MINISTER FOR ECONOMIC DEVELOPMENT
Report in relation to:
THE GLOBAL FORUM ON TRANSPARENCY AND EXCHANGE OF INFORMATION FOR TAX PURPOSES RECOMMENDATION ON ACCOUNTING RECORDS
1. Issue
1.1 The Global Forum is the multilateral framework within which work in the area of tax transparency and exchange of information is carried out by over 100 jurisdictions. It is charged with in-depth monitoring and peer review of the implementation of international standards of transparency and exchange of information for tax purposes and has reviewed, and published a report on, Jersey.
1.2 Overall, the report concludes that the legal and regulatory framework in Jersey for the exchange of information generally functions effectively to ensure that the required information will be available and accessible. In the case of accounting records, however, the report observes that “not all relevant entities and arrangements are consistently required to keep reliable accounting records” and recommends that Jersey addresses this point; and recommends that express provisions be introduced to hold accounting records for a minimum of 5 years, where express provisions are missing from legislation.
1.3 In order to address the above, following consultation with government, law drafting instructions have been prepared by the Jersey Financial Services Commission to amend most of the laws that govern the organisation of legal persons and arrangements in Jersey. These are:
i) Companies (Jersey) Law 1991
ii) Limited Partnerships (Jersey) Law 1994
iii) Separate Limited Partnerships (Jersey) Law 2011
iv) Incorporated Limited Partnerships (Jersey) Law 2011
v) Foundations (Jersey) Law 2009
vi) Trusts (Jersey) Law 1984
2. Background
2.1 Law Drafting instructions have been prepared to address the key areas of concern raised by the Global forum in relation to each of the individual product Law’s mentioned above. Below is an outline of those instructions.
Companies (Jersey) Law 1991
A variety of amendments are proposed to amend the definition of accounting records to include information necessary for the company to document:
i) All sums of money received and expended and the matters in respect of which the receipt and expenditure took place;
ii) All sales and purchases; and
iii) The assets and liabilities of the company, including shares, interests or units in other legal persons or in legal arrangements.
2.2 The Law should be amended to allow the registrar to inspect the accounting records (wherever held) that a company is required to keep in order to satisfy himself that records are being kept in accordance with the Law. As for the inspection of a company’s register of directors and secretary (Article 83) and register of members (Article 45), records should be available for inspection during business hours.
2.3 In addition, because there is no requirement for accounting records to be held in Jersey, the registrar should also be able to require the delivery of specified records, to satisfy himself that accounting records are being kept in accordance with Part 16. Once delivered, the accounting records (or copies made thereof) may not be used for any purpose other than to monitor and enforce compliance with the Law. A company that does not allow its accounting records to be inspected by the registrar or which fails to deliver specified accounting records to the registrar should be guilty of an offence. Where the registrar acts outside the set parameters, similarly he should also be guilty of an offence.
2.4 The Law should be amended so as to require that the accounting records that a company is required to keep must be preserved by it for at least 6 years beginning at the end of the year in which they are made. The Law should require the company, liquidation committee, or company’s creditors to determine how the accounting records (but not other records) are to be preserved for the necessary statutory period and to make adequate provision for custody of the accounting records during that period.
2.5 In the case of a court winding up, the Royal Court must also determine how records are to be preserved for the necessary statutory period and make adequate provision for their custody. The registrar should be permitted to make an application to the Royal Court for dissolution to be declared void where there are reasonable grounds to believe that a company has been dissolved in order to destroy accounting records. Thereupon, such proceedings may be taken which might have been taken if the company had not been dissolved.
2.6 Limited Partnerships (Jersey) Law 1994
Separate Limited Partnerships (Jersey) Law 2011,
Incorporated Limited Partnerships (Jersey) Law 2011
The Laws in relation to these products should be amended to require the respective partnerships to keep accounting records that are sufficient to show and explain their transactions. The records must be such as to:
i) Disclose with reasonable accuracy, at any time, the financial position of the partnership at that time; and
ii) Enable the preparation of accounts.
2.7 Accounting records should be defined to include invoices, contracts and other information as are necessary to allow it to document:
i) All sums of money received and expended and the matters in respect of which the receipt and expenditure took place;
ii) All sales and purchases; and
iii) The assets and liabilities of the partnership, including shares, interests or units in legal persons or in other legal arrangements.
2.8 During business hours, the registrar should be allowed to inspect the accounting records (wherever held) that a partnership is required to keep - in order to satisfy himself that records are being kept in accordance with the respective Law. In addition, because there is no requirement for accounting records to be held in Jersey, the registrar should also be able to require the delivery of specified records, to satisfy himself that accounting records are being kept in accordance with the respective Law. Once delivered, the accounting records (or copies made thereof) may not be used for any purpose other than to monitor and enforce compliance with record-keeping requirements. Further to this, the documents must be immediately destroyed once the registrar is satisfied that the partnership has complied with record-keeping requirements.
2.9 Each of the general partners should be guilty of an offence where a partnership does not allow its accounting records to be inspected by the registrar or fails to provide specified accounting records to the registrar. Where the registrar acts outside the parameters set by the Law, he should also be guilty of an offence.
2.10 The Law should require that the accounting records of a partnership should be preserved for at least 6 years beginning at the end of the year in which they are made, even when the partnership is dissolved.
2.11 Where a partnership is to be dissolved, then the Law should provide that:
i) In the case where the affairs of the partnership are wound up by the general partners, the general partners shall determine how the accounting records are to be preserved for the necessary statutory period and make adequate provision for custody of the accounting records during that period.
ii) In the case where the sole or last remaining general partner is an individual, where the general partner’s death, legal incapacity, bankruptcy, retirement or withdrawal causes the dissolution of the partnership, the Royal Court shall determine how the accounting records are to be preserved for the necessary statutory period on the application of the registrar, and make adequate provision for custody of the accounting records during that period.
iii) In the case where the sole or last remaining general partner is a body corporate, where the general partner’s dissolution, bankruptcy or withdrawal from the limited partnership causes the dissolution of the partnership, the Royal Court shall determine how the accounting records are to be preserved for the necessary statutory period on the application of the registrar.
iv) In the case of dissolution by the Royal Court, the Court shall determine how the accounting records are to be preserved for the necessary statutory period, and make adequate provision for custody of the accounting records during that period.
2.12 Foundations (Jersey) Law 2009
Article 36 should be amended to require a foundation to keep accounting records that are sufficient to show and explain its transactions. The records must be such as to:
i) Disclose with reasonable accuracy, at any time, the financial position of the foundation at that time; and
ii) Enable the preparation of accounts.
2.13 Accounting records should be defined to include invoices, contracts and other information as are necessary to allow it to document:
i) All sums of money received and expended and the matters in respect of which the receipt and expenditure took place;
ii) All sales and purchases; and
iii) The assets and liabilities of the foundation, including shares, interests or units in other legal persons or in legal arrangements.
2.14 The registrar should be allowed to inspect the accounting records (wherever held) that a foundation is required to keep - during business hours. The foundation should be guilty of an offence where it does not allow its accounting records to be inspected by the registrar.
2.15 The Law should require that the accounting records that a foundation is required to keep must be preserved for at least 6 years beginning at the end of the year in which they are made, even when the foundation is dissolved. The Law should further be amended to remove the discretion that is given to “dispose of” accounting records (but not other records).
The Law should further require the former council member, foundation’s creditors, registrar or Royal Court to determine how the accounting records (but not other records) are to be preserved for the necessary statutory period and to make adequate provision for custody of the accounting records during that period.
2.16 Finally, the Law should be amended to allow the registrar to make an application to the Royal Court for dissolution to be declared void where there are reasonable grounds to believe that a foundation has been dissolved in order to destroy accounting records.
2.17 Trusts (Jersey) Law 1984
The Law should be amended to require a trustee to keep accounting records that are sufficient to show and explain the trust’s transactions. The records must be such as to:
i) Disclose with reasonable accuracy, at any time, the financial position of the trust at that time; and
ii) Enable the preparation of accounts.
2.18 Accounting records should be defined to include invoices, contracts and other information as are necessary to allow it to document:
i) All sums of money received and expended and the matters in respect of which the receipt and expenditure took place;
ii) All sales and purchases; and
iii) The assets and liabilities of the trust, including shares, interests or units in legal persons or in other legal arrangements.
2.19 The Law should require that the accounting records that a trustee is required to keep must be preserved for at least 6 years beginning at the end of the year in which they are made, even when there is a failure or lapse of an interest or that the trust is terminated
The existing Law should continue to apply unaffected to other records (excluding accounting records).
3. Financial and Manpower Implications
As a result of this decision the Law Draftsman’s office will expend time preparing amendments to the above legislation. Apart from this, there are no further financial or manpower implications as a result of this decision.
- Recommendation
4.1 It is recommended that the Minister approve the policy decision for amendments to be made to the above legislation in line with the recommendations of the Global Forum outlined above. The Law Draftsman will be instructed to draft appropriate arrangements and liaise with both the Economic Development Department and the Chief Ministers Department in the preparation of drafts.
Director, Finance Industry Development
13 November 2012
gov.je