With the favourable tax regime for Luxembourg's Holding 1929 companies ("1929 companies") due to be abolished in 2010, we have seen a significant increase in clients looking to migrate such companies to the Channel Islands. Jersey and Guernsey are perfectly placed to accept migrations of 1929 companies and although each is a separate jurisdiction with its own laws, both offer similar benefits. This guide summarises the process by which a 1929 company (i.e. the applicant) may be continued as a company in either Jersey or Guernsey and the benefits each jurisdiction can offer.
Why the Channel Islands?
As well as offering a 0% tax regime and traditional "offshore" advantages, both jurisdictions provide robust yet flexible regimes for companies in the form of the Companies (Jersey) Law, 1991 (the "Jersey Law") and the Companies (Guernsey) Law, 2008 (the "Guernsey Law") respectively. Both Jersey and Guernsey companies are similar in structure to English companies, but are more flexible and simpler to operate.
Other benefits Jersey and Guernsey can offer include:
- Geography - both islands are less than an hour's flight from London and in the same time zone.
- Reputation - both enjoy an excellent reputation as well-regulated international finance centres.
- Expertise - both have operated as financial services centres for almost 50 years and have a full service and dedicated financial services offering.
- Stability - both are economically and politically stable, with strong infrastructures and business support services.
The continuance process - introduction
Set out below is a summary of the continuance process from both a Jersey perspective and a Guernsey perspective. It is, however, important to highlight that, in order to continue to either Jersey or Guernsey, the 1929 company will also have to satisfy certain Luxembourg legal requirements, and so Luxembourg counsel will also need to be instructed. Certain aspects of the Luxembourg legal requirements are referred to below.
Documentation - Jersey The continuance must first be approved at a shareholders' meeting of the applicant, and Luxembourg law requires that a Notary should be in attendance. Following such meeting, an application for continuance is made to the Jersey Financial Services Commission ("JFSC") and should be accompanied by the following documentation or information:
- a certified true copy of the applicant's current memorandum and articles or other constitutional documents;
- "Articles of Continuance" stating amendments to be made to the memorandum or articles necessary to conform to Jersey law. Often, the applicant will simply adopt new memorandum and articles which meet the requirements of the Jersey Law;
- a statement of solvency in the form required by the Jersey Law signed by all directors of the applicant and anyone who will become a director on its continuance in Jersey;
- the name under which the applicant proposes to continue as a Jersey company;
- personal information about the directors of the applicant, including any new directors to be appointed on the continuance becoming effective (if any);
- information about the secretary at the date of the application and the secretary to be appointed on the continuance becoming effective;
- a completed Form C100 (the application form for continuance into Jersey, a copy of which can be supplied on request) providing specified additional information;
- a copy of the most recent accounts (audited if available) which must not be more than 12 months from the date on which the application is made;
- any other documents and information which the JFSC may request in respect of the application; and
- the application fee.
If the applicant is a société anonyme, it will continue to Jersey as a public company and it will also be necessary to file a statement of particulars with the JFSC.
In addition, the application must also be accompanied by evidence to satisfy the JFSC that:
- the applicant is authorised under the laws of Luxembourg to make the application;
- any authorisation required by the constitution of the applicant or the laws of Luxembourg for the application to be made to the JFSC has been given;
- if a certificate of continuance is issued under the Jersey Law, the applicant will thereupon cease to be incorporated under the laws of Luxembourg;
- if a certificate of continuance is issued under the Jersey Law, the interests of members and the creditors of the applicant will not be unfairly prejudiced; and
- the applicant is solvent and not subject to any form of insolvency proceedings or insolvency application.
(Items 1-3 above are typically confirmed by the applicant's Luxembourg counsel and items 4 and 5 above are normally confirmed by a director of the applicant).
A certified true copy of the Notary's deed should be delivered to the JFSC once it is available.
Documentation - Guernsey
The continuance must first be approved at a shareholders' meeting of the applicant, in a similar manner to the process in Jersey. Following such meeting, an application for continuance is made to the Registrar of Companies in Guernsey ("registrar") and should be accompanied by similar documentation and information to that required for an application in Jersey, as set out above.
So far as the Jersey aspects of the continuance are concerned, no timescales are provided for in the Jersey Law. It might typically take two or three days from receipt of the documentation referred to above for the JFSC to make its decision on the application.
In terms of timing Guernsey's regime is broadly similar to Jersey. The Guernsey Law provides that in the application to the registrar the applicant may propose the date on which registration shall take effect, provided this is no later than three months after the application. Typically, where no date is specified the registrar should be in a position to register a 1929 company as a Guernsey company fairly quickly, usually within a week of receipt of an application.
One important factor in a continuance is to ensure that the applicant ceases to be a Luxembourg company and commences its existence as a Jersey or Guernsey company on the same day, thus ensuring that there is no time when the company is registered in both jurisdictions or alternatively is registered in neither jurisdiction. In our experience, it has generally been possible for Luxembourg counsel to agree with the Registre de Commerce et des Sociétés a date from which the applicant will cease to be a Luxembourg company, and for us to agree the same date with the JFSC or the registrar for the purposes of the applicant becoming a Jersey or Guernsey company as relevant. This date will generally be two to three weeks after the shareholders' meeting before the Notary to allow sufficient time for the Luxembourg filings to be made.
The JFSC or registrar will release the certificate of continuance (certificate of registration in Guernsey) upon a certified true copy of the certificate of discontinuance from Luxembourg being filed.
Effect of continuance
Under the Jersey Law and the Guernsey Law, once the certificate of continuance or certificate of registration has been issued the applicant becomes a company incorporated under the Jersey Law or Guernsey Law as relevant. The memorandum and articles (or the constitutional documents of the applicant) as amended in accordance with its articles of continuance become the memorandum and articles of the company. From such time:
- all property and rights to which the applicant was entitled immediately before the certificate of continuance was issued remain the property and rights of the applicant;
- the applicant remains subject to all criminal and civil liabilities, and all contracts, debts and other obligations, to which the applicant was subject immediately before the certificate of continuance was issued; and
- all actions and other legal proceedings which, immediately before the issue of the certificate of continuance, were pending by or against the applicant may be continued by or against the applicant.
Offences in relation to a continuance
Any person who, in connection with an application, knowingly or recklessly provides to the JFSC or the registrar as appropriate, any false, misleading or deceptive material or any document containing such information will be guilty of an offence. This briefing can only provide a general review of this area. Legal advice should be taken with regard to individual circumstances.
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.