On 17 January 2013 the Limited Liability Partnerships (Amendment
of Law) (Jersey) Regulations 2013 (the "Regulations")
came into force. The Regulations remove a fundamental problem in
the Limited Liability Partnerships (Jersey) Law 1997 (the
"Law"), that flaw being the requirement that a Jersey
limited liability partnership (an "LLP") maintain a
£5,000,000 bond to provide protection to creditors on its
winding up. To compound matters, this bond could not be assigned,
charged or otherwise encumbered by the LLP. There are various
theories at to why such a requirement was imposed in the first
place but there is no argument over the fact that the requirement
effectively killed off Jersey LLPs from the moment of their birth.
In the 15 or so years of the Law's life, no LLPs have been set
up in Jersey.
The Regulations are therefore to be welcomed as they replace the
requirement for a bond with the requirement to make and file an
annual "specified solvency statement". The solvency
statement must specify that the LLP, in its opinion and having
a) its prospects and the intentions of the partners with respect
to the management of its business; and
b) the amount and character of the financial resources that will
be available to it, the LLP will be able to:
i) continue to carry on business, and
ii) discharge its liabilities as they fall due,
until the earlier of either the end of the 12 month period
immediately following the date of the solvency statement or the
date on which the LLP is dissolved.
An LLP may make a solvency statement at any time but it cannot
allow any partner or former partner to withdraw any partnership
property from the LLP unless a solvency statement has been made
with the 12 months immediately preceding the withdrawal. If a
withdrawal of partnership property is made either when a statement
of solvency has not been made within the immediately preceding 12
months or when a statement of solvency has been made but there have
not been reasonable grounds for making it, the recipient is
potentially liable to return or account for the property to the
The Regulations go on to provide that a partner will not be
liable to return partnership property if the Royal Court is
satisfied (i) that at the time the distribution was made the LLP
was solvent, (ii) that the LLP has subsequently made a solvency
statement and (iii) that it would be contrary to the interests of
justice for the partner to be liable to repay or account for the
Consequential amendments have also been made to Jersey's
income tax regime to ensure that an LLP's profits and gains
arising from international activities and attributable to a
non-Jersey resident LLP partner are not liable to Jersey tax.
In removing the requirement for a bond and replacing it with the
requirement for a statement of solvency, the Regulations have
resolved a fundamental problem affecting Jersey's
attractiveness as an LLP jurisdiction. Jersey's amended LLP
regime now provides a viable alternative to Jersey's range of
other partnership structures (traditional partnerships, limited
partnerships, incorporated limited partnerships and separate
limited partnerships) for those considering the setting up of
offshore asset holding vehicles or structures for the conduct of
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.
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