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Banking

Jersey

The central objective of the new Security Interests (Jersey) Law is to provide Jersey with a simplified, modern, efficient legal regime for the creation, perfection, priority and enforcement of security interests in intangible movable property. Furthermore, the new law is designed to give Jersey one of the most up-to-date legal regimes in this field and thereby to enhance Jersey's attractiveness to local and foreign investors.

Lenders are increasingly examining the details of their security packages in order to identify the various enforcement options open to them. Where the security package includes a Jersey law security interest agreement in respect of Jersey situs assets, the provisions of the Security Interests (Jersey) Law 1983 must be taken into account.

A recent Royal Court of Jersey judgment gave strong support to the rights and powers of a secured party to take action necessary to protect its security and the value represented by the security, in accordance with the usual provisions of a security agreement. In addition, the court made a number of comments on variation of contract, estoppel and mitigation of loss.

The new Security Interests (Jersey) Law is in close-to-final form. The new law will add certainty and flexibility at a time when economic conditions have led to a greater focus on the protection of collateral. Among other things, it introduces more flexible methods of creation of a security interest and the establishment of a new centrally maintained register of security interests.

The draft Security Interests (Jersey) Law 201 is in close-to-final form and is shortly due to commence its journey through the legislative process. It is anticipated that the new law will come into force in the first half of 2011. This update looks at the transitional provisions that will apply to pre-existing security once the new law comes into force.

Capital Markets

Jersey

Jersey has passed an amendment to introduce an explicit statutory exemption from any liability to tax in Jersey for investment funds and certain capital markets issuers. The Income Tax (Amendment No 36) (Jersey) Law 2010 provides clarity in relation to the tax treatment of investment funds, their investment holding companies and certain categories of capital markets issuer in Jersey.

The Channel Islands Stock Exchange, LBG offers a fast document turnaround time, competitive pricing, international standards of issuer regulation and a pragmatic approach to disclosure requirements. This update highlights the principal requirements and key issues to be considered when considering the listing of structured debt securities on the exchange.

Commercial Property

Jersey

Under the Goods and Services Tax (Jersey) Law 2007, a landlord of commercial property in Jersey may be liable to account to the States of Jersey for 5% of its rental income. Commercial leases entered into before the law was published have been grandfathered, but this five-year exemption on goods and services tax liability ends later this year. All commercial leases will then potentially become taxable supplies.

In the current economic climate, margins have reduced considerably for all businesses - those developing property, whether for residential or commercial use, are no exception. Jersey is rightly renowned for its beautiful natural environment, but this in turn means that anyone seeking permission to build can face particular hurdles, depending on the nature and location of the land in question.

Company & Commercial

Jersey

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.

Competition

Jersey

Generally, pursuant to Article 8 of the Competition (Jersey) Law 2005, undertakings are prohibited from making arrangements with other undertakings that have the object or effect of hindering to an appreciable extent competition of the supply of goods or services within Jersey. This update deals with the key concepts and obligations that arise in relation to exclusive supply contracts.

The Competition (Jersey) Law 2005 generally prohibits any agreements, business practices and conduct which substantially lessen competition in Jersey. The Jersey Competition Regulatory Authority is responsible for enforcing the law. This update focuses on Part 4 of the law which regulates certain mergers and acquisitions in Jersey.

Corporate Finance/M&A

Jersey

While the M&A pipeline remains relatively strong, bringing deals to completion is proving challenging due to the tightening of available credit and uncertainty with asset valuations. A Jersey joint venture vehicle is a form of alternative structure by which companies can gain access to deals that might not be available through traditional mergers and acquisitions, and which can be used as a precursor to traditional M&A activity in future.

Some of the most common types of private equity acquisition transaction are leveraged buy-outs (LBOs) and management buy-outs (MBOs). Jersey companies, Jersey employee benefit trusts and Eurobonds quoted on the Channel Islands Stock Exchange have become integral components of the LBO and MBO transaction planning process.

The Companies (Jersey) Law 1991 has recently been amended by the Companies (Amendment 5) (Jersey) Regulations 2011. The new law aims to clarify and simplify certain merger procedures and enable Jersey incorporated companies to merge directly with a wider range of corporate bodies, including companies incorporated elsewhere.

Derivatives

Jersey

As financing transactions have become more sophisticated over the last decade, it has been common for parties to agree in advance matters relating to netting, contractual subordination and non-petition provisions. The Bankruptcy (Netting, Contractual Subordination and Non-Petition Provisions) (Jersey) Law 2005 ensures certainty to parties entering into such agreements. This update summarises its provisions.

Employment & Labour

Jersey

Amendments to the Employment (Jersey) Law 2003 creating rights on redundancy recently took effect. The new provisions mean that for the first time in Jersey there will be statutory redundancy payments for employees that are similar to those operating in the United Kingdom. This legislative change introduces a degree of complexity for employers which will require careful handling.

Environment

Jersey

The Carbon Reduction Commitment Energy Efficiency Scheme (CRC scheme) is a new mandatory climate change and energy-saving scheme aimed at improving energy efficiency and cutting carbon dioxide emissions in the United Kingdom. At present, a particular interest surrounds the impact of the CRC scheme on Jersey trusts where the trustees hold UK property directly.

Insolvency & Restructuring

Jersey

At the end of a financial year, there is likely to be an increase in the number of businesses becoming insolvent, some of which may have an interest in Jersey property. Insolvency practitioners appointed outside Jersey in respect of an overseas person or company must be recognised in Jersey before they can deal with certain forms of Jersey property, as Jersey immovable property can be transacted only before the Royal Court.

The ability of the court to ensure that similarly ranked creditors of a debtor are treated equally before the commencement of any insolvency procedure, including a just and equitable winding-up application, was recently considered by the Royal Court. Following this ruling, the indications are that the court will consider making use of its inherent jurisdiction to ensure parity between creditors even where no statutory protection exists.

The credit crunch has put pressure on a wide range of structures - as a result, lenders, borrowers and other counterparties are looking more closely at the impact of possible insolvency proceedings. As Jersey companies have often been used in cross-border finance transactions, it is important to be aware of the differences between Jersey and English insolvency procedures for companies.

Litigation

Jersey

In a recent case an application for Beddoe relief was made to the Royal Court of Jersey by beneficiaries of a trust. The court concluded there was no reason why its inherent supervisory jurisdiction should not extend to making a Beddoe order in favour of discretionary beneficiaries, provided that certain conditions were met. The case could increase the ability of beneficiaries to hold trustees to account for wrongdoing.

The Royal Court recently delivered a judgment concerning the principles to be applied where a body of executors is deadlocked. In reaching its decision, it had to determine the role of the court, the circumstances in which the court could intervene and the basis on which it could do so. The decision clarifies the court's jurisdiction to intervene where there is disagreement between a body of executors or trustees.

A recent case considered the issue of the situs of a debt. The court accepted that what may or may not constitute 'residence' for tax purposes is irrelevant for present purposes, and that what matters is where a corporation carries on business. This case is useful for international companies that retain their registered office in one jurisdiction and carry out their business activities in alternative jurisdictions.

A recent judgment of Commissioner Clyde-Smith with Jurats Liddiard and Nicolle set aside a service of proceedings on respondents outside of Jersey and stayed the proceedings. The importance of the judgment is the court's consideration of the 'forum for administration' and 'exclusive jurisdiction' clauses in the context of trusts.

Offshore Services

Jersey

The Court of Appeal recently endorsed the approach taken by the Royal Court in its landmark judgment on the circumstances under which proprietary claims may be established and assets traced. In so doing, the appellate court has expressly acknowledged that in future it will be making an evaluative judgment where it is asked to treat one asset as representing or being a substitute for the plaintiff's original property.

A recent case before the Royal Court concerned an application by a trustee seeking approval for entering into an agreement intended to settle various claims made against the trust by creditors, the net effect of which would be to exhaust the assets of the trust. For trustees, threatened claims in circumstances where the trust assets are insufficient to meet those claims pose difficult issues to contend with.

A test case recently brought before the Employment Tribunal aimed to clarify the law on annual leave entitlement for employees on long-term sick leave. The tribunal held that staff who are unable to take statutory annual leave due to serious ill health are entitled to carry over that leave to the next holiday year. Employers must therefore determine whether an employee signed off work due to ill health is too sick to take holiday.

At the end of a financial year, there is likely to be an increase in the number of businesses becoming insolvent, some of which may have an interest in Jersey property. Insolvency practitioners appointed outside Jersey in respect of an overseas person or company must be recognised in Jersey before they can deal with certain forms of Jersey property, as Jersey immovable property can be transacted only before the Royal Court.

The Flying Freehold Law was enacted to enable units within buildings to be sold on a freehold basis, instead of by share transfer. The law provides for the division of a property into private units and common parts. Ownership of a private unit grants outright freehold title to an apartment. Each co-owner is also allocated a percentage interest in the common parts and must contribute towards their maintenance and upkeep.

The Court of Appeal has clarified the principles relating to the payment of costs in non-adversarial trust applications. In so doing, it has drawn together approaches established in a number of early cases and consolidated the position in an area which it said had previously received only "sporadic consideration". The case is of relevance for all trustees that may be contemplating applications to the court in such circumstances.

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White Collar Crime

Jersey

The Court of Appeal recently endorsed the approach taken by the Royal Court in its landmark judgment on the circumstances under which proprietary claims may be established and assets traced. In so doing, the appellate court has expressly acknowledged that in future it will be making an evaluative judgment where it is asked to treat one asset as representing or being a substitute for the plaintiff's original property.

Jersey's Royal Court recently delivered a landmark judgment, eschewing long-established principles of common law concerning the circumstances under which proprietary claims may be established and when assets may be traced. While the outcome of this case may have done justice between the parties, the wider implications of the court's bold demonstration of jurisprudential independence remain to be seen.