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The Royal Court recently delivered a landmark decision on the ability of non-trustee fiduciaries to recover the costs that they incur in connection with the discharge of their fiduciary functions. The court found that the costs of administrative proceedings incurred by a settlor with reserved fiduciary powers were recoverable out of the trust fund on a 'trustee indemnity' basis.
A trustee recently applied to the Royal Court asking it to exercise its powers to set aside a deed of amendment, a deed of exclusion and a deed of appointment by reason of mistake, or seeking relief under the Hastings Bass principle. This ruling was in effect the first opportunity the Jersey courts had had to consider the Hastings Bass remedy since the English Court of Appeal decisions in Pitt v Holt and Futter v Futter.
There is an increasing need for businesses to ensure that they can demonstrate proper substance in the jurisdictions in which they operate. Jersey is ideally placed to provide proper substance and a permanent establishment in a tax-neutral environment. Furthermore, there are a number of commercial and structural benefits of using a Jersey company as part of creating a permanent establishment in Jersey.
A number of regulatory changes have recently been made that may be of interest to managers of investment funds in Jersey. These amendments involve both foreign regulations (including the EU Alternative Investment Fund Managers Directive) and domestic ones. In addition, an amendment to the law on limited liability partnerships removes the requirement for the £5 million bond which previously had to be maintained.
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.
Just and equitable winding-up is a discretionary remedy and the courts will always consider the terms on which investors have invested in a fund, including any provisions as to the closed-ended nature of the fund set out in its prospectus. It is crucial that the views of shareholders be sought before instituting any such action. In this vein, directors and managers of closed-ended funds may find a recent Royal Court judgment of interest.
Alternative investment fund managers (AIFMs) of private equity funds based within the European Union must fully comply with new regulations to the EU AIFM Directive. However, AIFMs of funds based in so-called 'third countries' - of which Jersey is one - can market their funds to professional investors without having to comply with the more onerous regulatory requirements of the directive, provided that certain conditions are met.
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.
A new approval process for legislation is under consideration, through which a significant amount of the work to review legislation that was previously undertaken by the Ministry of Justice in the United Kingdom will now be dealt with by the Law Officers' Department. It is therefore hoped that the approval time for legislation submitted to the Privy Council via the Ministry of Justice will decrease.
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.
The Security Interests (Jersey) Law 2012 will soon replace the 1983 version of the same law. The concept of registration, which is to be introduced by the new law, is a potential advantage to lenders. Registration of a financing statement regarding a security interest (intended or perfected) can enhance and protect a lender's position where certain collateral is to be secured under the new law.
Under the Proceeds of Crime (Jersey) Law, a financial institution may be guilty of assisting another to retain the benefit of criminal conduct if it facilitates the retention of the proceeds of criminal conduct, including by transferring the proceeds out of Jersey. A number of recent judgments provide conflicting examples for the Jersey courts to follow when ruling on such cases.
The Royal Court recently considered an application by executors to rectify a will to include provisions that had been revoked from the deceased's previous will. The case makes clear that the rectification of wills should not be restricted to the mere deletion of words within a will, but should also allow for the substitution and/or addition of words, in order to ensure that the deceased's clear intentions are put into effect.
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.
After some delay, the Trusts (Amendment 5) (Jersey) Law 2012 recently received Privy Council approval. The main changes contained in Amendment 5 include provisions relating to protection from foreign interference and remuneration of professional trustees, as well as details on how trustees can transact with themselves on behalf of different trusts, the position of outgoing trustees and limitation of actions or prescription.
The deputy bailiff recently made certain remarks regarding the situation of a qualified member of a foundation, which could amount to a criticism of the foundation regime. The court found all the defendants, including the foundation, to be in contempt and requested that the relevant affidavits be re-filed. To avoid similar criticism, sufficient disclosure on assets underlying a foundation should always be provided.
Jersey's Royal Court has confirmed the scope of its jurisdiction to set aside unreasonable decisions of trustees. In a related decision, the court also made it clear that trustees that make unreasonable decisions are not generally entitled to have their reputation protected by non-publication or redaction of judgments. Trustees should be aware of the consequences of failing properly to fulfil their duties.
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.
Existing statutory prospectus content requirements for Jersey investment funds that fall within the definition of 'certified funds' will soon be replaced by a new prospectuses order. The order demonstrates Jersey's commitment to continuing to meet the international standards laid down by the International Organisation of Securities Commissions for funds and prospectus regulation.
Jersey's Court of Appeal recently upheld the Royal Court's decision to stay an action on the ground of forum non conveniens, even though the defendants had already taken steps in the proceedings, including filing a defence. Defendants that wish for proceedings to be heard in another jurisdiction should apply for a stay at the outset and be careful to avoid taking substantive steps in the proceedings.
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 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.
The Royal Court has again played an invaluable role in the administration of a trust by approving a trustee's decision to widen the class of beneficiaries of the trust in the face of opposition from the existing individual beneficiaries. This case offers invaluable judicial guidance on how a trustee should act when faced with unproven allegations regarding its conduct.
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.
In a recent case before the Royal Court of Jersey, the question arose as to whether the court had jurisdiction to send a letter of request to the High Court of England and Wales in respect of four Jersey companies that were ultimate beneficial owners of English real estate. The case sets out the circumstances under which the Royal Court will be prepared to request assistance from the English High Court under the Insolvency Act.
In a recent case the Royal Court confirmed that an executor can be reimbursed for his or her costs incurred in administering an insolvent estate, in priority to other creditors. However, the executor can be remunerated only if authorised by the will or by order of the court, and the authorisation under the will does not apply where the estate is insolvent.
A recent Royal Court decision provides guidance on the approach that the court will take to a beneficiary's request for disclosure of information. The directions illustrate the importance for a beneficiary seeking disclosure to set out clearly what information he or she is seeking, the purpose for which it is being sought and the basis on which disclosure should be ordered by the court.
A trustee would ordinarily be expected to take a neutral position in relation to hostile litigation affecting trust assets. However, where the court considers that it is inappropriate for the claim on the trust assets to go undefended and there is no other party willing and able to take up the defence, the court may direct the trustee to defend the trust. The Royal Court recently considered one such case.
The Jersey court recently considered whether excluding someone irrevocably from benefiting from trust assets means just that, even if there were no error involved in the exclusion. The court's ruling again demonstrates the willingness of the court (while still testing applicants and requiring them to meet the relevant legal criteria) to exercise its jurisdiction in a commercial and pragmatic manner.
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.
In a recent case before the Royal Court, counsel for one of the parties and Commissioner Clyde-Smith were at odds over whether the court's decision to deprive one of the parties of 50% of its costs would send shockwaves around the trust industry. The court stated that it did not believe the decision would have a negative impact on the industry, as it was apparent on the facts that the trustee had behaved poorly.
Following a period of consultation with industry, the Trusts (Amendment 5) (Jersey) Law was debated and recently adopted by the States of Jersey. The Trusts Law Working Party believes that the amendments in this law will make Jersey more attractive as a destination for private client business, with the changes bringing clarity and certainty to a number of areas.
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.
The new Security Interests (Jersey) Law governing security over intangible movable property in Jersey has recently been passed by the States of Jersey and is expected to come into force in early 2012. The new law replaces the earlier Security Interests (Jersey) Law 1983 and includes changes to the scope of collateral, creation, attachment and perfection, third-party security, rights to deal, registration and enforcement.
In a recent Jersey trust case the trustee sought directions as to whether it should disclose confidential financial information to a person designated as an excluded person under the terms of the trust. The Royal Court of Jersey held that it was in the interests of the beneficiaries for the English court to have accurate information and to resolve proceedings without further delay. Accordingly, disclosure was ordered.
In a recent case before the Royal Court, the court considered an application of a trustee to recover documents relating to a trust from the police, following the seizure of those documents from a former employee as part of a fraud investigation. The court ruled that the trustee was entitled to the trust documents and this was unaffected by the subsequent seizure of such documents by the police.
Jersey companies continue to be popular as listing vehicles, with more international businesses likely to choose a Jersey holding company to lead them to market in future. With its high standards and wide recognition, particularly in terms of its tax environment and corporate laws, Jersey as a jurisdiction can normally provide that crucial advantage to a successful offering.
The Jersey legislation provides a solution to the underlying problems that exist for cell companies in many other jurisdictions. The incorporated cell company, in particular, introduces a truly innovative corporate structure that combines robust ring-fencing provisions with a degree of flexibility and convenience not presently available in other jurisdictions.
In an important decision, and in the face of criticism of the Jersey law position by the English Court of Appeal in the recent English case of Pitt v Holt, the Royal Court has nevertheless upheld and confirmed the pre-existing Jersey law position on voluntary dispositions by donors which are sought to be set aside on the grounds of mistake.
The Jersey Royal Court recently discussed the extent of a trustee's obligation to disclose documents and detailed the principles to which it refers in such cases. These include context, capacity, relevance and purpose, as well as implications for other cases, the effect on third parties and procedural appropriateness. Trustees should consider these issues closely before making decisions in relation to requests for documents.
The Royal Court of Jersey recently ruled on an application for the widow of a settlor to participate in proceedings in relation to a charitable trust. Given the appetite of high-net-worth individuals for establishing such trusts, it is reassuring to see that the court is minded to allow settlors, heirs, legatees and executors to participate in proceedings, in particular where they can assist the court as to the settlor's wishes and intentions.
The Bankruptcy Law details the enforceability of netting and collateral opinions provisions under standard form agreements (including prime brokerage agreements) against counterparties incorporated or registered in Jersey, including in pre-insolvency and post-insolvency circumstances. The law ensures certainty for parties entering into agreements involving netting and set-off provisions.
The Royal Court of Jersey recently ordered an ex parte mandatory interlocutory injunction against a nominee shareholder, who had until then refused to comply with the instructions of the beneficial owner of those shares. This judgment serves as a timely reminder that those who hold assets as a nominee must always comply promptly with the directions of the relevant beneficial owner.
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.
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.
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.
The Royal Court recently approved a momentous decision by a trustee in a case that concerned payment from a trust of moneys representing an award by the English High Court in divorce proceedings to the former wife of a beneficiary of the trust. This case considered proper exercise of a trustee's powers, where its powers are not in doubt, but the trustee wishes to obtain the court's blessing before exercising them.
A recent matter concerned the rectification by the Royal Court of an error in an instrument of appointment and retirement of trustees. The error had resulted in the invalid retirement and appointment of successor trustees, and was compounded by the trustee who had purported to retire having subsequently been struck off.
Often, the only contact that an individual will have with a lawyer is when giving instructions for making a will. This update provides a short guide to making a will in Jersey. In Jersey, property is divided into immovable estate and movable estate. Different rules apply to wills of real and personal estate and, accordingly, it is the practice of most Jersey lawyers to prepare separate wills for real and personal estate.
The trustee of a settlement established by a deceased recently brought an application to vary her will under the Probate (Jersey) Law 1998. The court agreed to vary the will leaving Jersey situs personal estate to the trustees of a trust in order to avoid adverse tax consequences for the beneficiaries, which would have been incurred if, as was likely, distributions had been made from the trust to those beneficiaries.
A tax information exchange agreement between France and Jersey recently entered into force. One of the key benefits of the agreement is that Jersey investment funds and real estate holding structures are now eligible to qualify for exemption from the French 3% real estate tax which is assessed annually on the fair market value of real property in France.
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.
In a recent case the Royal Court considered the position of a trustee who had received notice of an adverse claim contesting the origin of the trust assets, but in respect of which litigation had not been brought forward. The court balanced the duty of the trustee to the beneficiaries to administer the trust and the interest of the respondent in obtaining justice in respect of his claim.
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.
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.
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.
A recent case of the Jersey Royal Court considered the legal test for rectification and, in particular, whether suing a professional adviser who had given mistaken advice on which the settlor had relied is an alternative practical remedy to rectification.
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.
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 borne in mind when considering the listing of structured debt securities on the exchange.
The Channel Islands Stock Exchange is one of the most popular exchanges for listing Eurobonds and other debt securities as a result of its inexpensive and quick procedure and the flexibility of the Listing Rules. This update sets out certain of the continuing obligations which an issuer is required to observe once any of its securities have been admitted to listing.
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.
The Alternative Investment Fund Managers Directive has finally been approved by the European Parliament to regulate the activities of managers of alternative investment funds. A dual system will be created to allow for the regulation of managers who are based either within the European Union or in a third country outside it. This update examines the implications for Jersey.
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.
The principal Jersey tax statute is the Income Tax (Jersey) Law 1961 (as amended), which determines the rate of Jersey income tax payable by Jersey investment vehicles. A company will be Jersey tax resident for the purposes of the Income Tax Law if it is incorporated in Jersey or, if incorporated elsewhere, its business is managed and controlled in Jersey.
A recent Royal Court case concerned an application for directions made by the corporate trustee in relation to the underlying assets of three Jersey trusts. The trustee was trustee of each of the trusts, which were settled by three brothers for their families. The three families were trying to obtain a separation of their interests in the trusts. The trustee sought directions from the court as to how to proceed.
A trust is a legally binding arrangement whereby a person (a settlor) transfers assets to another person (a trustee) who is entrusted with legal title to the trust assets, not for his or her own benefit, but for the benefit of other persons (beneficiaries, who may include the settlor) or for a specified purpose. This update looks at the ins and outs of offshore trusts and why Jersey makes for an attractive choice of domicile when setting up a trust.
The Carbon Reduction Commitment Energy Efficiency 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. A particular interest surrounds the impact of the scheme on Jersey trusts where the trustees hold UK property directly.
The A Cunningham No 2 Settlement Trust was established in 1991 with two brothers (the plaintiff and his brother) in the class of beneficiaries who subsequently entered into a dispute with one another as to certain transactions relating to the trust. This unusual case surrounding fairly unique facts provides another example of the Royal Court's willingness to help trustees find a solution to seemingly intractable problems.
Jersey's tax information exchange agreement with France is expected to enter into force shortly. One of the key benefits of the agreement is that Jersey investment funds and real estate holding structures will qualify for exemption from the French 3% real estate tax that is assessed annually on the fair market value of real property in France.