Jersey investment funds

By Daniel Richards and Nathan Powell, Ogier
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Jersey has over 30 years’ experience of establishing and providing support to investment funds. Many of the world’s leading fund managers have chosen Jersey to establish funds including 3i, Blackrock, HSBC, Intermediate Capital and UBS.

There are a number of reasons for Jersey’s popularity.

(1) Tax neutrality. Domiciling an investment fund in Jersey will not impose any direct or indirect taxes on the investment fund vehicle (save in a tiny minority of very limited cases) or any withholding taxes on distributions made by the investment fund vehicle to its investors.

(2) Legal regime. Jersey has a modern and efficient legal and court system which is internationally respected.

(3) Regulatory regime. Jersey has a risk-based regulatory regime which provides a pragmatic structure for the regulation of investment funds.

(4) Service providers. As one of the largest offshore jurisdictions, Jersey has the legal and administrative depth and expertise to facilitate complex transactions.

Daniel Richards, Partner 合伙人, Ogier
Daniel Richards
Partner
Ogier, Jersey

Regulatory framework

Jersey is unique among offshore jurisdictions in offering a full range of fund regulation, from rigorous regulation of publicly offered funds targeting retail investors through to funds targeting highly sophisticated investors. The applicable level of regulatory protection is generally determined by the number and nature of the targeted investors.

The establishment and regulation of investment funds in Jersey is governed by the Control of Borrowing (Jersey) Law, 1947 (the Borrowing Law) and the Collective Investment Funds (Jersey) Law, 1988 (the Funds Law) together with their related regulations, and is regulated by the Jersey Financial Services Commission (JFSC). Although the scope of the two statutes overlaps, in practice an investment fund established for a limited number of investors or for a single purpose and which is not to be listed on a recognized stock exchange will only be governed by the Borrowing Law, whereas a more widely distributed or listed fund will be regulated under the Funds Law.

If the total number of investors is less than 15, then the investment vehicle will be treated as a private vehicle and will be exempt from any regulatory approval other than a consent under the Borrowing Law. This consent would be issued as a matter of course upon incorporation or registration. No prospectus or private placement memorandum is required.

Where an investment vehicle has more than 15 investors but less than 50 it will still only need a consent under the Borrowing Law, but the JFSC will treat the vehicle as an investment fund and will apply a promoter test to ensure that the promoter has the necessary track record and expertise to advise the fund. However, the Funds Law (and associated prospectus consents requirements) will not apply. For such funds, the JFSC will also expect a form of private placement memorandum to be produced.

Nathan Powell, Partner 合伙人, Ogier
Nathan Powell
Partner
Ogier, Hong Kong

If shares, units or limited partnership interests are to be offered to more than 50 persons or are to be listed on a recognized stock exchange, a certificate under the Funds Law will also be required for the collective investment fund. It is important to note that for these purposes it is the number of offers made, not the number of investors actually subscribing, which dictates whether a fund is to be regulated under the Borrowing Law or the Funds Law. Accordingly, it is possible for a “red-herring” offering document to be distributed to more than 50 prospective investors without this giving rise to regulation under the Funds Law provided the red-herring document makes it clear that it is not intended to constitute an offer of securities.

Where an investment fund falls to be regulated under the Funds Law, there are various categories of fund class which permit the JFSC to take a light touch to regulation or, in the case of “unregulated funds”, no approval is required at all.

Expert funds: these are subject to a relatively light degree of regulation on the condition that all investors qualify as expert investors and expressly acknowledge an investment warning. An expert fund will benefit from expedited regulatory review and approval and will not be required to adopt any prescribed investment restrictions or risk diversification strategy. Self-certification as to compliance with the expert fund requirements means that an expert fund can be approved by the JFSC within three business days.

Listed funds: corporate closed-ended funds which are listed on recognized stock exchanges or markets also benefit from expedited regulatory approval. Listed funds must have at least two Jersey resident directors and a Jersey regulated administrator. No minimum investment level applies to listed funds and they are open to all investor categories. Jersey was approved as an Acceptable Overseas Jurisdiction by the Hong Kong Stock Exchange (HKSE) in October 2009, making it possible to list Jersey companies on the HKSE in the same way as, for example, a Cayman company.

Unregulated funds: to set up an unregulated fund, only a notification to the JFSC is required. No approval is necessary. An unregulated fund is required to be either a closed-ended fund whose equity interests are listed on a stock exchange/market or a closed-ended or open-ended fund in which all investors make an initial minimum investment of US$1 million or currency equivalent (whether through the initial offering or by subsequent acquisition) or who are “institutional” or “professional” investors as defined in the relevant order. There is no regulatory review or oversight of the terms or the conduct of an unregulated fund. The offering document of an unregulated fund must contain an investment warning and statement that the fund is unregulated.

Tried and tested

Jersey is politically stable and has enormous experience of establishing, and providing ongoing support to, funds. It has a favourable time zone for China-based managers. Above all, Jersey has a tried and tested funds regime chosen by many of the world’s leading fund promoters and has a uniquely wide range of regulatory options to suit the particular circumstances of each fund.

Daniel Richards is a partner at Ogier in Jersey. Nathan Powell is a partner at Ogier in Hong Kong

Jersey

Ogier House, The Esplanade

St Helier, Jersey JE4 9WG

Tel: +44 (0) 1534 504000

Fax: +44 (0) 1534 504444

Email: jsy@ogier.com


Hong Kong

11/F Central Tower

28 Queen’s Road Central, Hong Kong

Tel: +852 3656 6000

Fax: +852 3656 6001

Email: hk@ogier.com

www.ogier.com

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