Summary of Jersey companies
A helpful guide to the use and flexibility of Jersey companies.
Types of company
Par value company
- Can issue shares with a nominal capital (or par) value
- Will maintain a share capital account in respect of the nominal capital and a share premium account in respect of any premium over the nominal capital paid for such shares
- Total amount of the initial authorised share capital and the par value of each authorised share must be stated in the memorandum of association
- No minimum authorised or issued share capital requirement under Jersey law
- Fully paid up shares of a par value company may be redeemed from any source if accompanied by a solvency statement signed by all directors authorising the redemption. The statement confirming that the company will still be solvent on a cash flow basis 12 months after the redemption
- Save in respect of lawful redemption, repurchase or distribution, a reduction of share capital l generally requires the sanction of the Royal Court of Jersey.
No par value company
- Issues shares which are expressed as having no nominal value
- Proceeds from the issue of shares must be credited to a stated capital account
- Number of shares that a no par value company is authorised to issue must be stated in the memorandum of association. This can be unlimited
- Fully paid up shares may be redeemed out of any source provided the company can meet certain cash flow solvency tests
- Distributions may be made out of stated capital accounts of no par value companies, unlike nominal accounts of par value companies. This adds a greater degree of flexibility where shareholders wish to recover capital
- Also suited to companies with a frequently changing membership and limited number of creditors
- Par value companies can convert to no par value and vice versa.
- Abandon the concept of shares altogether
- Each guarantor member guarantees to contribute a fixed sum in the event of the company’s insolvent liquidation
- Particularly suited to charitable, social, political or other non-trading purposes
- As a guarantor member is under a contingent liability to the company, the articles of association can provide that his interest be non-transferable, without this provision being attacked as a fraud on the minority, as would be the case were the restriction to be applied to a shareholder
- Can allow the membership of the company to be more closely controlled than in a company with shareholders
- The articles of association could provide for the appointment of ex-officio or honorary members (who will not necessarily be guarantor members)
- Depending on the manner in which the articles of association are drafted, it can be easier to protect the rights of minority members in a guarantee company than it is to protect minority shareholders in a traditional company
- May be well suited as a vehicle for sporting or leisure associations, or in any circumstances where shareholdings are unnecessary or undesirable
- As the member’s interest is a ‘contingent liability’ rather than an asset, this may be advantageous in the context of tax and inheritance planning.
- It is possible to have a ‘hybrid’ company with both guarantee members and shareholders, either par value or no par value – but not both
- Particularly adaptable and useful in the context of international tax planning or asset protection structures
- Can create a split between the legal and beneficial ownership of assets, due to the combination of guarantor members and shareholders
- Possible to structure a hybrid company so as to be treated by a foreign tax or regulatory authority as a company, a trust or a partnership.
- A par value company or a no par value company may be limited liability or unlimited liability
- Holder of unlimited shares has unlimited liability to contribute to the assets of the company on a winding up
- Members of the company effectively underwrite the company’s liabilities to the extent of their own personal assets
- Has some similarities to a partnership but it does have a legal responsibility; a creditor of the company can only bring an action directly against a member as part of the process to wind up the company
- In return for accepting the greater risks of unlimited liability, a number of the requirements of the Law, particularly in relation to the maintenance of share capital, do not apply
- Can reduce the number of its unlimited shares without the consent of the Court. An exception to the general rule that a reduction in capital requires the Court’s consent
- Likely to be required to meet international tax planning and regulatory considerations
- Possible to have both limited and unlimited shares.
Single member company
- A Jersey company can be established with a single shareholder without any loss of the corporate veil.
Public and private companies
- The Law distinguishes between public and private companies
- A Jersey company is a public company if stated as such in the memorandum of association
- A Jersey private company is subject to the additional provisions of the Law applicable to a public company as though it were a public company if:
a) it has more than 30 members
b) it circulates a prospectus relating to its own securities or its securities are admitted to trade on a regulated market
- Under the Law, a company may be registered as a private company if it has no more than 30 members or if the Jersey Financial Services Commission is satisfied that by the nature of the company’s intended activities its affairs may properly be regarded as the members’ domestic concern.
- The Law permits the creation of two types of Jersey cell company, the protected cell company and incorporated cell company
- Each is a corporate vehicle giving a flexible structure now widely used in financial transactions
- May be public or private companies
- May have limited or unlimited liability
- May issue par value shares, no par value shares or have guarantee members
- May issue par value shares in respect of one cell and no par value shares in respect of another (unlike a “conventional” company)
- Individual cells may not issue both par and no par value shares
- The name of a cell company must end in the words ‘Incorporated Cell Company’ or ‘ICC’; or ‘Protected Cell Company’ or ‘PCC’.
Protected Cell Company (PCC)
- A single legal entity that attributes its assets and liabilities either to the protected cell company itself or to the individual cells it creates
- The assets and liabilities of the PCC and those attributed to its cells are ‘ring fenced’ from each other.
Incorporated Cell Company (ICC)
- The ICC is a further development of the PCC concept
- Each cell of an ICC is itself an individual incorporated company which can hold assets and incur liabilities in its own name without contamination of or by the assets and liabilities of another cell
- The rights of the shareholders in such cells are restricted to the relevant cell, although individual companies cannot act independently of the incorporated cell company that created them
- The combination of the umbrella of the incorporated cell company and the separate legal personality of each individual cell will prove extremely attractive to investors seeking segregation of assets and liabilities within one vehicle whilst allowing those jurisdictions unfamiliar with the PCC concept to recognise and respect such segregation.