Nadia Trehiou, Director at Ocorian in Jersey, examines the compelling reasons why Jersey remains an attractive jurisdiction for establishing a company.
One of the natural by-products of globalisation is that corporate clients have a wider-than-ever choice regarding where to do business. And part of the decision-making process may well involve where to incorporate a company. In the wake of the Covid-19 pandemic and with ongoing geopolitical instability, such decisions come with increased weight and require thorough consideration.
As such, clients are looking to balance economic benefits with certainty and security. And many are turning to Jersey to provide exactly that. Here are six reasons why.
1. Stability of Jersey as a jurisdiction
Jersey has long promoted the fact that it has a stable government, its own independent legal, administrative and fiscal systems, robust regulation, and a considerable track record in fiduciary services as just a few of its major strengths as a jurisdiction. Considering the current global landscape, the importance of this stability can't be understated.
The fact that Jersey doesn't have significant party politics also means that there is consistency – there isn't one government implementing policies only for them to be overturned by a subsequent government. As a result, clients incorporating companies in the island have the peace of mind that this consistency brings.
Jersey's relatively small size also means that it is easier for government, the regulator – the Jersey Financial Services Commission (JFSC) – and the finance industry to work closely and at speed when required. If there are new threats or opportunities in the market, they can quickly to find solutions and implement them, including new company structures.
2. Longstanding-yet-flexible companies law
The Companies (Jersey) Law 1991 is recognised for its clarity, flexibility and the fact that it is constantly being amended to reflect the changing world in which businesses operate. Jersey companies are attractive for many reasons – some of the key factors being:
- Flexibility in terms of what can be distributed back to shareholders, especially when compared with the UK. Where permitted, Jersey allows share buybacks and redemptions, and Directors can declare a dividend based on a 12-month forward-looking cashflow solvency statement. This is often particularly attractive to funds clients.
- Jersey law permits the incorporation of no-par value companies, which are even more flexible. Converting shares across classes is straightforward and distributions can be made from the stated capital account.
- There is no requirement to audit or file annual accounts (except for public companies), which can reduce costs and make administration less onerous.
- It is possible to migrate a Jersey company to another jurisdiction and vice versa.
- Jersey companies can offer privacy as there is no public register of ownership. This can be especially attractive to wealthy families who want to retain confidentiality, but also for private equity firms who are looking to target a company for acquisition and wish to remain confidential until the deal is made.
On this latter point, corporates that are acquiring other businesses often instruct us to incorporate a Jersey company or perhaps even acquire an existing one that holds the target asset. Using a Jersey acquisition vehicle can have distinct advantages for clients with European investors or who want to go to IPO at some stage.
In addition, once all the necessary onboarding, KYC and documentation is complete, a Jersey company incorporation can be fast-tracked within two hours.
3. Economic benefits
As Jersey is a tax-neutral jurisdiction, the majority of companies are subject to corporate tax at the rate of 0% (with exceptions for certain types of business). Similarly, they are not liable for withholding or capital gains tax.
There is no VAT – although goods and services tax (GST) is charged at 5%. However, most 'international service entities' are exempt. Significantly, stamp duty is not payable on the transfer of shares.
It's worth noting that while these economic benefits are compelling, Jersey companies are often used in structures that are taxed onshore – essentially, tax is not the driver, rather it's the flexibility of the companies law that is attractive.
4. Variety of companies available
There are a range of different company types available, each of which can be used for certain purposes, and have their specific benefits and level of flexibility. Largely they can be broken down as follows:
- Company limited by shares (having a par value or no-par value)
- Company limited by guarantee
- Unlimited or limited liability companies
- Limited life company (limited by time or the occurrence of specified events)
- Cell companies (both protected and incorporated)
For clients incorporating in Jersey, these options generally ensure that the most effective structure is available depending on their requirements and goals.
5. Connections to key financial centres and other jurisdictions
As business operates on a global scale, Jersey's location is a strong selling point. Not only is it close to the financial centres in the UK and Europe, but its timezone means it is also convenient both for the US and Asia-Pacific. It's not surprising, therefore, that Jersey entities are used to list on many key global stock markets.
Many clients incorporating in Jersey have a nexus either in the UK or EU, and the island has spent decades building close relationships with professional service providers, advisers and intermediaries in these locations. With many deals being initiated out of London, Jersey's proximity is proving key, especially as the world opens up post-Covid and people return to face-to-face meetings.
6. Access to fiduciary service providers, lawyers and accountants
Because of its proven track record as an award-winning international financial centre, Jersey unsurprisingly, has a deep pool of fiduciary, legal and accounting expertise. According to the latest figures, more than 13,000 people (over 10% of the population) work in finance in the island.
These professionals have exceptional knowledge of establishing all types of Jersey companies, especially working in a cross-border context. Plus they often work seamlessly together, bringing their particular area of specific expertise to any incorporation.
What's more, the JFSC requires businesses such as Ocorian to ensure that all staff have certain levels of qualifications, providing certainty that the highest of standards is being upheld.
From KYC, due diligence, documentation and getting the company set up and running in the shortest possible timeframe, professional service companies in Jersey underpin all the above compelling reasons for incorporating in the island.
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.