Tag: Mason Birbeck

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. 
Trust Foundations & Private Client

Capital Markets | Arrangers – beware potential tortuous liability owed to investors

Capital Markets | Arrangers – beware potential tortuous liability owed to investors

A recent English High Court judgment (Golden Belt 1 Sukuk Company B.S.C.(c) v BNP Paribas [2017] EWHC 3182 (Comm)) will be of interest to the capital markets community.Capital Markets | Parslows International

Though it may be a decision on its particular facts, it does establish the possibility of a duty of care being owed to investors by arrangers in structured finance transactions.  The case emphasises the importance of arrangers ensuring that they fulfil obligations which industry practice would recognise as being inherent to the transactional functions they fulfil, including establishing proper execution of transaction documents.

The court case centred around a USD650m “sukuk” (a Sharia compliant certificate comparable to a Eurobond) issued by Golden Belt, a Bahraini SPV that acted as issuer and trustee of certificate holders’ rights under the sukuk.

The ultimate economic borrower was a Saudi entity, Saad Trading, Contracting & Financial Services Company (“Saad”).  The certificate holders’ return on their investment was to be by way of rental payments made by Saad relating to land in Saudi Arabia.

The claimants in the High Court proceedings were Golden Belt, and certain holders of the certificates (New York private equity funds specialising in distressed debt) who had acquired their certificates in the secondary market after Saad had defaulted in making payments.

The defendant was BNP Paribas (BNP), involved as arranger / sole bookrunner, lead manager and part underwriter.  Its role included coordinating execution of the transaction documents for the sukuk.

Saad had issued a Saudi law governed promissory note to Golden Belt in support of its obligations under the sukuk.  Due to the uncertainty of successfully enforcing the English law governed certificates in the Saudi courts (applying Sharia law) the promissory note was a vital component to protect certificate holders in the event of a default by Saad and to enhance materially their prospects of a recovery.

Evidence submitted to the High Court established the likelihood that the promissory note was unenforceable as a matter of Saudi law as a result of it not having been executed effectively (a laser-printer signature having been used despite an original handwritten signature having been required under Saudi law).

As a consequence, Golden Belt had ceased to pursue proceedings before the Saudi Arabian Committee for the Settlement of Negotiable Instrument Disputes (CSNID) which it had commenced against Saad on the promissory note.

Consequently, the claimants asserted that they had suffered loss due to the promissory note being unenforceable and that BNP should be made liable, having failed in its duty to exercise reasonable care and skill to ensure that the promissory note had been properly executed.

BNP sought to exclude liability on the basis of the standard disclaimers in the offering circular (by which it excluded any representation or warranty and any responsibility as to the accuracy or completeness of the information in the offering circular).  The offering circular also included a warning to the effect that the existence of a secondary market for the certificates could not be guaranteed.

In his judgment, Mr Justice Males identified that responsibility for the contents of the Circular should not be conflated with responsibility for ensuring proper execution of the relevant transaction documents.  A broad disclaimer of responsibility for actions and statements of its clients, such as those made by way of an offering circular, did not necessarily mean that an arranger was also disclaiming any responsibility for the performance of its own functions.

He accepted that the certificate holders’ decision to invest through the secondary market was based in part on the assurance that, with BNP as arranger, appropriate steps would have been taken to ensure the validity of the transaction.

He held that overseeing and ensuring that the transaction documents had been properly executed was an integral part of arranging the issue.  As such, BNP did owe the funds a duty to take reasonable care to ensure that the promissory note had been properly executed, and it had breached that duty.

Further, that while Saad was BNP’s client, for all practical purposes, ensuring that the promissory note was properly executed was a service carried out entirely for the benefit of certificate holders. In this respect there was no difference between immediate purchasers of certificates and those who purchased subsequently in a secondary market after issue.

Conversely he ruled that BNP, as arranger, did not owe an equivalent duty to Golden Belt.  He concluded that Golden Belt was merely a special purpose vehicle (a “shell”, “conduit” or “brass plate”) with no economic interest of its own in the validity of the promissory note.  It had suffered no loss as a result of the invalidity of the note.

If you require any further information, advice or assistance please contact our head of Trusts & Private Wealth, Mason Birbeck on mason.birbeck@parslowsinternational.com

 

Trusts, Foundations & Private Wealth

 


Main Contact: Mason Birbeck

Head | Trusts & Private Wealth

 


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. 
News and Deals

Parslows International advises New Zealand and Australian tax counsel

variation of a Jersey trust structure Parslows International

Variation of a Jersey trust structure

Parslows International team members advised New Zealand and Australian tax counsel to advise a bank-owned TCB on the variation of a Jersey trust structure to maximise the efficiency of appointments out to New Zealand non-resident trusts.

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

Trusts, Foundations & Private Wealth


Media Contact:

Sally Chinn
Parslows International
Tel: 01534 630530
Email: sally.chinn@parslowsjersey.com
https://parslowsinternational.com


Notes to Editors

Parslows International:

Parslows International is a niche law firm headquartered in Jersey, Channel Islands. It  provides specialist legal advice in Corporate law, Commercial law, Private Client and Trust work and Commercial property.  It has particular expertise that it can call on in cross-border, M&A and international transactions.

Parslows International lawyers have advised and assisted on transactions in many parts of the world including Australia, China, Dubai, much of the EU, Hong Kong, India, Kazakhstan, the United Kingdom, USA, the Republic of Ireland, Russia and Singapore.

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. 
Trust Foundations & Private Client

Pensions | Jersey | Are Qrops Staging a Comeback? | Parslows International

Pensions | Jersey | Are Qrops Staging a Comeback?

In 2014, the UK government announced reforms that were described by some as a pensions ‘revolution’. Those reforms introduced ‘flexible drawdown’, relaxing long-standing restrictions on how, and from what age, pension savers could access their pension pots – meaning that retirees would no longer be forced to buy an annuity to fund their pensions which, in depressed economic times, often produced relatively poor returns for a lifetime’s saving.

The first phase of ‘flexible drawdown’ saw a reduction in size of the pension pot a retiree with a defined contribution pension needed before being entitled to draw a lump sum proportion. A year on, the 2015 UK budget saw the abolition of restrictions on what proportion could be taken as a lump sum, and, as an alternative to the annuity option, the choice of a freely accessible drawdown contract.

While not so fundamental, Jersey has seen similar reforms to its domestic pensions regime. Jersey’s pensions legislation is principally built into its primary tax legislation, the Income Tax (Jersey) Law 1961. In September 2014, an amendment to that law was passed paving the way for implementation of, among other pension-based reforms, the following changes:

  • The existing 30 per cent limit on tax-free lump sum withdrawals was retained – pensioners, however, have been given greater flexibility in the number of tranches by which that 30 per cent lump sum entitlement may be drawn.
  • The requirement that a person of retirement age retires before drawing a pension no longer applies.
  • And pension savers are now allowed to enter into a drawdown contract – attractive to those not wishing to secure their pension by way of an annuity – even if they have already received a tax-free lump sum from their pre-existing occupational pension scheme.

Crossing borders

As well as introducing domestic reforms, the amendment to Jersey’s tax legislation opened opportunities for Jersey’s international pensions offering, particularly in relation to Qualifying Recognised Overseas Pension Schemes (QROPS).

The UK’s QROPS regime enables accrued benefits in a UK pension to be transferred to a non-UK based scheme – where a UK employee is moving overseas, for example – without losing the tax breaks which HMRC affords to UK-registered pension plans. For a QROPS scheme to be ‘recognised’ it has to meet certain criteria laid down by HMRC.

Other international finance jurisdictions, Guernsey included, stole a march on Jersey with regard to accessing the ‘third-country QROPS’ market. In response, Jersey QROPS legislation was lodged for approval by the States in 2012. However, events intervened, as, around the same time, and in response to what it perceived as abuse of the QROPS regime, HMRC de-listed a swathe of self-certified QROPS schemes established in various jurisdictions, including Guernsey.

The third-country QROPS market survived nonetheless, and these latest amendments to Jersey’s pensions law may provide a shot in the arm for Jersey’s own QROPS offering.

The UK rules do not require a QROPS to be established in an individual’s new country of residence – so a QROP established in, say, Guernsey, could be used by a person moving from the UK to the other side of the world. Historically, however, Jersey QROPS were only permitted for Jersey residents. The recent changes to pensions law now allow Jersey residents to transfer their pensions to ‘equivalent’ schemes in other jurisdictions. A corollary to that is the ability for local service providers to now offer Jersey QROPS to non-Jersey residents, removing a significant impediment to promotion of Jersey as a QROPS-friendly jurisdiction.

The recent introduction of flexible drawdown in the UK from April 2015 also has implications for QROPS offerings in Jersey and elsewhere. Whether that will be positive is unclear. It remains somewhat uncertain whether or not HMRC’s principle that overseas scheme rules should mirror those in the UK will mean that QROPS will have to afford flexible drawdown with a similar age cap on accessing pension funds. For a number of jurisdictions offering QROPS, this would mean raising the current age limit provided for by their own legislation.

Certain jurisdictions, such as Malta, have already made legislative moves to align their pension regimes with those changes to the UK rules, and it may be that Jersey will have to follow suit.

Contact: Mason Birbeck

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