The Foundations (Jersey) Law was passed on 22nd October 2008 and is anticipated to come into force in late Spring 2009 following the necessary Order in Council and registration in the Royal Court. This window of time provides a useful opportunity to consider how Jersey foundations can be used.

Because foundations have their roots in civil law they will be familiar and thus more attractive than trusts to clients and advisers from civil law jurisdictions. However their potential goes much further because the only limit to what they can do is that their objects – which can include purposes or human beneficiaries or both – is that they must be lawful, so it is important not to confine one's thinking.

A foundation will be formed by the registration of its Charter with the Registrar and the issue of a Certificate of Registration. Its existence depends solely on that Certificate, so there is no requirement to fulfil the three certainties of intention, assets and objects which applies to trusts. Thus there is greater certainty that a foundation exists, and no risk of it failing for want of assets or beneficiaries.

The Charter is the only public document, and whilst it must state the objects of the foundation, this can be by reference to objects set out in the Regulations, which are a private document. Thus, apart from the public record of its existence, a foundation can achieve the same degree of confidentiality of its provisions as a trust.

A foundation will be managed by a Foundation Council, which will owe its duties to the foundation rather than to any human beneficiary or purpose. This means that no duties are owed to any human beneficiaries, not even a duty to account, and the Law confirms that there is no duty to disclose information to any beneficiaries unless the Charter or Regulations so provide or the Royal Court orders it. Thus a foundation can provide a greater degree of confidentiality from any human beneficiaries than a trust.

Purpose trusts require that the purpose be separate from the asset, thus a trust with the sole purpose of holding shares in a private trust company when the only asset is those shares may be invalid and thus liable to attack e.g. in divorce proceedings, or where the trust has avoided forced heirship rights. A foundation does not have any such requirement, so it is a more robust structure. Indeed a foundation can be used in place of the private trust company and the trusts under it.

Like trusts, foundations can reserve powers to the Founder or a third party, and may also incorporate retained assets and prescribed directions provisions.

Foundations may also be useful in commercial arrangements; for example, acting as escrow holder, or in place of non-charitable purpose trust in capital markets structures.

Apart from the requirement for the objects to be lawful, the only limitation on what foundations can do is the ingenuity of those establishing them.

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.