A foundation has elements of both trusts and companies and these vehicles are of great interest to clients to whom the concept of equity and therefore a trust, is foreign. Foundations combine the flexibility of a trust entity with the separate legal identity and transparency of a company. A foundation has a separate legal personality and is able to hold its own assets, contract with third parties and sue and be sued in its own name and capacity. It does not have shareholders and holds the assets for the benefit of beneficiaries.
The Foundations (Jersey) Law 2009 came into force on 17 July 2009.
A Jersey foundation is created when one or more persons or legal entities (founders) formalise a Charter, which, is registered with the Jersey Financial Services Commission (JFSC).
Through the charter, the founders undertake to make donations (foundation Assets) for the benefit of beneficiaries. Unlike other jurisdictions such as Panama, Jersey will not require a minimum level of capital to be held as assets of the foundation. The foundation assets will be managed by a Council consisting of individuals or a body corporate and they must include a qualified person who is registered in Jersey under the Financial Services (Jersey) Law, 1998 to carry out trust company business. Vistra (Jersey) Limited is a qualified person.
A Jersey foundation must also have a guardian. The guardian has a monitoring function to ensure the Council carries out its functions. The Qualified Member or the founder (but no other council member) may act as the guardian of the foundation.
A foundation is not required to provide any person (including a beneficiary) with any information about the foundation except as specifically provided under the Foundations Law, the Charter or the Regulations.
Foundations can be used for similar purposes as trusts and include the following:
- asset management for and protection of persons at a disadvantage due to minority or incapacity
- family and/or inheritance structuring. They can also be used to protect against fragmentation and outsiders gaining control of family businesses which are passed down through the generations or as a substitute for a will, circumventing complicated inheritance procedures
- as a means of guaranteeing payment of sums of money or assets to members of one or more families
- as a way of sponsoring scientific, humanitarian, philanthropic, religious or charitable activities or to manage funds reserved for the same
- company ownership. They can serve as the owners of companies (in which capacity the foundation is generally called a holding company or a parent company)
- administration of employee benefits such as pensions and options
- as a substitute for prenuptial agreements
- to own and/or invest in shares, interests and stocks of private companies or other securities
- to collect royalties and other types of returns
- to own real estate or valuable movable property
- to insure assets against adverse situations, such as excessive taxes for those who reside where the assets are located, future claims by creditors, forced heirs or political or economic instability in the country where the client resides
- to manage bank accounts
- for any specific asset protection plan Vistra has experience in the establishment of Jersey foundations and is able to provide comprehensive advice on subjects including their establishment and other regulatory and strategic issues.
Jersey foundations appeal particularly to clients from the Middle East and Asia who want more control over their assets.
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.