Jersey Foundations – A Technical Briefing

Jersey Foundations - Background

Jersey Foundations can be established following the enactment of The Foundations (Jersey) Law 2009 (the ‘Foundations Law’) on 17 July 2009; they blend the highly attractive features of both Jersey companies and Jersey trusts and add significantly to the structuring opportunities available to clients selecting Jersey as a jurisdiction for both private wealth management and estate planning purposes.

Additionally, the Foundations (Continuance) (Jersey) Regulations 2009 (the ‘Continuance Regulations’) came into force at the same time and enables certain existing foreign law structures to migrate to Jersey so that they can continue as Jersey foundations and benefit not only from the flexibility of the Foundations Law, but also other generic benefits associated with incorporation in Jersey, including its recognition as an international finance centre in the top ‘white list’ jurisdictions , its quality of banking, legal and accounting services, its political stability, proximity to London’s financial markets, convenient time zone etc.

As a concept, a foundation has its roots in civil law, and is likely to be familiar to persons based in continental Europe and the Middle East whose preferred choice of structure falls naturally to a foundation rather than the ‘Anglo-Saxon’ concept of a trust with which they may be less familiar.

Jersey Foundations may be used for charitable and non charitable purposes, and common uses include private wealth management, dealing with succession issues, charitable purposes and securitisations. In a sense they may be regarded as an incorporated trust, effectively blending the features of Jersey companies and trusts. A Jersey Foundation has its own separate legal personality, being granted a registration number and certificate by the Jersey Financial Services Commission, and is therefore able to hold assets, contract with third parties and can sue and be sued in its own name and capacity. It has no shareholders. A Jersey Foundation may have an infinite duration, is not subject to the ultra vires doctrine and is able to carry out all the functions of an incorporated body, save that it cannot directly acquire, hold or dispose of immovable property in Jersey nor can it directly engage in commercial trading other than that which is incidental to the attainment of its objects.

Incorporation of a Jersey Foundation requires a public Charter and private Regulations. The Charter is lodged with the Jersey Registrar of Companies and contains very basic information including the name and objects of the Foundation. The Regulations are private and will typically identify who is to benefit and set out how the assets are to be administered, including the establishment of the Council of the Foundation and the appointment of the Guardian. The Council is responsible for the administration of the Foundation’s assets and can consist of one or more Council Members, who may be individuals or a body corporate and must include a Qualified Person. A Qualified Person must be registered under the Financial Services (Jersey) Law 1998 and authorised to conduct financial services business of this type.  The Guardian has a monitoring function and is responsible for ensuring that the Council carries out its functions but need not be a licensed person under the above law.
 
Jersey Foundations are incorporated on the instruction of a Founder, but are not owned by the Founder or any other party. The rights of the Founder (if any) are provided in the Charter and Regulations. Where the objects of a Foundation are to benefit a person or class of persons, the Beneficiaries have no interest in the assets of the Foundation and nor are the Beneficiaries owed a fiduciary duty by the Foundation, the Council or the Guardian. However, if a Beneficiary becomes absolutely entitled to a benefit in accordance with the Charter or Regulations, and that benefit is not provided, then the Beneficiary can then apply to the Courts of Jersey for an order that the Foundation should provide the benefit. Except as expressly required by the Law, the Charter or the Regulations, a Foundation is not required to provide anyone (including a Beneficiary) with any information regarding the Foundation. The Law expressly provides that a copy of the Regulations shall be provided to the Council Members, the Guardian and anyone else appointed under the Regulations to carry out a function in relation to the Foundation.

 Jersey Foundations do not require any initial property to come into existence.

The Jersey Registrar of Companies records basic details of Jersey Foundations on a Public Register, including the date of incorporation, the registered number, whether it has paid its last annual statutory fee and the name and business address of the Qualified Person.  Such registration records constitute conclusive evidence of the incorporation of Jersey Foundations. 

•  The name, which must not be misleading or undesirable and must end with the word ‘Foundation’ in either English or a foreign language translation thereof;
• The objects which must be lawful and may be charitable or non charitable, or both. The objects may be to benefit a person (or class of persons) or to carry out a specific purpose, or to do both. The Charter need only provide that the person or classes of person may be determined by the Regulations, and therefore the identity  of the beneficiaries is kept private;
• If there is an initial endowment, details must be contained in the Charter. If further endowments may be made subsequent to incorporation of the Foundation, this must also be stated although details of such additional endowments are not required to be stated;
• The Charter must specify what is to happen to any of its assets on it being wound up or dissolved. However, this can be merely by statement that any such assets will be disposed of in accordance with the Regulations;
• If the Foundation is to be wound up on the happening of some event or after a specified time, such details must be recorded in the Charter. Also, if a person has the right to apply to have the Foundation wound up or dissolved, the Charter must specify details of this right;

Jersey Foundations may, if wished, record the names and addresses of the first Council members in the Charter. This may be relevant where it is wished that the Foundation has a Public profile.

If desired, the Law also allows for any other desired matters to be set out in the Charter, including the manner in which the Charter or Regulations may be amended or may contain any provisions that must or may be included in the Regulations.

Jersey foundations must have Regulations unless the required governing provisions are all contained in the Charter. The Regulations are not a Public Record and are not filed with the Registrar. Unless otherwise specified in the Regulations, they are only available to the Council members, the Guardian and any other person appointed under the Regulations. In particular, unless specifically specified, the beneficiaries have no right to a copy of the Regulations.

The Regulations must contain the following provisions:

• They must establish the Council to administer the Jersey Foundations assets and carry out its objects;
• Provide for the appointment, retirement, removal and remuneration (if any) of its members;
• Set out how the decisions of the Council are to be made and, if any decision requires the approval of any other person, specify such  decisions and that person;
• Specify the functions of the Council, and detail any delegation of such functions; and
• Detail the procedure to ensure that a Qualified Person serves on the Council in the event of the death, retirement, or such other cessation of the previously acting Qualified Person. 

b. Re the Guardian: 

• The Regulations must provide for the appointment of the Guardian;
• In particular, they must identify the initial Guardian, provide how the Guardian may retire and a new Guardian be appointed, and provide for the Guardian’s remuneration (if any).
• Unless he is either the Founder or the Qualified Person of the Council, a person may not be both a Council Member and the Guardian;
• The Guardian does  not have to be a qualified person
• The Regulations may give the Guardian the power to approve or disapprove specified actions of the Council.

• The Regulations may also provide for a person appointed to be reimbursed reasonable expenses incurred;
• They may provide for any further matters not specifically required by the Law, including the manner in which the Charter or the Regulations may be amended and the appointment, retirement, removal and remuneration (if any) of persons other than Council members and the Guardian to carry out the Foundation’s functions.

Jersey Foundations – the Founder