More than 100 Jersey foundations have been registered since the Foundations (Jersey) Law came into force on 17th July 2009. While that may not seem a great number over more than two years, the Jersey foundation was born into a world of great turmoil and uncertainty when confidence was low and there was reluctance to create new wealth planning structures.
Foundations are also new to many of the intermediaries who provide business to Jersey, and to the service providers, so there has been a significant learning curve to be undertaken and during a period of economic constraint. There also is uncertainty of tax treatment in the UK and other important jurisdictions.
Despite all these obstacles and negative influences the Jersey foundation has succeeded and registrations have been steadily increasing, from 20 in the last 6 months of 2009 to nearly 30 in the first 6 months of 2011 and 9 in March 2011 alone.
So who is using them and what for?
Not surprisingly because they are creatures of civil law, Jersey foundations have found favour in civil law jurisdictions, but they are also being used by clients from the Middle East and Far East.
They are being used instead of trusts for private clients, but also in commercial arrangements as escrow holders or for off-balance sheet transactions, and a number of charitable and philanthropic foundations have been registered.
There are virtually no limits on what they can do and the lack of duties to beneficiaries means that higher risk assets can be held than with trusts.
In particular they are being used to own active trading businesses for wealth planning and asset protection purposes but with control of the businesses remaining with the family.
Guernsey is likely to introduce foundations during 2012, which will have some significant differences, and we will be informing you about them once the draft legislation is known.
In the meantime Advocates Richard Pirie and David Dorgan of our Jersey office are acknowledged experts and have provided the documentation for nearly a quarter of foundations registered to date. We will be pleased to assist you.
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.