One of the latest additions to Jersey's variety of investment vehicles available to arrangers of funds is the Private Placement Fund ("PPF"). This fund is designed for Professional and Sophisticated Investors worldwide, and the swift authorisation procedure under which consent can be obtained from the Jersey Financial Services Commission ("JFSC") as well as its cost effectiveness makes this option even more attractive. The PPF vehicle is used widely and is a flexible fund option. Before a fund can be classified as a PPF it has to satisfy a certain eligibility criteria, namely;
- It should be a closed-ended fund established or managed in Jersey (this means that the fund can be established outside of Jersey but managed in Jersey);
- Only Professional or Sophisticated Investors allowed;
- Maximum of 50 investors.
The PPF provides a great deal of flexibility and allows promoters who want to move quickly to take advantage of an investment opportunity.
Requirements to set up a PPF
Besides the above-mentioned eligibility criteria one has to comply with, there is also the requirement for a Private Placement Memorandum ("PPM"). The PPM should contain information that will enable the investor to fully consider the merits of investing in the fund and information relating to the risks involved.
Other information that is generally included is:
- subscription terms;
- voting arrangements;
- conflict of interests;
- terms of the PPF;
- regulatory matters; and
- capital structure.
The PPM will, in short, contain all the information needed for the investors to make an informed decision and for the JFSC to analyse the structure
A PPF is obligated to satisfy certain requirements in terms of management. Each different Jersey entity has different requirements. For these purposes, a Jersey company is required to have not less than two Jersey resident directors with relevant experience, where a company is not established in Jersey then no less than two directors resident in Jersey need to be appointed to the fund or two resident directors with appropriate experience appointed as managers to the fund. The limited partnership, on the other hand, must have at least one partner that is either a Jersey company with no less than two resident directors, or has one general partner that is a Jersey company, which has at least two resident directors. Lastly, with a unit trust, each trustee and the manager must be a Jersey company with no less than two resident directors. A PPF must also appoint a Jersey administrator as its Designated Service Provider.
Professional and Sophisticated Investors
The definition of the Professional Investor, contained in the PPF Guide, includes any person who habitually invests by way of business, or invests in any structure with assets over US$10,000,000 as well as senior employees, directors, partners, shareholders or consultants of the PPF or its investment management or advisory team, who receive their interests by way of remuneration or carried interest. A Sophisticated Investor is an investor who makes a minimum initial investment or investment commitment of £250,000 (or the equivalent in any other currency) in the PPF, whether through the initial offering or subsequent acquisition. This means that investors in the PPF would have to invest a minimum of £250,000 and this will be an added requirement for the establishment and investment in the PPF
Regulation and Process of approval
The PPF is regulated by the JFSC and the regulator requires the following to be submitted:
- a written statement of confirmation from the promoter confirming that it has complied with the guidelines as set out in the PPF Guide;
- a counter signature form the administrator certifying that it has completed its due diligence and has no reason to believe the promoter's confirmation is incorrect;
- a written confirmation from the administrator, that the funds PPM meets the requirements of the PPF Guide; and
- details of all the principal persons of the promoter.
After the above have been processed, the JFSC will grant consent and the fund can be launched (The JFSC has a published turnaround time of 3 working days).
Other fund options
The PPF compliments the other fund regimes available in Jersey which include:
- expert funds;
- listed funds;
- very private funds;
- unregulated funds;
- fully classified funds; and
- recognised funds.
Finally, the PPF allows promoters to test the market and once the structure is up and running, it can be converted into one of the more public type funds.
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.