Corporate Law

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Limited Liability Companies (Jersey) Law 201 | Commercial Law | Parslows International

Consideration of the Limited Liability Companies (Jersey) Law

On 21 May 2018, the Limited Liability Companies (Jersey) Law 201- (LLC Law) was formally presented to Jersey’s government for its consideration and approval.

Limited Liability Companies (Jersey) Law

LLC Law will continue Jersey’s trend of introducing innovative financial services vehicles

If adopted, the LLC Law will continue Jersey’s trend of introducing innovative financial services vehicles.  It follows on from legislation introduced in 2009 creating the Jersey foundation, a company / trust hybrid, aimed at providing clients based in civil law jurisdictions (Europe, South America and the Far East) with an alternative, more familiar, wealth planning vehicle to the Jersey trust. Other recent innovations in Jersey’s financial services-focused legislation include amendments to the Trusts (Jersey) Law 1984 and the adoption of the Limited Liability Partnership (Jersey) Law 2017.

Once in force, the LLC Law will bring into being the Jersey limited liability company (Jersey LLC).  Another hybrid entity, the Jersey LLC has been described as sharing some features of a company and others akin to a statutory partnership.  As such, it will have separate legal personality but without being classified as a body corporate.

Its proponents’ focus is across the Atlantic.  It is anticipated that introducing an entity which is identifiable with the ubiquitous vehicle of choice for a wide range of activities in the United States will further encourage the current growth in Jersey’s U.S. source business.

LLC Agreement

A Jersey LLC will be governed by an “LLC agreement” operating within the overarching legal framework set out in the LLC Law.  The LLC agreement will be legally binding on the LLC itself, each of its members and its managers.  Appointment of a manager to manage the LLC would be optional, with the extent of the manager’s powers determined by the LLC agreement.

A Jersey LLC would have one or more members, and absent appointment of a manager, would be managed by its members, who would each have an “LLC Interest” – an interest in the LLC’s profits / losses, rights to distributions and whatever other rights / obligations are provided for in the LLC agreement.

Designed to be a transparent entity for tax purposes, and emulating the flexibility of its U.S. counterpart (the Jersey LLC will be capable of creating designated series), it is anticipated that the addition of this vehicle to Jersey’s existing financial services offering will have appeal not just in the U.S., but globally.

If you require further information or advice please contact our head of department,  Mason Birbeck on +44 (0)1534 630530 or email mason.birbeck@parslowsinternational.com


Main Contact | Mason Birbeck

 


Please note that the information provided on this website is for general information purposes only and is designed to provide you with an outline of the legal services or opinions we offer.  Whilst we endeavour to ensure our information is correct and useful, we make no representations or warranties regarding the accuracy or completeness of the information offered.  Information on our website does not constitute legal advice and Parslows International accepts no liability for any loss or damage arising out of, or in connection with, the information found in this website.  Please consult a lawyer in the event that you require professional assurance that our information, and your interpretation of the same, is correct.
Corporate Law

Jersey Company Mergers | Jersey | Parslows International

Jersey Company | Merger Regime

Mergers Parslows International

In 2011, the Companies (Amendment No. 5) (Jersey) Regulations replaced the pre-existing merger provisions contained within Jersey’s principal companies legislation, the Companies (Jersey) Law 1991 (“Companies Law”).

Those new provisions were introduced in order to modernise and extend the statutory basis for mergers involving Jersey incorporated companies. The hope was to provide a more flexible merger regime, while at the same time ensuring shareholder and creditor protections were maintained.

It introduced a statutory mechanism enabling the merger of Jersey companies with other Jersey incorporated entities (not being companies), and also with entities incorporated outside of Jersey.

Which entities can / cannot merge?

The Companies Law provides that only “relevant Jersey companies” are capable of mergers. It defines a “relevant Jersey company” as a Jersey incorporated company which is not:

• a cell company;
• a cell;
• a company with unlimited shares; or
• a company with guarantor members.

The Companies Law goes on to identify the types of entities with which a relevant Jersey company is capable of merging. In broad terms, that encompasses:

• another Jersey company;
• another Jersey incorporated body (if the Jersey legislation under which that body is formed allows that); or
• a foreign incorporated entity (say a foreign company or foundation) which under the laws of its existing jurisdiction is able to merge with a Jersey company.

The Companies Law empowers Jersey’s Chief Minister to designate “excluded bodies” – classes of foreign incorporated entities with which a Jersey company cannot merge.

Survivor Body / New Body

Whatever the nature of the entities involved in the merger, at the end of the process a single incorporated entity exists, being either a “survivor body” or a “new body”. It will be a survivor body if one of the merging bodies absorbs all the others and continues in existence after the merger. Alternatively, it will be a new body if all the merging entities cease to exist and are reconstituted as an entirely new legal entity.

The Companies Law envisages that a survivor body, or new body, can be:

• a Jersey company;
• a Jersey incorporated body (not being a company); or
• an overseas incorporated body (e.g. a foreign company or foundation).

Types of merger

The Jersey merger process is broadly similar in each case, but with some differing steps and complexity depending on whether the merger is:
• a cross-border merger (i.e. a merger that involves a Jersey company and an overseas body),
• a merger between two or more unrelated Jersey incorporated bodies; or
• an internal group merger of Jersey companies.

Merger process

The directors of each merging company must resolve to approve the merger and execute a solvency certificate confirming the company’s solvency. The persons selected as the directors / managers of the post-merger body also have to sign a solvency certificate.
Except in the case of an internal group merger, a written merger agreement will be required. It is that agreement which governs the terms of the merger. The merger agreement has to be approved by the members of each merging company.

Once the directors’ resolutions and solvency certificates have been concluded, the directors of each merging company must submit the merger agreement for approval by its members. The members’ approval must be by special resolution, and where a company has more than one class, by special resolution of each class.

Each merging company must also give written notice of the merger to each of its creditors having claims over £5,000. The Companies Law sets out specific time periods for obtaining member approval and for notifying creditors. As well as those individual creditor notices, advertised public notice of the proposed merger is required.

As a protection mechanism, the Companies Law confers on creditors and members the right to object to the merger by application to Jersey’s Royal Court.

Jersey Regulator / Companies Registrar approval

A cross-border merger requires the approval of Jersey’s financial services regulator (the Jersey Financial Services Commission). That approval must be at the level of the Commissioners themselves. In determining whether or not to approve the merger, the Commission must be satisfied that it would not be unfairly prejudicial to the interests of any creditor of any of the merging bodies and will also have regard to its wider remit of protecting Jersey’s reputation and interests. Various documents evidencing compliance with the statutory merger process, and the effect of the merger for the purposes of the other jurisdiction(s) involved, must be submitted to the Commission together with the merger application.

A merger between Jersey incorporated companies also involves an application process, albeit a simplified joint application by the merging companies to Jersey’s Companies Registrar.

Internal group mergers

The merger process is further simplified still where the merger is between Jersey companies in the same group. The board resolutions, solvency certificates, creditor notices and advertisement are still required; however, a formal written merger agreement is not. The shareholders can approve the merger simply by passing special resolutions to that effect. The Companies Law sets out a different merger mechanism / effect depending on whether the internal merger is a holding company merger or an inter-subsidiary merger – which also dictates the prescribed wording for the shareholder special resolutions approving the merger.

Insolvent merger

If any of the merging entities are insolvent, the Companies Law provides that the merger cannot proceed without permission of the Royal Court of Jersey. The Court will not permit the merger unless satisfied it would not be unfairly prejudicial to the interests of any creditor of any of the merging bodies.

Effect of merger

The effect of the merger for Jersey law purposes is that the merging entities continue as a single merged body. Any merging Jersey body that is not a survivor body ceases to be incorporated. Assets and liabilities of the merging companies transfer to the surviving or new corporate body so that:

• all property and rights to which each merging body was entitled immediately before the merger was completed become the property and rights of that merged body;
• it becomes subject to all criminal and civil liabilities, and all contracts, debts and other obligations, to which each of the merging bodies was subject immediately before the merger was completed; and
• all legal proceedings, which were pending by or against any of the merging bodies before the merger was completed, can be continued by or against the merged body.

Comment

A merger may be an attractive alternative restructuring tool as compared to a takeover or scheme of arrangement (mechanisms also provided for by the Companies Law). A merger does not require Court sanction as would a scheme of arrangement, and while, in the context of a takeover, squeeze out provisions under the Companies Law require 90% shareholder approval, a merger may proceed with the sanction of a two thirds majority. A merger may also present tax planning advantages as compared to a conventional company acquisition.

If you require any further information, advice or assistance please contact Mason Birbeck mason.birbeck@parslowsinternational.com

 

Corporate / M&A

 


Main Contact | Mason Birbeck

Corporate | Jersey


Please note that the information provided on this website is for general information purposes only and is designed to provide you with an outline of the legal services we offer.  Whilst we endeavour to ensure our information is correct and useful, we make no representations or warranties regarding the accuracy or completeness of the information offered.  Information on our website does not constitute legal advice and Parslows International accepts no liability for any loss or damage arising out of, or in connection with, the information found in this website.  Please consult a lawyer in the event that you require professional assurance that our information, and your interpretation of the same, is correct. 
Corporate Law

Company Demerger | Jersey | Parslows International

demerger regime Parslows International

Jersey Company | new demerger Regime

Following a period of consultation which closed early in the year, it is anticipated that the Companies (Demerger) (Jersey) Regulations will come into force later in 2018.

These regulations will introduce a new procedure for Jersey companies, allowing them to spin off or split up into two or more Jersey companies, with the original company’s property, rights and obligations being apportioned between them.

Will the demerger regime be available to all Jersey Companies?

Demerger will not be available to all Jersey companies.  Certain companies within Jersey’s regulated financial services sector will be excluded, and factors such as Jersey taxation status will preclude others from making use of the demerger provisions.

What will the demerger process be?

The process requires a demerger instrument which sets out the fundamental characteristics of the demerged companies following demerger.  Approval at board and shareholder level will be required, as will a confirmation of solvency from the board (a court sanctioned process will be available for insolvent companies).

Generally, a demerger will not require sanction by the Jersey courts.  It will however involve an application to Jersey’s Registrar of Companies and notification to Jersey’s tax authorities.

The regulations include measures aimed at protecting shareholders, creditors and employees.  Notice must be given to creditors and employees, and both shareholders and creditors are empowered to formally object to the demerger by way of a court application.  Continuity of employment is maintained by employment contracts being transferred to one of the demerged companies, subject to an employee’s right to object to the transfer.

Comment

It is anticipated that the new demerger rules will strengthen Jersey’s corporate law offering.  The ability to segregate a company’s business lines, assets and liabilities or effect a pre-sale restructuring utilising the new demerger process, (as an alternative to existing mechanisms such as a court sanctioned scheme of arrangement, liquidation or asset sale), will provide welcome flexibility and cost-efficiency.

If you require any further information, advice or assistance please contact Mason Birbeck mason.birbeck@parslowsinternational.com

Corporate / M&A

 


Main Contact | Mason Birbeck

Corporate | Jersey


Please note that the information provided on this website is for general information purposes only and is designed to provide you with an outline of the legal services we offer.  Whilst we endeavour to ensure our information is correct and useful, we make no representations or warranties regarding the accuracy or completeness of the information offered.  Information on our website does not constitute legal advice and Parslows International accepts no liability for any loss or damage arising out of, or in connection with, the information found in this website.  Please consult a lawyer in the event that you require professional assurance that our information, and your interpretation of the same, is correct. 
Corporate Law

Company Reinstatement | Jersey | Parslows International

Company Reinstatement 


Company reinstatement | Jersey | Parslows InternationalDissolution

Jersey companies can be dissolved either through

(a) formal procedures contained in the Companies (Jersey) Law 1991 (the “Companies Law”) or the Bankruptcy (Désastre) (Jersey) Law 1990 which laws provide for the solvent and insolvent winding up of Jersey companies or

(b) being “struck off” under the provisions of Article 205 of the Companies Law as a result of a failure to submit the annual fee and file the annual return to the Registrar of Companies (the “Registrar”) in Jersey.

If the Registrar has not received the necessary payment/annual return filing by the end of February in each year following the incorporation of the company, then a notice will be sent to the registered office of that company and if there is continued non-compliance for a further period of three months then, at the end of that period, the company will be “struck-off” the Register of Companies pursuant to Article 205 of the Companies Law (a gazette notice is subsequently published in Jersey disclosing these companies).

Company Reinstatement

It is recognised that there will be circumstances when it is necessary for an interested party to seek a company reinstatement of a dissolved Jersey company which is provided for by Article 213 of the Companies Law.

Examples of situations that give rise to an application under Article 213 are as follows:-

(a) as a result of the company being inadvertently “struck-off” (often because the company administrators have not been provided with funding for the annual fee in good time);or

(b) on discovery of further assets owned by a company that was dissolved under a solvent winding-up procedure (a summary winding -up) under the Companies Law; or

(c) on an application of a creditor of a company that has been dissolved where it is perceived that property is held by that company and available to satisfy the claim.

Application

Pursuant to Article 213 of the Companies Law, the Royal Court may declare the dissolution void and order that the company be reinstated.

Who may apply?

The liquidator of the company as well as “any other person appearing to the court to be interested” may make an application for reinstatement. Both shareholders and creditors of the company would be interested parties under Article 213.

Preparation for application for Company Reinstatement

The applicant will firstly need to contact the Jersey Financial Services Commission (the “JFSC”), advising of the intention to seek reinstatement of the company and to confirm whether the JFSC has any objection to the application.

In order for the JFSC to consider the matter and confirm that it has no objection to the application, it will request, amongst other things, the following:-

(a) a draft of the Representation (a form of court pleading and further details of which

are explained below);

(b) in the case of an application made by a shareholder/beneficial owner of the company, a signed letter of confirmation by the beneficial owner confirming certain matters in relation to the company, including any change in its beneficial ownership together with submission of all annual returns of the company that should have been filed but for the dissolution of the company together with outstanding annual filing fees and fines; and

(c) payment of the prescribed fee for the JFSC’s consideration of the application.

The applicant will also require confirmation from the Comptroller of Tax that he has no objection to the application. If there are Tax liabilities owed by the company, then they will have to be satisfied before the Comptroller will provide his confirmation that he has no objections to the reinstatement.

Where the applicant is a creditor, the JFSC will require an undertaking over the discharge of its fees and costs from the creditor and the Comptroller of Income Tax will need to be contacted in order that any tax claims against the company are considered as part of the approval process for the application.

Representation to the Royal Court for Company Reinstatement

Following approval by the JFSC, the ‘Representation’ is filed by the ‘Representor’ (or on its behalf by its legal advisers) with the Judicial Greffe (the administrative arm of the court) for consideration by the Royal Court in relation to company reinstatement.

The Representation must include:-

(a) details of how the company came to be dissolved;

(b) why it is now needed to be reinstated; and

(c) information concerning the current activities of the company (if any).

The Representation must be accompanied by copy letters received by the applicants from the Income Tax Department and the JFSC confirming that they have no objection to the application (see above).

The application does not require an appearance before the Royal Court. However, it should be noted, the resulting “Act of Court” is a public document that may include detailed information in respect of the beneficial ownership of the company.

Effect

The reinstatement will come into effect on the date that the Act of Court is issued by the Royal Court. However, the Representor must send a copy of the Act of Court to the Registrar for registration by the Registrar within 14 days, otherwise the

Representor will be guilty of an offence.

Upon the issuing of the Act of Court, the dissolution of the company will be declared void.

Power of the Court to make additional orders

The Court has the power to include in the Act of Court such orders, give such directions and make such provisions as seem just for placing the company and all other persons in the same position as nearly as may be as if the company had not been dissolved.

Limitation Period

Article 213(1) of the Companies Law provides that the application must be brought within a 10-year limitation period commencing from the date when the company was dissolved. The result is that there is an absolute bar on the reinstatement of the company after this time.

Comment

Great caution should always be taken when providing a personal guarantee under a lease (or otherwise).  If is not a document you should sign without legal advice.

If you require any further information, advice or assistance please contact Mason Birbeck mason.birbeck@parslowsinternational.com

Company Reinstatement | Jersey


Main Contact | Mason Birbeck

 

 


 

Please note that the information provided on this website is for general information purposes only and is designed to provide you with an outline of the legal services we offer.  Whilst we endeavour to ensure our information is correct and useful, we make no representations or warranties regarding the accuracy or completeness of the information offered.  Information on our website does not constitute legal advice and Parslows International accepts no liability for any loss or damage arising out of, or in connection with, the information found in this website.  Please consult a lawyer in the event that you require professional assurance that our information, and your interpretation of the same, is correct. 
Corporate Law

Directors’ Duties Under Jersey Law

Directors duties Parslows InternationalJersey Directors Duties  | A brief guide

The general statement of  directors duties in  is set out in Article 74(1) of the Companies (Jersey) Law 1991. It is set out in two parts and states:

‘A director, in exercising the director’s powers and discharging the directors duties, shall:

  1. a) act honestly and in good faith with a view to the best interests of the company; and
  2. b) exercise the care, diligence and skill that a reasonably prudent person wold exercise in comparable circumstances.’

There have been numerous decisions of the courts which elaborate on these general statements and as such it is important to consider key aspects of the case law when explaining the scope and nature of such Jersey director duties.

Acting honestly and in good faith with a view to the best interests of the company

In order to understand this aspect of directors duties, it is necessary to define what is meant by the best interests of the company. Companies are comprised of shareholders, directors, employees and agents and these respective groups’ interests may conflict and compete over time. The guiding principle is generally taken from the English authority Gaiman v National Association of Medical Health [1971] Ch 317 (England and Wales), which states that when acting, directors should consider the future of the company and balance any short-term benefits against the long-term interests of present as well as prospective members as a whole. Put more simply, a director should consider the collective interests of present and potential future shareholders in the company.

As regards whether any act is itself in the best interests of the company, the key authority is the English case of Charterbridge Corporation v Lloyds [1970] Ch 62. The court held that what is in the best interests of the company is that which an intelligent and honest person in the position of a director would believe to be for the benefit of the company (taking into account all the circumstances in relation to the relevant transaction).

It should also be noted that all the acts of the director must be intra vires. Essentially, this means that a director must exercise the powers available to them for the purposes for which they were intended. This stands even if the director feels that the relevant act would benefit the company. The powers of a director must always be used to benefit the company, fulfil its objectives or be used in a manner that is reasonably incidental to the business.

Further, directors should be aware that their duty to the company persists post-resignation in certain circumstances. Should a director, who has resigned from a company, use knowledge gained from his prior position for personal enrichment, he may be called to account for this benefit to the company of which he was a director.

Exercising the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances

The director must not only act honestly and in good faith, but must also exercise the care, diligence and skill of a reasonably prudent person. Historically the test was simply that as set out in the statute, which effectively set a very low bar. An illustration of this is provided in the case of Re Brazilian Rubber Plantations [1911] 1 Ch 425. There were three directors of the company, one who was deaf, one who knew nothing of the relevant business, and a third who liked the other two directors and took up the position as a favour. None of them was held accountable for the subsequent failure of the company.

That original test remained until as recently as 1989 until the decision in Dorchester Finance v Stebbings and Others [1989] BCLC 498. A group of non-executive directors delegated the management of the company to an executive director and provided pre-signed cheques for his use. Following the misuse of company funds, all directors were sued and each of the non-executive directors was held liable for negligence. The court altered the relevant test and declared that from that point on directors must show such skill and care as may be reasonably expected from persons of their knowledge and experience, take such care as an ordinary person might be expected to in the conduct of their own affairs, and exercise any and all powers in good faith in the best interests of the company. The courts can therefore consider the particular skills and experience of a director in considering whether or not the duty has been met.

Breaches of duty

Should the actions of a director be in breach of their directors duties, they may be liable for any losses incurred and be required to compensate the company. Should such a transaction personally benefit the director, it may be made void.

If a director is intending to or performs an act and is concerned of committing a breach, Article 74(2) of the Companies Law may provide some protection. If all of the members of the company (including those who hold shares which typically carry no voting rights) authorise or ratify the act or omission of the director, the offending act is no longer a breach of the duty, provided that the company will still be able to discharge its liabilities as they fall due. It should be noted that full disclosure of the relevant act or omission is essential for any such ratification to be valid.

Conclusion

It is essential that directors always keep the duty to the company in mind and that they are upfront in declaring any interests they may have in transactions to ensure that their duty is not breached. If a director is ever concerned about the consequences of any act, they should seek guidance notwithstanding the possibility of a retrospective ratification of their decisions.

If you require any further information, advice or assistance please contact Mason Birbeck at mason.birbeck@parslowsinternational.com

Corporate / M&A


Main Contact|  David Hill

Head |  Corporate/M&A


Please note that the information provided on this website is for general information purposes only and is designed to provide you with an outline of the legal services we offer.  Whilst we endeavour to ensure our information is correct and useful, we make no representations or warranties regarding the accuracy or completeness of the information offered.  Information on our website does not constitute legal advice and Parslows Jersey accepts no liability for any loss or damage arising out of, or in connection with, the information found in this website.  Please consult a lawyer in the event that you require professional assurance that our information, and your interpretation of the same, is correct. 
Corporate Law, Cross Border & International Transactions

Migration Of Companies | Jersey | Parslows International

Migration of Companies | Brief Guidemigration of companies Jersey | Parslows International

The Companies (Jersey) Law 1991 (the “Companies Law”) includes provisions enabling:

A company incorporated in a foreign jurisdiction to move its place of incorporation to Jersey; or

A Jersey incorporated company to continue as a foreign incorporated company in that foreign jurisdiction.

The terms “continuance”, “migration” and “re-domiciliation” are used interchangeably but the Companies Law refers to the term “continuance”. However, for the purposes of this note we shall use the commonly used term “migration”.

Consent for either inward or outward migration is required from the Jersey Financial Services Commission (the “JFSC“), which provides regulatory oversight for financial services conducted in Jersey.

The key feature of a migration is that the migrating company can move its business (together with its place of incorporation) from one jurisdiction to another (assuming each place recognises the ability to migrate) and retain legal liability for all of its existing obligations without the need for complex and expensive business transfer assignments or novations of obligations. Furthermore, where migrations are recognised, there is no need to convey property into the name of the company that is seeking “continuance” because it continues to benefit from all ownership rights relating to its assets.

Companies may choose to migrate between jurisdictions for a variety of reasons e.g. to benefit from changing business opportunities, to achieve a more efficient cost base or to take advantage of more flexible regulation.

Migration of companies into Jersey

The application process for a foreign migration of companies  to migrate to Jersey is, so far as the Jersey side of the migration is concerned, a three-stage process and one that requires consent from the JFSC.

Pre-application

The first stage of the process principally involves the creation and approval of the “articles of continuance”.

The constitutional documents of the foreign company will generally not conform with the requirements of the Companies Law, therefore, company’s members must adopt amended constitutional documents that do so, these being the “articles of continuance”. These articles will take effect upon the company becoming incorporated as a Jersey company.

Other ancillary matters should be dealt with at this stage to avoid delay at a later stage, namely the administration arrangements for the company (it will need a registered office address in Jersey), the satisfaction of anti-money laundering issues and taxation advice, which should be taken to ensure that all relevant fiscal consequences are understood.

Application

The second stage of the process involves the application itself to the JFSC.

The relevant application form (form C100) can be downloaded from the Registry Section of the JFSC website. This form must be completed and submitted on behalf of the company to the JFSC with the requisite information and documentation including, inter alia:-

(i) the articles of continuance;

(ii) a statement of solvency signed by each director and each proposed director;

(iii) particulars of the directors and secretary;

(iv) confirmation from a lawyer qualified in the foreign jurisdiction on various issues regarding the foreign company;

(v) application fee payable to the JFSC (currently £500).

Post-Application

The JFSC will advise the Registrar of Jersey Companies (the “Registrar”) that the application has been granted. The Registrar will then issue the company with a Certificate of Continuance.

The potential of other regulatory requirements should also be considered, including the obtaining of a licence under the Regulation of Undertakings and Development (Jersey) Law 1973, if the company is intending to occupy floor space and employ staff in Jersey.

Migration of companies out of Jersey

As with a migration into Jersey, the process for a Jersey company to seek continuance overseas is also a staged process.

Shareholder approval

The company must first obtain shareholder approval of the migration. The members and each separate set of share classes must pass a special resolution (as defined in the Companies Law and the company’s articles of association) approving the migration.

Board of directors approval

The board of directors of the company must then hold a meeting at which it must approve:-

(i) the proposal to migrate;

(ii) the issuing of all notices to creditors (see below); and

(iii) the circulation of the special resolution.

Notice to creditors

A notice must be sent to all creditors as well as the publication of a Notice to Creditors in the Jersey Gazette informing them of the company’s intention to migrate and their right to object within 30 days. Only after 30 days following the sending of the last of the Notices to Creditors (assuming no objections are received from any creditors) can the application be made to the Registrar.

A second board meeting must then take place:

(i) Noting that a period of 30 days has passed following the passing of the special resolution and no members have objected to the migration;

(ii) Noting that a period of 30 days has passed since last notification to creditors and no creditor objection has been received (see above);

(iii) Noting that all local government consents have been obtained; and

(iv) Approving the final application to the Registrar for the migration from Jersey, including:

(a) a completed Form C101 (similar to the C100 Form);

(b) the Directors’ Declarations (see below).

Directors’ Declarations

Directors’ Declarations are required pursuant to the Companies Law confirming, inter alia, the solvency of the company and that no member objection has been received.

The Application

The company must then write to the JFSC enclosing all relevant application documentation including, inter alia:-

(i) Completed C101 Form with Minutes of the directors authorising the same;

(ii) A certified copy of the members’ special resolution;

(iii) Copy of Jersey Gazette extract showing the publication of the Notice to Creditors and the date of publication;

(iv) A certified copy of the audited financial statements of the company for the period ending 12 months within the date of the application (non-audited accounts may be accepted in certain circumstances);

(v) Originals of the Directors’ Declarations;

(vi) Affidavit of a lawyer authorised to practice in the foreign jurisdiction as to the ability of the company to seek continuance in that jurisdiction.

The JFSC will issue a conditional consent pending notification by the company to the Registrar of the date of issuance of the certificate of incorporation from the relevant registrar in the foreign jurisdiction along with the delivery of a copy of the same to the Registrar. Upon receipt by the Registrar of such certificate of incorporation the company shall cease to be incorporated under the Companies Law and the Registrar shall record that it has ceased to be so incorporated as of that date.

If you require any further information, advice or assistance please contact Mason Birbeck mason.birbeck@parslowsinternational.com

Company Migration | Jersey


Main Contact | Mason Birbeck

Head | Company Migration

 


 

Please note that the information provided on this website is for general information purposes only and is designed to provide you with an outline of the legal services we offer.  Whilst we endeavour to ensure our information is correct and useful, we make no representations or warranties regarding the accuracy or completeness of the information offered.  Information on our website does not constitute legal advice and Parslows International accepts no liability for any loss or damage arising out of, or in connection with, the information found in this website.  Please consult a lawyer in the event that you require professional assurance that our information, and your interpretation of the same, is correct. 
Corporate Law

Joint Venture Agreements | Core Aspects

Joint Venture Parslows InternationalJoint Venture Agreements | Core Aspects

Finding the right “Joint Venture” partner can open up new markets and distribution networks, and combining distinct skills and resources of separate but complimentary businesses should make achieving common objectives easier.  As compared to going it alone, a joint venture eases the level of resource commitment (financial or otherwise) of each joint venture party.

However, it is by no means free from potentially fundamental difficulties.  The set-up and operation of a separate joint venture vehicle often means additional cost in both monetary terms and human resource.  If contributions are not purely monetary there may be disagreement as to the value each party brings to the arrangement and, in turn, expectations as to control and financial return.

Most often, joint venture parties will be separate businesses with separate leadership, used to autonomy in decision making.  That can also create tensions as to the division of control in relation to their joint enterprise.  If those originating businesses operate in the same space then competing interests can also mean frictions arise.

A joint venture agreement will not resolve such commercial issues.  It can however bring into focus the parties’ respective expectations, and identify and address potential problems at an early stage, which may create more fundamental difficulties further down the line, when less easily resolved.

Having determined that operating through a separate jointly owned company is the right model, what should the respective holders ensure that the agreement governing the venture will cover?  Unsurprisingly, such an agreement will to an extent need to be tailored to the particular circumstances of the parties and their business, but there are common aspects one would expect to be included.

Identifying the exact nature and scope of the new undertaking’s activities is fundamental.  The term of the agreement should also be set out – is the venture to be finite to achieve a specific project within a given timeframe, or endure for the longer term?  Expectations as to turnover, and any geographical limitations (e.g. excluding territories in which one shareholder already operates) should also be incorporated.

The agreement should identify the contributions to the venture which the respective parties are obliged to provide and, if the joint venture is to be financed, how that financing will be serviced.  If the parties’ contributions by their nature create associated legal relationships, such as the licensing of intellectual property rights or the secondment of employees, the terms of those relationships should be clearly set out, possibly by way of separate stand-alone agreements.

The respective shareholders’ powers and in turn the levels of control can be a key area of friction.  If the equity in the business is not to be divided equally, shareholders with smaller interests will invariably seek minority protections, giving them a veto on critical decisions, such as the issue of further shares or acquisition and disposal of major assets.

If the essential nature of the respective shareholders’ ongoing commitments, financial returns or voting rights are not to be identical, then it may well be that having separate classes of shares will deal with that most effectively.

Balance of power is not an issue confined to shareholder level.  The directors will be the company’s governing mind, so each joint venture party will often want the ability to nominate a representative to the board, and to ensure the board meeting quorum and voting rights are structured so as to achieve the agreed balance of board level decision making powers.

Unrealistic profit expectation is another common cause of discord.  The understandable desire to expedite returns on investment may need to be tempered by the need to meet financing obligations or to reinvest into the business.  Joint venture partners must therefore understand their respective financial needs, and care should be taken before deciding to record in the shareholders agreement a commitment to fixed dividends.

The agreement should also address how and when shareholders will be able to exit the joint venture, and in what circumstances the venture should terminate, as well as the consequences of termination.  Those might include forced buy-sell mechanisms aimed at achieving a speedy determination of share value if deadlock arises on exit from the venture.  The parties will also want certain provisions of the agreement to survive termination, for example, confidentiality and non-compete / non-solicitation clauses.

The above is by no means an exhaustive summary of the provisions which a joint venture agreement might cover. Issues such as tax, dispute resolution mechanisms and employment matters may well have to be catered for.  However, this provides a flavour of the type of provisions that, if included, should produce an agreement creating a solid foundation for the sound operation of a joint venture.

If you require any further information, advice or assistance please contact our head of  Corporate/ M&A,  David Hill at david.hill@parslowsinternational.com

Corporate / M&A


Main Contact|  David Hill

Head | Cross Border & International Transactions, Corporate/M&A


Please note that the information provided on this website is for general information purposes only and is designed to provide you with an outline of the legal services we offer.  Whilst we endeavour to ensure our information is correct and useful, we make no representations or warranties regarding the accuracy or completeness of the information offered.  Information on our website does not constitute legal advice and Parslows accepts no liability for any loss or damage arising out of, or in connection with, the information found in this website.  Please consult a lawyer in the event that you require professional assurance that our information, and your interpretation of the same, is correct. 

Corporate Law

Framework for Successful Joint Venture Company

Successful Joint Venture CompanyFramework for Successful Joint Venture Company

Successful Joint Venture Company – There are various statistics bandied about as to the success rate for joint ventures.  A fairly conservative consensus puts that at around 40%.  So why do many businesses still choose to embark on joint ventures?

Having the right ‘JV’ partner can open up new markets and distribution networks, and logic dictates that combining distinct skills and resources of separate but complimentary businesses should make achieving common objectives easier.  As compared to going it alone, a joint venture eases the level of resource commitment (financial or otherwise) of each joint venture party.

What then are the factors that contribute to that statistical failure rate?  Establishing and running a separate joint venture vehicle often means additional cost in both monetary terms and human resources.  If contributions are not purely monetary there may be disagreement as to the value each party brings to the arrangement and, in turn, expectations as to control and financial return. This can impact on a successful joint venture company.

Inherently, a joint venture has as its origin separate businesses with separate leadership, used to autonomy in decision making.  That can also create tensions as to the division of control in relation to their joint enterprise.  If those originating businesses operate in the same space then competing interests can also come into play.

A joint venture agreement will not be a panacea for commercial issues such as those.  It can however set the framework identifying to each of the parties the others’ expectations, and bring into focus potential problems at the establishment stage, which they may otherwise come up against further down the line, when less easily resolved.

So, if, as a prospective joint venture partner, you have concluded due diligence on your proposed confederate(s) and determined that a separate company is the right model for a successful Joint Venture Company, what exactly should the agreement governing the venture cover?  While such a shareholders agreement will to an extent be bespoke to the particular circumstances, there are common aspects one would expect to be included.

Purpose and objectives

For obvious reasons, identifying the exact nature and scope of the new undertaking’s activities is fundamental.  The term of the agreement should be set out – is the venture to be finite to achieve a specific project within a given timeframe, or endure for the longer term?  Expectations as to turnover, and any geographical limitations (e.g. excluding territories in which a shareholder already operates) should also be incorporated.

Contributions and financing

The agreement should state the parties’ initial contributions, and any future commitments they are bound to provide.  Those might include, for example, cash, assets, facilities or intellectual property.  If, by their nature, the contributions create associated legal relationships, (e.g. the licensing of intellectual property rights or the secondment of employees), the terms of those relationships should also be stated, possibly by way of separate stand-alone agreement.

If secured third party financing is to be obtained then one should anticipate recording the requirement for charges over company’s assets and, potentially, secured guarantees from the shareholders, which, to one degree or another, would undermine the effectiveness of using a limited liability company to ring-fence the risk of the venture.

Control

Identified as one of the key areas of friction, it is critical that the agreement identifies the respective shareholders’ powers.  If the equity in the business is not to be divided equally, shareholders with smaller interests will often insist on minority protections, giving them a veto on critical decisions, such as the issue of further shares or acquisition / disposal of major assets.

If the essential nature of the respective shareholders’ ongoing commitments, financial returns or voting rights are not to be identical, then it may well be that having separate classes of shares will deal with that most effectively.

Balance of power is not an issue confined to shareholder level.  The directors will be the company’s governing mind, so the joint venture parties will invariably want the ability to appoint a representative to the board, and to ensure the board meeting quorum and voting rights are structured so as to achieve the agreed balance of board level decision making powers.

Financial return

Unrealistic profit expectation is another common cause of discord.  The desire for a speedy return on investment may need to be tempered by the need to meet third party financing obligations or to reinvest into the business.  Accordingly, care should be taken before deciding to record in the shareholders agreement a commitment to fixed dividends.

Exit

The agreement should also address how a shareholder will be able to exit the joint venture, and in what circumstances the venture should terminate, as well as the consequences of termination.  Those might include forced buy-sell mechanisms aimed at achieving a speedy determination of share value if deadlock arises on exit from the venture.  The parties will also want certain provisions of the agreement to survive termination, for example confidentiality and non-compete / non-solicitation clauses.

The above is by no means an exhaustive summary of the provisions which a joint venture shareholders agreement might cover.  Among others, issues such as tax, dispute resolution mechanisms and employment matters may well have to be catered for.  However, this provides a flavour of the type of provisions that, if included, should produce an agreement providing a solid foundation for the sound operation of a joint venture.

If you require any further information, advice or assistance in relation to Successful Joint Venture Company or any other advice on corporate law please contact Mason Birbeck at mason.birbeck@parslowsinternational.com

Corporate / M&A


Main Contact|  David Hill

Head |  Corporate/M&A


Please note that the information provided on this website is for general information purposes only and is designed to provide you with an outline of the legal services we offer.  Whilst we endeavour to ensure our information is correct and useful, we make no representations or warranties regarding the accuracy or completeness of the information offered.  Information on our website does not constitute legal advice and Parslows Jersey accepts no liability for any loss or damage arising out of, or in connection with, the information found in this website.  Please consult a lawyer in the event that you require professional assurance that our information, and your interpretation of the same, is correct.