12 September 2008
On 9 September, the Minister for Economic Development lodged a proposed draft Foundations (Jersey) Law 200-. This Law, if approved by the States, will introduce to Jersey a new legal entity, the ‘foundation’, which will be used for wealth management and charitable purposes.
Foundations have a long history in continental Europe. In medieval times they were used for charitable or religious purposes. More recently they are commonly used for wealth management purposes in a number of our competitor jurisdictions. Clients from jurisdictions such as the Middle and Far East are often more familiar with the concept of a foundation than with trusts, which are alien to their legal systems, and they would therefore feel happier with a foundation as an investment vehicle.
Welcoming the proposal the Minister for Economic Development, Senator Ozouf, said; “This is a major step forward for the Island’s finance industry. The Jersey foundation will be attractive to investors, especially those from countries where trusts are unknown. It will also assist those wishing to establish foundations for charitable purposes. It is an innovative product which will help to maintain Jersey’s position as one of the world’s leading finance centres.”
A foundation will be an incorporated legal entity, incorporating some of the best features companies and trusts. It will be run by a foundation council, similar to a company’s board of directors. However, unlike a board of directors (or the trustees of a trust) a foundation council will be required to have at least one member who is a Jersey financial professional regulated by the Jersey Financial Services Commission. The high quality of Jersey’s regulated community will ensure that Jersey foundations are effectively and responsibly run. This will ensure that investors can be confident in relying on Jersey foundations, and also that the Island complies with its international obligations in respect of preventing fiscal crime.
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Notes to editors:
For further information please contact Senator Philip Ozouf, Minister for Economic Development, on 07797 713838
For questions of a more technical nature, please contact Robert Jones on 440558 or email r.jones2@gov.je.
Further notes concerning a foundation:
The foundation council will be supervised by an independent guardian, who will receive information about the foundation’s activities and will be able to hold the council to account, if necessary by applying to court. Combined with the presence of the qualified person on the council, this will mean that foundations’ have sufficient checks and balances to ensure that the endowment is used for the purpose intended by the founder.
Unlike a company, a foundation will not have shareholders. The role of shareholders in holding the board of directors to account will be taken instead by the guardian, who will not have any direct interest in the foundation.
The foundation, as a body corporate, will hold assets in its own name. It will use these assets in accordance with its constitutional documents, either to benefit specified persons or for a specified purpose. These constitutional documents will be a charter, a public document held by the registrar, and the regulations, which will be a private document. The charter will set out, at a minimum, certain key pieces of information regarding the foundation. It will be permissible for a foundation to include all the relevant information in its charter, and this may be the case, e.g. for charitable foundations which wish to put all information in the public domain. However, it is envisaged that the majority of founders and foundations will wish to preserve confidentiality over certain information and will therefore include these matters in private regulations.
The benefits of a Foundation over existing wealth management vehicles
The benefits of a foundation over a trust include: that it is a separate legal entity, able to hold property and act in its own name; that the founder has the option of maintaining greater control than is usually the case for a trust; that family members can sit on the council and be involved in the management of family assets; that there is a regulated person on the council.
The benefits of a foundation over a company include: that the regulations allow for a more flexibility than the articles of a company; that there will a guardian to hold the council to account; that there will be a regulated person on the council.
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