This briefing discusses the different types of Jersey companies and provides an outline of the procedure for their incorporation.
Types of Jersey companies
The Companies (Jersey) Law 1991, as amended (the "Law") makes provision for different types of company. These include the following:
- Private and public companies with shares that are expressed as having a par value (e.g. the company's share capital may be expressed as being 100 shares of £1 each). These are known as par value companies.
- Private and public companies with shares that do not have a par value (e.g. the company's share capital may be expressed as just being 100 shares without giving any nominal value to any individual share). These are known as no par value companies. A company cannot have both par value shares and no par value shares.
- Private and public companies with guarantee members. The liability of the guarantee members is limited to the amounts they undertake to contribute on a winding up of the company. These are known as guarantee companies.
- Private and public companies with unlimited members. On the winding up of the company, the liability of the members is unlimited. These are known as unlimited liability companies. In many respects, unlimited liability companies can be likened to a general partnership where an individual partner has unlimited liability for the debts of the partnership.
- Private and public companies of limited life. These are companies which are to be wound up and dissolved upon (a) the bankruptcy, death, expulsion, insanity, resignation or retirement of any member of the company or (b) the happening of some other event which is not the expiration of a fixed period of time. These are known as limited life companies.
- A limited life company may also make provision for its winding up and dissolution on the expiration of a fixed period of time. This is a sub-category of limited life companies and these companies are known as fixed life companies.
The Law also makes provision for cell companies. There are two types of cell company: the "incorporated cell company" and the "protected cell company". These vehicles are particularly useful in the context of investment funds and structured finance transactions. The cells of an incorporated cell company are companies in their own right. In contrast, the cells of a protected cell company do not have their own separate legal personality. A protected cell company will contract in respect of a particular cell and there are detailed provisions in the Law which provide that creditors may only have recourse to the assets which are attributable to the relevant protected cell.
In addition, overseas companies can migrate to Jersey (and vice versa) and may also merge with Jersey companies. Separate briefings in relation to migrations and mergers can be found on the Bedell Cristin website.
Ownership and activities
Unless a company is to be incorporated by a Jersey resident ultimate beneficial owner, the incorporation application must be made by one of the many local trust companies which are specifically licensed for this purpose by the Jersey Financial Services Commission (the "JFSC").
The appointed trust company will carry out client due diligence and gather the necessary "know your client" documentation in relation to the proposed beneficial owners and directors of the company at the outset. This will also include obtaining an understanding of the proposed activities of the company in light of the JFSC's Sound Business Practice Policy (the "SBPP"). The SBPP sets out the principles the JFSC will adopt when assessing the incorporation application and, specifically, whether the company's activities could adversely impact the integrity of Jersey in commercial and financial matters and the island's best economic interests.
The proposed name for the Jersey company must be chosen in advance and submitted for approval to the Registrar of Companies at the JFSC. The approval of the chosen name will depend upon its similarity to existing company names and its suitability from a public policy point of view.
Where the company is being incorporated as a subsidiary or group company of another corporate entity and is to bear a related name, the Registrar of Companies will require a letter of consent from the holding company or promoter agreeing to the use of the name by the proposed Jersey company.
The name of a limited company must end with the word "Limited" or the abbreviation "Ltd" or the words "avec responsibilité limitée" or the abbreviation "a.r.l.". However, the name of a public company which is a limited company may end with "public limited company" or the abbreviations "PLC" or "plc".
Memorandum of association
The memorandum of association (the "Memorandum") will set out certain fundamental provisions of the constitution of the company.
The ultra vires rule in its application to Jersey companies was abolished in 1992 and, accordingly, the capacity of a Jersey company is not limited by anything in its Memorandum or its articles of association ("Articles") or by any act of its members. Consequently, the Memorandum will not generally be expected to set out the objects or powers of the company. Instead, the Memorandum will simply state:
- the name of the company;
- whether the company is a public or a private company;
- whether the company is a par value company, a no par value company or a guarantee company;
- the full name and address of each subscriber who is a natural person and the corporate name and address of the registered or principal office of each subscriber which is a body corporate; and
- as relevant, whether the liability arising from any share is limited or unlimited; whether there are guarantor members; details of any par value share capital or the maximum number of no par value shares the company may issue; and details of the extent of the liability of any guarantor member.
A private company may be incorporated with one or more subscribers, whereas a public company must have at least two subscribers. The Memorandum must be signed by or on behalf of each subscriber in the presence of at least one witness.
The Articles will govern the contract between the members (whether shareholders and/or guarantor members) and the company. The Law provides for a standard table of Articles (the "Standard Table") which will be presumed to have been adopted except insofar as the Articles registered with the JFSC specifically exclude or modify it. It is unusual for the Standard Table to be adopted without amendment, and bespoke Articles are typically drafted to meet the company's specific requirements and circumstances.
The Law requires that, on the incorporation of the company, the Articles are also signed by or on behalf of each subscriber to the Memorandum in the presence of at least one witness.
The Memorandum and Articles bind the members as between themselves and the company. They may be subsequently altered by special resolution.
Period of existence - limited duration
If a company is to be wound up and dissolved upon the expiration of a period of time or upon the happening of some other event, the period or event must be specified in either the Memorandum or the Articles of the company.
Statement of particulars on incorporation
The local trust company engaged in relation to the incorporation must prepare a statement to be signed by the subscribers (or their agent), known as the Statement of Particulars on Incorporation. This statement will indicate the intended address in Jersey of the company's registered office upon incorporation, whether the company is to be a public or private company and whether the Standard Table has been adopted. In the case of public companies, particulars of the first directors of the company and of the period to which the first accounts of the company will relate are also indicated on this statement.
Control of borrowing consent
In order to issue shares or admit any guarantor member, a Jersey company requires a regulatory consent from the JFSC pursuant to the Control of Borrowing (Jersey) Order, 1958, as amended (a so-called "COBO Consent").
An application form requesting the COBO Consent will be submitted to the JFSC together with the incorporation papers for the company. The application form will provide information regarding the proposed activities of the company and the identity of its ultimate beneficial owner(s). It will also confirm that the ultimate beneficial owner(s) has/have not at any time been declared bankrupt or been a director of or otherwise involved in the management of a company which has been the subject of an insolvent liquidation or judicial enquiry.
If the ultimate beneficial owner is a public company, it is standard practice for the Registrar of Companies to require sight of a copy of the latest annual report and accounts of that company.
Application for incorporation
The Memorandum, the Articles, the Statement of Particulars on Incorporation and the COBO Consent application form will be lodged at the JFSC, together with the applicable registration fee. The registration fee depends on the speed with which the JFSC is requested to process the application.
The application will be processed and, assuming satisfactory information has been provided, the Registrar of Companies will issue a certificate of incorporation of the company which constitutes conclusive evidence of its incorporation. At the same time, the company will also be issued with its COBO Consent.
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.