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 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
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.
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