other general meeting at which a special resolution is to be
proposed, is reduced from 21 to 14 days; and
- In the course of a creditors winding up, liquidators may
make interim distributions to the company's members,
before settling all claims of creditors, if satisfied that
the company's assets are sufficient to cover all
creditors' claims and the expenses of the winding up,
taking into consideration the interim distribution.
Some further changes to the requirements for accounts and auditors will be brought into force under the Law at a later date, probably in August. Those changes include permitting audited accounts to either 'show a true and fair view' of or to be 'presented fairly in all material respects' to show the company's financial position. The latter alternative offers greater flexibility to international investors using Jersey companies.
Conclusions
These amendments to Jersey company law follow changes earlier this year including those to permit the use of treasury shares by Jersey companies and the removal of the prohibition on financial assistance for the acquisition of shares. They should ensure that Jersey retains its position as a leading offshore jurisdiction providing flexible corporate structures, responsive to market developments.
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