Jersey: Enhancing Jersey's Philanthropic Wealth Structures

Last Updated: 8 October 2019
Article by David Dorgan

First published in: Jersey – First for Finance 2019

There are distinguishing characteristics between charity (which tends to focus on the relief of a particular social problem) and philanthropy (which tends to address the root cause of the problem), and although there is a recognised degree of overlap in practice between the two, ultimately they both contain the act of "giving" for the betterment of society and humanity.  This act is important for many wealthy families who look to structure that "giving" to causes with which they identify.

Jersey has multiple strengths in making it an attractive jurisdiction to establish and administer charitable and/or philanthropic wealth structures.  Fundamentally Jersey offers:

  • independent domestic autonomy;
  • political, economic and geographic stability;
  • a highly regarded judicial system;
  • one of the strongest regulatory frameworks in the world;
  • a highly-skilled workforce;
  • substance of presence;
  • tax neutrality;
  • location and time-zone; and
  • legislation which places a strong emphasis on the importance of flexibility, allowing for the creation of structures tailored to individual client requirements.

Two key structures used in Jersey for charity and philanthropy are trusts and foundations.  Additionally, charities are regulated by the Charities (Jersey) Law 2014 (Charities Law) which introduced a Charities Register.

Structures

Trusts are governed by the Trusts (Jersey) Law 1984 and Foundations are governed by the Foundations (Jersey) Law 2009.  Both permit a trust or a foundation to be established for charitable or non-charitable or charitable and non-charitable purposes.  Therefore a structure may combine charitable purposes with philanthropic purposes, which might not be technically charitable, in order to pursue a client's chosen causes.

Additionally, both structures:

  • are exempt from Jersey income tax;
  • can be established for an unlimited or limited duration;
  • have a choice of name (save that a foundation must end with the word "Foundation");
  • must have a third party trust enforcer or a foundation guardian whose role it is to enforce the purposes of the trust or to ensure the foundation's council carries out its functions;
  •  are under the supervisory jurisdiction of the Royal Court of Jersey; and
  • are administered by professionals subject to the supervision and regulatory framework of the Jersey Financial Services Commission.

In recent years, foundations in particular have proven popular as philanthropic structures.  It is estimated that one third of all Jersey foundations are used for philanthropic purposes.  Their popularity is due to the foundation's particular characteristics:

  • Legal Personality: A foundation is a legal entity (similar to a company but without shareholders) and can enter into transactions and make distributions in its own name.  By contrast, a trust is not a legal entity and transactions and distributions are made in the names of the trustees acting in their capacity as trustees of the "ABC Trust".
  • Involvement: A foundation permits greater opportunity for the family to be involved.  Family members can be council members, be a guardian or have powers given to them.  The same is also true of trusts, but the risks of involvement are higher due to a trust's lack of legal personality.
  • Open Profile: A foundation's existence is a matter of public record on the Register of Foundations.  There is no equivalent register of trusts.  The searchable nature of a foundation's existence can be an important factor for some families in giving the foundation legitimacy.
  • No Ultra Vires: The doctrine of ultra vires (i.e. beyond the powers) does not apply and a foundation can exercise all the functions of a body corporate (similar to a company).  There are two limited exceptions to this, both of which can be overcome by interposing an underlying company.  Whilst the doctrine of ultra vires does not apply to trusts, trustees do need to be mindful of any limitations imposed on their powers pursuant to trustees' duties and the terms of the trust.

Charities Register

Trusts or foundations may choose to register on the Charities Register to provide families with an additional regulatory framework and credibility as to their altruistic causes.  However, registration is required to use of the word "charity".  The Charities Register is supervised by an experienced Charity Commissioner, is searchable online and registration is evidenced by a certificate of registration confirming the registered name, number and date of registration.

In order to register, a trust or foundation would need to satisfy the "charity test" under the Charities Law, namely:

  • all of its purposes are charitable purposes or purposes that are purely ancillary or incidental to any of its charitable purposes; and
  • in giving effect to those purposes, it provides (or intends to provide) public benefit in Jersey or elsewhere to a reasonable degree.

The Charities Law contains a broad list of charitable purposes and permits purposes reasonably regarded as analogous to the listed purposes.  Public benefit is determined by Jersey's Charity Commissioner who compares the benefit gained, or likely to be gained by the public, with any benefit gained or likely to be gained by members of the entity itself or any other people (other than as members of the public) and disbenefit incurred or likely to be incurred by the public.

The Charities Register is divided into three sections: general, restricted and historic.  General registration is required where it is intended to raise funds from the public and, consequently, its registered information will be publicly accessible.  Restricted registration can be chosen when funds are not sought from the public (i.e. the family's own funds are utilised) and, therefore, limited information is publicly accessible providing more privacy for those funding purposes without public involvement.

Consequently, the Charities Register further enhances Jersey's ability to assist with charitable and philanthropic structuring providing families with a choice of either a public or private profile depending on what is appropriate to each family.  This is a key offering not permitted by other jurisdictions.

Conclusion

Jersey is a stable, tax neutral jurisdiction with a highly regarded regulatory regime, flexible and innovative legislation and experienced professionals making it an ideal jurisdiction for both charitable and philanthropic structures.  The Charites Law only enhances that position demonstrating Jersey as an innovative place where the highest standards are maintained in respect of charitable and/or philanthropic wealth structuring.

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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