Jersey’s Limited Liability Companies Law 2018 came into force on 1 September 2022, enabling regulated entities to register limited liability companies (LLCs) with the Jersey Financial Services Commission (JFSC). So what’s the significance? Here, we provide everything you need to know about Jersey LLCs.
An LLC is a vehicle that has elements of a partnership but with separate legal personality. Members therefore have limited liability in relation to their ‘interests’ in the LLC, while also being able to benefit from tax transparency in a similar way to a partnership. This combination makes the LLC a vehicle of choice for alternative investment funds, especially those with US-based investors.
The Jersey LLC regime came into force following the adoption of the Limited Liability Companies (Jersey) Law 2018 (the Law), which is broadly based on the Delaware Limited Liability Company Act. It was amended on 14 February 2023 so that an LLC may register either as a body corporate or an unincorporated body, but no subsequent change is permitted.
What are the key characteristics of the Jersey LLC?
- LLCs have separate legal personality, which means that they can, in their own capacity, sue and be sued, acquire and dispose of assets and incur debts and obligations
- The member(s) or manager(s) of the LLC are not personally liable for the debts and liabilities of the LLC by virtue of being a member or manager – unless expressly provided otherwise in the LLC agreement
- An LLC may be formed for any lawful business, purpose or activity, whether or not for profit. It has unlimited capacity and shall possess and may exercise all powers and privileges granted by the LLC agreement or the Law
- A specific feature of the Law – as of the February 2023 amendment – is that an LLC can elect, on registration, to be a body corporate or not. This is a one-off and irrevocable election
- The key governing document of the LLC is its agreement. The Law is not prescriptive on the contents of the LLC agreement with the exception that the governing law of an LLC agreement must be Jersey law
- The LLC agreement must be made in writing and it binds the LLC, its members and the manager, irrespective of whether or not they execute it. It can only be amended in accordance with its terms or alternatively with the unanimous approval of all LLC members
- An LLC agreement may only be amended in accordance with its terms and, if it is silent on that matter, with the unanimous approval of all members
How do you establish a Jersey LLC?
An LLC is established and registered by filing a declaration, which must state the name of the LLC, its registered office address and the name and address of each member, manager, secretary or (if any) deputy secretary.
In addition, information relating to the activities of the LLC and its ultimate beneficial owners must be provided, together with the relevant fees.
Upon registration, the Jersey Registry of LLCs issues the LLC with a certificate of registration. The name of an LLC must end with the words “Limited Liability Company”, either in full or using the abbreviations “LLC” or “L.L.C.”.
Management of a Jersey LLC
An LLC agreement may provide for the management of an LLC by one or more managers and for the appointment of a person as a manager. A manager may also be a member. The appointed manager has, to the extent provided in the LLC agreement, vested in itself the management of the LLC. Subject to the LLC agreement, each manager has the authority to bind the LLC.
Where the LLC agreement does not provide for the management of an LLC by a manager, or it does but no manager has been appointed, the management of the LLC vests in its members and a member has, subject to the LLC agreement, authority to bind the LLC.
If the LLC agreement is silent on the mechanics of the removal/appointment of the manager, there is taken to be included in the LLC agreement a provision that a manager may be removed by a vote or with the consent of the members.
A manager of an LLC can be a company or an individual and does not need to be a Jersey resident. There can be more than one manager.
The specific roles of secretary and nominated person
An LLC must appoint a secretary and may appoint a deputy secretary.
The secretary may be a company with a registered office in Jersey, an individual resident in Jersey, or a company or individual registered under the Financial Services (Jersey) Law to carry out trust company business (TCB).
The secretary must keep an LLC’s accounting records, returns and filings for 10 years at a place in Jersey.
In addition to the secretary, each LLC must appoint a nominated person to act as the main contact with the Jersey Registry and provide it with information.
Members of a Jersey LLC
An LLC must have at least one member. A member of a Jersey LLC doesn’t have to be a Jersey resident.
Subject to the LLC agreement, members can limit their liability to the amount they have agreed to contribute to the LLC.
For a person to become a member (including a sole member) it is not necessary to provide a contribution to the LLC. However, this is subject to any capital or investment requirements if certain regulatory exemptions in Jersey will be sought, such as requirements relating the Jersey Private Fund (JPF) regime.
A person may be a member and a manager at the same time in the LLC and the rights and duties of the members in an LLC shall, as between themselves, be determined by the LLC agreement.
An LLC may not become a member of itself and any such LLC interest so acquired by the LLC shall be deemed cancelled.
The LLC agreement determines the procedure for holding meetings and voting or providing written consents (equivalent to a company passing a written resolution). In addition, meetings may be held remotely and members may vote in person, by proxy or by written consent. Any proxy or written consent may be communicated by electronic communication.
Winding up or dissolving a Jersey LLC
An LLC must be wound up and dissolved in accordance with the LLC agreement, the Law or other applicable laws. The provisions for winding up a Jersey LLC are similar to those for a Jersey company; winding up is commenced by the vote or consent of members entitled to two thirds of profits of the LLC.
Specific secondary legislation (Limited Liability Companies (Winding Up and Dissolution) (Jersey) Regulations 2022) contains procedures for summary winding up, end of fixed period winding up, insolvent winding up and winding up on just and equitable grounds.
An LLC can be reinstated within 10 years of its dissolution.
What can a Jersey LLC be used for?
The LLC provides an interesting alternative to a company due to its improved constitutional flexibility as well as greater simplicity of governance using the LLC agreement as its key operational framework.
Other potential uses of Jersey LLCs can include holding and securitisation vehicles, but also JPFs or even fund management companies, as well as vehicles for listing on international stock exchanges.
It is also anticipated that Jersey LLCs will appeal to sophisticated and institutional investors based in North America as an alternative investment fund vehicle that is familiar to them.
To find out more about Jersey’s LLC framework and IQ-EQ’s end-to-end support, please get in touch.