New proposed requirements for an economic substance test for Jersey tax-resident entities have been published to meet the requirements of the EU Code of Conduct Group. Among other things, specific consideration should be given to outsourcing arrangements, to each company within a relevant structure and to updating policies and procedures.
Limited partnerships in Jersey are governed by the Limited Partnerships (Jersey) Law 1994, as amended. The main feature of limited partnerships, as the name suggests, is the limited liability afforded to the limited partners. In addition, the law is highly flexible, such that the partners in a Jersey limited partnership are free to agree the terms attaching to the structure and operation of the partnership between them. For this reason, Jersey limited partnerships are popular vehicles.
The Jersey limitation period for claims against directors for breach of duty under Article 74 of the Companies (Jersey) Law 1991 has not been definitively decided by the Jersey Royal Court. However, the UK High Court recently found that the prescription period for claims against directors of Jersey companies for breach of their duties under Article 74 was 10 years. While this decision is not binding on the Jersey courts, it is likely to carry considerable weight.
One of the many improvements made by the Companies (Amendment 11) (Jersey) Law 2014 was to allow Jersey companies to carry out a reduction of capital without court approval. While the old mechanism for court approval is still in place, the new procedure allows Jersey companies to reduce their capital accounts more easily and supplements their ability to distribute from certain capital accounts.
The Royal Court recently ruled in a case involving a claim by a former director of two Jersey companies for sums due under service contracts with those companies. In dismissing the defences raised by the companies and ordering that the former director be paid the sums to which he claimed he was due, the court clarified its interpretation of certain provisions of the companies' articles of association.
The law on limited liability partnerships (LLPs) in Jersey has recently been amended. Under the previous law, onerous financial requirements had proved an insurmountable barrier to the establishment of LLPs in Jersey. The amendments will enhance the flexibility of Jersey LLPs, encourage their use for investment structuring purposes and enable them to be used as an alternative structure to a UK LLP.
The Royal Court recently clarified its approach to applications made under Articles 141 to 143 of the Companies (Jersey) Law 1991. The decision makes clear that if a minority shareholder has grievances that it proposes to advance in litigation, careful thought must be given before choosing which procedural path to take. It also acts as useful guidance as to when the statutory unfair prejudice regime will apply.
The Limited Partnerships (Jersey) Law 1994 provides a comprehensive statutory framework for the establishment and operation of limited partnerships. An appropriate structure for a number of different purposes, a limited partnership is often used to provide an additional form of investment vehicle for mutual funds, in particular for the venture capital industry, and is also an attractive structure for various tax-planning purposes.
Two new types of limited partnership have been introduced in Jersey - the separate limited partnership and the incorporated limited partnership. The new forms differ from a conventional limited partnership in that each has a separate legal personality. The incorporated partnership is further distinguished by being constituted as an independent body corporate and by having perpetual succession.
It is anticipated that the Companies (Amendment No 4) (Jersey) Regulations 2010 will soon come into force. Among other things, the amendments to the rules contained in Part 16 of the Companies (Jersey) Law 1991 relating to accounts and audits effected by the regulations are being made in response to the impact of the EU Statutory Audit Directive on Jersey-based auditors.