Jersey Foundations: the Infinitely Capable, Infinite Duration

Jersey foundations: The infinitely GUIDE capable, infinite duration vehicle

Last reviewed: September 2018

What is a Jersey foundation?

A Jersey foundation is an entity designed to blend highly attractive features of both Jersey companies and Jersey trusts. In many ways it can be regarded as an incorporated trust. It has its own legal personality, as evidenced by a registered number with the Jersey Financial Services Commission, and is able to own property and sue and be sued in its own name. Its constitutional documents are a public charter and private regulations. The charter has to be lodged with the registrar of companies in Jersey and contains certain basic items of information as required by the Foundations (Jersey) Law 2009 (the 'Law'). The privately kept regulations typically identify those who are to benefit under the foundation, establish the foundation's council (which is to administer the foundation's assets and to carry out its objects), and identify the foundation's guardian (whose duty it is to ensure that the council carries out its functions). The foundation may, and often does, have infinite duration.

Speed of incorporation

Foundations can be established on a same day 'fastrack' basis like Jersey companies.

Drafting flexibility

A key feature of the Law is the flexibility it allows as to the precise terms of each foundation, in that although the Law dictates matters which must be included in the charter or regulations it leaves it entirely to the founder to decide the precise manner in which such matters may be dealt with. By way of example, the Law requires that the regulations provide for appointment retirement and removal of council members but does not dictate who is to have powers to appoint and remove members. The founder may decide that.

Incorporation

An application for the incorporation of a foundation in Jersey may only be made by a 'Qualified Person', being a person registered under the Financial Services (Jersey) Law 1998 to conduct financial services business of this type.

The application must be accompanied by a copy of the proposed charter and a certificate signed by the Qualified Person confirming (amongst other things) that: • a Qualified Person will become a member of the council on incorporation; • the Qualified Person making the application is in possession of regulations approved by both the founder and the Qualified Person; • the identity of the original member or members of the council; and • the identity of the guardian.

The charter is a public document which must include the following details: • the name of the foundation;

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• the objects for which it is established, which must be lawful, charitable or non-charitable, or both, and may be to benefit a person or a class of person, carry out a specified purpose, or do both; • any initial endowment; • the term of the foundation if any; • details of the rights of any person to have the foundation wound up; and • what will happen to the assets of the foundation on dissolution.

The Registrar of Companies must be advised of any amendments to the charter.

The regulations are not filed with the Registrar of Companies and remain confidential. The regulations must: • establish a council to administer the assets of the foundation and carry out its objects, • make provision for the appointment, removal, retirement and remuneration of council members; • set out how decisions of the council will be made and specify any decisions which may require the approval of another person; • set out the functions of the council and if and how such functions may be delegated; and • make provision for the appointment of a guardian.

A foundation does not need to have any initial property to come into existence. The majority of the foundations we have set up so far have had no initial endowment.

The objective behind the requirements that only a Qualified Person may incorporate a foundation and that the council of members must always include a Qualified Person, is to ensure that Jersey's extensive regulations to prevent and forestall money laundering are observed from the outset and on a continuing basis.

The founder

The founder is the person (who may be an individual or a body corporate) who instructs a Qualified Person to apply for the incorporation of the foundation, regardless of whether or not that person donates any assets to the foundation.

The founder may be both a member of the council and the guardian, so a direct and very high degree of control is possible subject to relevant tax and legal advice.

A person who donates assets to the foundation after incorporation will not be regarded as a founder, unless the regulations of the foundation provide otherwise.

The founder may retain rights under the foundation and may assign those rights to any other person at any time during the lifetime of the founder or by will.

The identity of the founder or of the beneficiaries does not need to be disclosed on the foundation's publicly available charter.

The foundation's objects

The objects of the foundation may be to benefit • a person or a class of persons (i.e. beneficiaries); • specified or general charitable purposes; • non-charitable purposes; or • all or any of the above concurrently or consecutively in any order.

The objects must be specified in the charter, save that in the case of the objects being to benefit a person or class of persons the charter may simply provide that the person or class of persons may be determined in accordance with the privately kept regulations. Subject to the charter or regulations being drafted to the contrary, a beneficiary under a foundation: • has no interest in the foundation's assets; • is not owed any fiduciary duty by the foundation or by the council, the guardian or any other person appointed under the regulations of the foundation; and

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• has no right to any information about the foundation.

The council

Each foundation has an executive body (like the board of directors of a company) known as the council made up of one or more members whose collective role is to administer the foundation's assets and to carry out the foundation's objects.

The members of the council must conduct the foundation in accordance with its charter, its regulations and the Law. Total flexibility exists as to the residency of the membership and organisation of the council, save that the council must include at least one Jersey licensed Qualified Person (see above).

The duties of the council members are largely the same as the duties of directors of Jersey companies (i.e. to act honestly and in good faith with a view to the best interests of the foundation and to exercise the care, due diligence and skill that a reasonable prudent person would exercise in comparable circumstances). The Law provides that nothing in the terms of the charter or regulations will relieve a council member from liability for that person's fraud, wilful misconduct or gross negligence.

The guardian

A Jersey foundation must have a guardian, whose duty it is to take such steps as are reasonable in all the circumstances to ensure that the council carries out its functions. There are no residency restrictions on the guardian who can be a natural or legal person or a committee of persons or indeed another foundation.

The founder or the Qualified Person, but no other council member, may be the guardian.

Where an action of the council is not permitted by the charter or regulations, the guardian will have power to sanction or authorise such action of the council unless the regulations provide otherwise.

The regulations must provide for the appointment and retirement of a guardian and for his or her remuneration.

The safeguard role of the Royal Court of Jersey

The Royal Court has powers in respect of foundations as it does with trusts, including powers to give directions on the administration of foundations and to dismiss and appoint council members or the guardian. In addition, the Royal Court has an independent power to amend the charter or regulations. Applications may be made to the Royal Court by a 'person with standing', which includes the foundation itself, the founder, the guardian, a beneficiary, a creditor or the Attorney General.

Contacts

A full list of contacts specialising in Jersey foundations can be found here.

This guide is only intended to give a summary and general overview of the subject matter. It is not intended to be comprehensive and doe s not constitute, and should not be taken to be, legal advice. If you would like legal advice or further information on any issue raised by this guide, please get in touch with 2021934/73819100/2 one of your usual contacts. © 2018 MOURANT OZANNES ALL RIGHTS RESERVED