It is not intended to provide a comprehensive guide and further advice should be sought in relation to specific transactions.
Advantages of Jersey
Jersey is the premier offshore jurisdiction of choice for many global corporations and financial institutions and lead onshore counsels. Its enviable position owes much to the excellent quality of its service providers and its flexible and well-developed legal and regulatory framework. The provision of corporate, funds and finance advice and related services represents the core business of Walkers globally and is the primary focus of the Jersey office.
Benefits of using a Jersey LLP
LLPs are often used for the purposes of tax and financial planning because they are tax transparent for Jersey income tax purposes, with no assessment being raised on the LLP itself but instead on the partners of an LLP in respect of their share of the income and gains of the LLP. This ensures tax neutrality for the LLP partners who are subject to tax in accordance with the rules of their own jurisdictions.
Additional benefits of Jersey LLPs include the limited liability afforded to its limited partners. Partners in a Jersey LLP can participate in the management of the LLP (each being an agent of, with the ability to bind the LLP) without jeopardising their limited liability status.
In addition, the Limited Liability Partnerships (Jersey) Law 2017 (as amended) (the "LLP Law") is very flexible, such that the partners in a Jersey LLP are free to agree the terms attaching to the structure and operation of the LLP between themselves in an LLP agreement.
Uses of an LLP
Over 60% of LLPs currently registered in Jersey are being used as general partners to limited partnerships, where the intended onshore tax treatment requires a general partner to be tax transparent.
LLPs can also be used in relation to internal tax planning arrangements, as vehicles for Jersey Private Funds and Alternative Investment Funds (but not Collective Investment Funds), as components in family office/asset protection arrangements and as a vehicle for professional services business including asset manager and investment advisers.
Key characteristics of an LLP
Separate Legal Personality
A Jersey LLP has its own separate legal personality from its partners, meaning that under the LLP Law it can own its own property, enter into contracts and sue and be sued in its own name.
Partnership contribution
Under the LLP Law, all partners of an LLP must contribute capital or effort and skill to the business and wish to carry on the business with a view of profit, and this will be regulated by the LLP agreement.
Limited Liability
Partners of an LLP have limited liability, with all liabilities of an LLP being met out of the LLP's own assets and, although there may be clawback from partners in limited circumstances, the maximum amount that a partner could lose if judgement was made against the LLP would be their interest in the property of the LLP, together with certain amounts paid to that partner from the LLP's property if the LLP was insolvent at that time.
Partners can also participate in the management of an LLP, each being an agent of the LLP and having the ability to bind the LLP, without jeopardising their limited liability status.
Tax Transparency
Jersey LLPs are tax transparent, with taxation being assessed on the partners of the LLP in respect of their share of the income and gains of the LLP, with no assessment being raised on the LLP itself. Non-Jersey resident partners' profits or gains from international activities of an LLP are not subject to Jersey income tax, although the partners should always seek tax advice tailored to their specific circumstances.
Withdrawal of Property
If a partner wishes to withdraw any LLP property, a specified solvency statement must be made or already be in place within the previous 12 months, otherwise, in most circumstances, the partner is liable to reimburse the LLP for that withdrawn property. The LLP Law specifies the form of a solvency statement that needs to be made by the LLP to the effect that the LLP will be able to carry on its business and discharge its debts as they fall due for a period of 12 months (or earlier dissolution) from the date of the statement. A solvency statement may be made at any time and a copy must be sent to the LLP's secretary within 28 days.
Formation of LLPs
Legislation
An LLP is a legal person (other than a body corporate) distinct from the partners whom it is for the time being composed of, with its existence depending upon the LLP having at least two partners. Accordingly, any contract which binds the LLP is made only with that legal person and any change in the persons who are partners in the LLP shall not affect the existence, rights or liabilities of that legal person. Jersey LLPs are established pursuant to the LLP Law.
Regulatory Consent
The consent of the Jersey Financial Services Commission (JFSC) pursuant to the Control of Borrowing (Jersey) Order 1958 (as amended) must be obtained in order to register a Jersey LLP and/or to create interests in a Jersey LLP.
LLP registrations can only be made by a beneficial owner who resides in Jersey, or an entity regulated by the JFSC with the relevant licence to provide formation services.
Establishment and Registration
The name of an LLP must end with 'Limited Liability Partnership', 'LLP' or 'L.L.P.'.
Under the LLP Law, there must be a minimum of two partners to establish an LLP, but there is no upper limit on the number of partners that can be named.
An LLP is established by way of an application made to the Registrar of LLPs and the application must specify, amongst other things:
- the total amount of proposed capital to be invested; and
- identify any partners who are activity involved in managing the LLP as 'significant persons'.
The LLP may have an unlimited duration or be limited to a specific term.
A declaration (the "Declaration") must also be filed pursuant to the LLP Law and will include, amongst other things, the following details for submission:
- the name and registered office address of the LLP; and
- the name and address of all partners and the LLP secretary.
Any change to the information contained in the Declaration must be notified to the Registrar within 28 days. The Declaration is available to the public but there is no need to file the details of the partners' contributions or details of the nature of the activities and purpose of the LLP in the Declaration.
It is common to appoint a corporate services provider in Jersey to assist with the establishment a Jersey LLP, provide a registered office (which it must maintain) and to attend to the ongoing Jersey filings (such as tax return filings with Revenue Jersey and statutory filings with the Jersey Registry) on behalf of the Jersey LLP.
A consent under the Control of Borrowing (Jersey) Order 1958 and certificate of registration are issued upon establishment of the LLP. The certificate is conclusive evidence that the LLP has been properly registered noting that the Registrar has the right to remove material from the register that is:
- inaccurate or derived from forgery; or
- invalid or ineffective; or
Additional regulatory consent may also be required depending on the nature of the business of the LLP (eg if the LLP wishes to be authorised as a Jersey Private Fund).
Constitutional documents and other requirements
Constitutional Documents
The LLP agreement sets out the terms of governance and regulation of the affairs of the LLP. There are no requirements to file the LLP agreement with the Registrar, meaning that the terms of the LLP Agreement are not available to the public. However, if the LLP is regulated, certain details may need to be disclosed on a private basis to the Registrar.
Residence of Partners
Under the LLP Law, there is no requirement for a partner of the LLP to be resident or (in the case of a body corporate) to be incorporated in Jersey, although if an LLP is regulated in Jersey, then there may be a regulatory requirement to have Jersey based partner(s), upon which specific advice must be sought.
Accounting Records
Accounting records must be maintained, with these being sufficient to show and explain the LLP's transactions and to disclose the financial position of the LLP with reasonable accuracy. However, there is no obligation for the LLP to appoint an auditor or have its accounts audited (unless otherwise required by the LLP Agreement).
LLP Records
The Records of the LLP (which includes a register of partners) must be kept at the LLP's registered office and may only be inspected by partners and the Registrar on request and are unavailable for public inspection.
LLP Documentation
All letter heading, accounts, invoices, statements and other official publications must state the LLP's name, number (if any) assigned to it by the Registrar and the wording 'registered as a limited liability partnership in Jersey'. It is an offence under the LLP Law to fail to comply with these requirements.
Secretary
An LLP must appoint a secretary, which can be either a company or individual and is:
- a Jersey resident partner in the LLP, or in the case of a body corporate, one with a registered office in Jersey; or
- registered under Part 2 of the Financial Services (Jersey) Law 1998 to carry out trust company business.
Termination of an LLP
There are three stages involved in relation to the termination of an LLP, pursuant to the LLP Law. These are:
- winding up of the affairs of the LLP; and
- cancellation of the registration of the LLP.
Dissolution
There are a variety of ways in which an LLP can be dissolved, and these include:
- if the number of partners in the LLP falls below two;
- by agreement of the partners in accordance with the terms of the LLP agreement;
- by application to the Royal Court (in circumstances which are specified in in the Limited Liability Partnerships (Dissolution and Winding Up) (Jersey) Regulations 2018 (the "LLP Regulations");
- pursuant to a declaration of désastre under the Bankruptcy (Désastre) (Jersey) Law 1990.
The Registrar may also issue a notice of intended dissolution in the following situations:
- if the LLP has failed to do any of the following:
- provide its secretary with any accounting records or annual confirmation statements; and
- pay any fees as required to be paid under the LLP Law;
- where the LLP does not have a registered office in Jersey;
- if the Registrar believes that the LLP is not carrying on business; and
- if the Registrar fails to receive from the LLP's secretary any annual confirmation statement or specified solvency statement as required by the LLP Law.
The LLP has three months to remedy any non-compliance with the LLP Law, otherwise, if the non-compliance is not rectified within this timeframe, the Registrar may issue a certificate of dissolution in respect of the LLP.
Winding up of an LLP
The LLP Regulations set out in detail the procedures to wind up an LLP in both solvent and insolvent situations.
If an LLP is solvent at the point of being wound up, then a dissolution manager will be appointed by the partners, or, if no one is appointed, it shall be all the partners jointly taking on the role. In an event where the number of partners falls below two, the dissolution manager will be the individual who was the last remaining partner of the LLP. A dissolution manager can be appointed or removed by the Court in certain circumstances as set out in the LLP Regulations.
If an LLP is insolvent at the point of being wound up, or becomes insolvent thereafter, an insolvency manager will be appointed in accordance with the LLP Law. A dissolution manager may be appointed as the insolvency manager if they are appropriately qualified.
Cancellation of registration of the LLP
If the LLP was solvent at the point of winding up, a statement that the LLP has been wound up and signed by the dissolution manager must be delivered to the Registrar within 28 days. In the case where the LLP was insolvent at the point of winding up, the insolvency manager provides certain specified information to the Registrar upon completion of the winding up. Once the relevant information is received, the entry in the register relating to the LLP will be cancelled and a certificate of cancellation of registration will be issued by the Registrar.
Reinstatement of the LLP is possible up to ten years after the dissolution of the LLP.
About Walkers
The Walkers Investment Funds & Corporate teams in Jersey are experienced in all aspects of the establishment and use of Jersey LLPs and have strong links with onshore counsel and tax advisers.
The information contained in this Guide is necessarily brief and general in nature and does not constitute legal or taxation advice. Appropriate legal or other professional advice should be sought for any specific matter.
