Given the flexibility of Jersey Foundations, a number of potential uses (and reasons for establishing) arise:
- Foundation concept Having its roots in civil law, a Foundation is a familiar concept to Middle Eastern and Continental European clients who may accordingly prefer to establish a Foundation rather than a Trust. This may be particularly relevant to clients from jurisdictions who have not signed up to the Hague convention on trusts and as such do not recognise the concept of a trust.
- Forced heirship Unlike foundations established in certain other jurisdictions, assets gifted into a Jersey foundation can be protected from repatriation to the donor’s motherland and are not at risk from claims from authorities in a deceased donor’s jurisdiction demanding a share of the assets under forced heirship rules.
- Charitable and philanthropic purposes Jersey foundations can be established for charitable or other philanthropic purposes, including cultural, educational, humanitarian, scientific or religious purposes.
- Holding of single assets, family businesses or wasting assets Jersey foundations may be established with the express purpose of holding assets such as family businesses, aeroplanes or other wasting assets. Unlike trustees, the Council Members do not owe a fiduciary duty to the beneficiaries. This is particularly relevant where there may be competing beneficiaries interests in a family business between those involved with the management and day to day running (whose interests may lie in reinvesting profits into the business) and those having a more passive interest (who may be more interested in receiving distributions from the business). Holding of the business in a trust structure can create difficulties for trustees, and a foundation may be a more suitable vehicle. A Foundation may also protect against fragmentation of family businesses by outside parties gaining control and enable them to be passed down through future generations.
- Management and safeguarding of assets on behalf of minors and other venerable persons Unless otherwise specified in the foundation documents, the beneficiaries have no rights to information relating to the Foundation. This contrasts with a trust, where the law confers rights to information on the beneficiaries. Accordingly, a foundation may be a more suitable vehicle for those wishing to tailor the beneficiaries’ rights to information particularly for those who cannot manage their assets or risk losing the same. It may also be considered as a possible substitute for a pre or post nuptial agreement.
- To hold the shares of a Private Trust Company (‘PTC’) A Jersey Foundation may be a suitable vehicle to hold the shares of a PTC which is established to act as trustee of one or more family trusts. In this instance, the board of directors of the PTC will frequently include certain family members and it may also be appropriate for family members to sit on the Foundation Council.
- Acting as a Special Purpose Vehicle Jersey foundations may be a suitable alternative to the more traditional purpose trust and underlying company structure in order, for example, to licence intellectual property, provide incentivisation benefits to employees, or for capital market, collateralisation or financial structuring purposes.
- Reservation of powers A foundation allows the Founder to act as both a member of the Council and also as the Guardian, and as such may be considered as an alternative to a trust with settler reserved power provisions.
- Legal persona As a Foundation, unlike a Trust, has its own separate legal persona, it may be regarded as an appropriate vehicle where it is desired that it contracts in its own name.