By Trevor NormanDirector of Funds &
Middle East Group, Volaw Trust & Corporate Services
In recent years there has been a worldwide move towards ethical
investment leading to a dramatic growth in Islamic Finance. Jersey
Finance has invested much time and effort in highlighting
Jersey's credentials in this area. Jersey is well placed to
meet the demands and challenges associated with providing
Shari'a-compliant services. But this is not a new development,
Jersey has been providing services to Muslim clients and in
particular to those resident in the GCC for many years.
The two primary areas of Shari'a-compliant services in
Jersey are those offered to:
a) Individuals, through private wealth management services,
b) Institutions, by way of the establishment and administration
of collective investment funds and other vehicles for raising
finance or the investment of capital.
Private wealth management
A key feature in the growth of Jersey as a financial centre has
been the provision of private wealth management services, such as
the establishment of trusts, private companies and more recently
foundations. There are many reasons why an individual may wish to
establish such an entity, ranging from the simple creation of a
company to own, for example, a holiday residence in London, to the
more complex structures required by a family office or the
ownership of a family business to ensure that it is not broken upon
the death of the patriarch and founder.
The concept of a trust is very similar to the Islamic waqf.
Today, a trust has become one of the most effective tax and estate
planning techniques available. One potential barrier in the
establishment of a trust is the requirement that ownership of the
assets must be transferred to the trustee, a concept that many
wealthy people unfamiliar with trusts have difficulty in accepting.
Jersey recently enacted a Foundations Law, which, in providing for
a Council to oversee the management of the underlying assets,
should alleviate such concerns. Similarly, the nature of a
foundation is that it has separate legal personality, it is able to
contract with third parties, sue and be sued in its own name and
holds its own assets, which can be traded.
Corporate vehicles and funds
Islamic (or Shari'a-compliant) collective investment funds
were the key Islamic financial product of the late 1990's and
it is difficult to think of any major financial institution that
did not participate in the promotion of an Islamic investment fund,
with funds in Jersey investing in assets ranging from equities to
real estate. The early 2000's saw the emergence of the Islamic
securitisation market, often referred to as the Sukuk market, and
several vehicles issuing Sukuk were established in Jersey, notably
Caravan I Limited, which won an award as the Innovative Product of
the Year in 2004, this transaction generally being regarded as the
first true-sale corporate Sukuk.
The advantages of Muslim clients using Jersey for either private
wealth structures or the issuance of securities are very similar to
those for any other group, but Jersey's long-standing
connections with the GCC bring an additional benefit of experience
and expertise in establishing these structures in a
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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It can sometimes be a dangerous business to be a professional trustee operating in a world where the fiscal and judicial authorities of certain on-shore states take a dim view of their citizens’ desire to minimise their exposure to taxation.
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