Jersey LinksA focus on Jersey’s international profile

Jersey’s growing links with the GCC

www.jerseyfinance.je

www.jerseyfinance.je Jersey Links | GCC 1

Contents

Jersey cements its presence in the Gulf ........................................................................... 2

Strengthening ties with the region ..................................................................................... 3

Islamic Finance in Jersey ...................................................................................................... 4

Servicing the needs of the family office ........................................................................... 5

GCC succession planning is evolving in partnership with Jersey ............................... 6

Jersey Foundations: Wealth planning for family businesses ....................................... 7

Jersey - An important jurisdiction for clients in the GCC ............................................ 8

www.jerseyfinance.je Jersey Links | GCC 2

Jersey’s finance industry places great value on its expanding

relationship with the nations of the Gulf Cooperation Council

(GCC) and for this reason has cemented its presence in the

region this year with the opening of Jersey Finance’s new

representative office in Abu Dhabi.

With a permanent presence in the region and further

product innovations and enhancements to our legislative and

regulatory regimes, we are committed to intermediaries and

clients in the GCC region.

Jersey, which is celebrating its 50th anniversary as a

modern international finance centre this year, has powerful

endorsement as one of the best regulated jurisdictions in

the international community from the OECD, IMF, FATF and

UK Government amongst others. It also has a history and

tradition of providing services to the Gulf market with many

long standing business relationships between practitioners in

the Gulf and Jersey. We are proud of those connections and

keen to build on them.

The new Gulf office at Al Bateen, C6 Tower in Abu Dhabi, is

headed by Sean Costello, Jersey Finance’s Head of Business

Development for the GCC and India, who has been a UAE

resident for a number of years and who has wide ranging

experience in the finance industry.

A centre of excellence

There are new products and updates to our legislation that we

will be highlighting in our visits this year including:

• The Foundations vehicle, which is being used as

an alternative to the trust amongst wealth and

estate planners

• Changes to our company laws that bring even

further flexibility

• Further developments in our fund capabilities

We plan to continue highlighting Jersey’s expertise and

capabilities in managing international capital and its role as a

jurisdiction for corporate clients in the GCC wishing to invest

in the European markets.

Jersey is a well established centre of excellence in managing

the wealth of high net worth individuals and a world leader in

trusts. In particular Jersey has strong expertise in managing

specialist structures popular in Islamic Finance, with a choice

of practitioners familiar with Shari’a-compliant vehicles able

to support this increasing sector of Gulf business.

It is fitting that in this anniversary year for Jersey’s finance

industry, we can celebrate a new milestone with the opening

of a permanent office in the Gulf. Jersey’s finance industry

is both diverse and wide ranging and continues to evolve to

meet the needs of financial institutions in the region, as well

as international investors and their advisers.

By Geoff Cook Chief Executive, Jersey Finance

Jersey Finance’s Sean Costello and Rachel Chisnall in the new Abu Dhabi office

“Jersey has strong expertise in managing specialist structures popular in Islamic Finance, with a choice of practitioners familiar with Shari’a

compliant vehicles able to support this increasing sector of Gulf business”

“Jersey has a history and tradition of providing services to the Gulf market with many long standing business relationships between practitioners in the GCC and Jersey”

Jersey cements its presence in the Gulf

www.jerseyfinance.je Jersey Links | GCC 3

Strengthening ties with the region

“Jersey’s legal and finance practitioners, working from a jurisdiction of substance with high standards of corporate governance, are well-placed to build on their long-established commercial ties with clients throughout the Gulf”

By Sean Costello Head of Business Development for the Gulf Cooperation Council and India, Jersey Finance

Jersey Finance also marked its arrival in Abu Dhabi by

sponsoring an event held at the British Embassy in April to

celebrate The Queen’s birthday. The party attracted hundreds

of specially invited guests, including senior Emirati ministers,

and was a wonderful opportunity to highlight Jersey Finance’s

new permanent presence in the region.

A strong and stable partner

Throughout the global financial crisis, Jersey has remained a

strong, stable partner for international business, acting as a

conduit for the distribution of capital to the world’s leading

finance centres and as a gateway to European markets. As the

global recovery continues to gather pace led by the emerging

economies, Jersey’s legal and finance practitioners, working

from a jurisdiction of substance with high standards of

corporate governance, are well-placed to build on their

long-established commercial ties with clients throughout the

Gulf. In addition to our new permanent presence in Abu Dhabi,

Jersey Finance has also recruited representatives in India, the

UAE’s biggest trading partner. We are confident that this link

will be of great value going forward, as Jersey continues to

grow its business across the region.

Jersey makes its mark in Abu Dhabi

The official opening of the Abu Dhabi office was celebrated

at a reception at the British Embassy in March. A Jersey

delegation including Jersey’s Deputy Chief Minister, Senator

Philip Ozouf, the Director-General of the Jersey Financial

Services Commission and representatives of Jersey’s finance

industry attended the event, which was hosted by the British

Ambassador HE Dominic Jermey CVO OBE and officiated by

HE Sheikha Lubna bint Khalid bin Sultan Al Qasimi, Minister

for Foreign Trade.

His Excellency Dominic Jermey told the invited guests that

Jersey and London complemented each other as financial

centres and were frequently part of the same transaction

chain facilitating the deployment of mobile international

capital. He was confident that a similar relationship would

evolve between Jersey and the Abu Dhabi financial centre

going forward.

Jersey’s commercial ties with the GCC nations have never been stronger. Jersey Finance’s new office in Abu Dhabi, established

in response to increasing requirements from both corporate and private clients for international and cross border financial

services, is clear evidence of Jersey’s commitment to developing business in the Gulf.

Besides Jersey Finance, there are up to 10 Jersey firms with a presence in the GCC, with more actively planning one, and

many more leading international banking and finance institutions with offices in the Gulf that also have a substantial office

presence in Jersey. There are close contacts between the regulatory authorities in Jersey and those in the Gulf and high level

governmental contacts have been maintained through the regular delegation visits that Jersey undertakes to GCC countries.

Jersey Finance Chairman Jonathan White, HE Sheikha Lubna bint Khalid bin Sultan Al Qasimi, Minister for Foreign Trade, Jersey’s Deputy Chief Minister, Senator Philip Ozouf and British Ambassador HE Dominic Jermey CVO OBE

Guests respect the playing of the National Anthem at The Queen’s birthday event

© F

ate

n A

ma

n

www.jerseyfinance.je Jersey Links | GCC 4

estate planning techniques available. One potential barrier in

the establishment of a trust is the requirement that ownership

of the assets must be transferred to the trustee, a concept that

many wealthy people unfamiliar with trusts have difficulty in

accepting. Jersey recently enacted a Foundations Law, which,

in providing for a Council to oversee the management of the

underlying assets, should alleviate such concerns. Similarly,

the nature of a foundation is that it has separate legal

personality, it is able to contract with third parties, sue and

be sued in its own name and holds its own assets, which can

be traded.

Corporate vehicles and funds

Islamic (or Shari’a-compliant) collective investment funds were

the key Islamic financial product of the late 1990’s and it is

difficult to think of any major financial institution that did not

participate in the promotion of an Islamic investment fund,

with funds in Jersey investing in assets ranging from equities

to real estate. The early 2000’s saw the emergence of the

Islamic securitisation market, often referred to as the Sukuk

market, and several vehicles issuing Sukuk were established

in Jersey, notably Caravan I Limited, which won an award as

the Innovative Product of the Year in 2004, this transaction

generally being regarded as the first true-sale corporate Sukuk.

The advantages of Muslim clients using Jersey for either

private wealth structures or the issuance of securities are

very similar to those for any other group, but Jersey’s long-

standing connections with the GCC bring an additional benefit

of experience and expertise in establishing these structures in

a Shari’a-compliant context.

Islamic Finance in Jersey

In recent years there has been a worldwide move towards

ethical investment leading to a dramatic growth in Islamic

Finance. Jersey Finance has invested much time and effort

in highlighting Jersey’s credentials in this area. Jersey is well

placed to meet the demands and challenges associated with

providing Shari’a-compliant services. But this is not a new

development, Jersey has been providing services to Muslim

clients and in particular to those resident in the GCC for

many years.

The two primary areas of Shari’a-compliant services

in Jersey are those offered to:

a) Individuals, through private wealth management

services, and

b) Institutions, by way of the establishment and

administration of collective investment funds and other

vehicles for raising finance or the investment of capital.

Private wealth management

A key feature in the growth of Jersey as a financial centre

has been the provision of private wealth management

services, such as the establishment of trusts, private

companies and more recently foundations. There are many

reasons why an individual may wish to establish such an

entity, ranging from the simple creation of a company to

own, for example, a holiday residence in London, to the

more complex structures required by a family office or

the ownership of a family business to ensure that it is not

broken upon the death of the patriarch and founder.

The concept of a trust is very similar to the Islamic waqf.

Today, a trust has become one of the most effective tax and

By Trevor Norman Director of Funds & Middle East Group, Volaw Trust & Corporate Services Limited

“The advantages of Muslim clients using Jersey for either private wealth structures or the issuance of securities are very similar to those for any other group”

“A key feature in the growth of Jersey as a financial centre has been the provision of private wealth management services”

www.jerseyfinance.je Jersey Links | GCC 5

Servicing the needs of the family office

“Jersey-based service providers are well versed in the needs of GCC-based clients and where necessary can accommodate Shari’a Law principles and associated accounting methodologies”

regulatory body, the Jersey Financial Services Commission,

has produced new legislation to enable family offices and

investment clubs to operate practically within or, where

appropriate, outside the regulatory framework. Jersey-based

service providers are well versed in the needs of GCC-based

clients and where necessary can accommodate Shari’a Law

principles and associated accounting methodologies.

Depending on the needs of the family office and its co-investor,

Jersey offers a great degree of flexibility. A fund vehicle that

is established for a small number of co-investors (up to a

maximum of 15) and where there is no formal offering of

securities, is regarded as a Very Private Fund. Where a fund is

offered to not more than 50 investors and is not listed, it is

treated as a Private Placement Fund. A collective investment

vehicle offered to eligible investors subscribing greater than

US$1m can be classified as an Unregulated Fund. Shari’a-

compliant investment funds have been formed in Jersey and

the expertise exists to deal with the complexities associated

with such investment restrictions.

Collective investment funds in Jersey can be established within

a few days using a variety of vehicles including a Unit Trust,

Public or Private Company, Protected or Incorporated Cell

Company and also a Limited Partnership. Depending on the

liquidity profile of the asset and investor appetite, both open

and closed ended arrangements can be accommodated.

Jersey is an internationally recognised, highly respected and

established trust, company and fund-structuring jurisdiction.

With a strong finance industry populated by the world’s

leading accounting, tax, legal and administration firms, Jersey

is well placed to service the needs of the ever-evolving family

office in the GCC region.

Family office is a term widely used in the wealth

management industry and can generally be described as a

private enterprise that manages investments and trusts for

a wealthy family or group of families. Such arrangements

are commonplace in the Gulf Cooperation Council (GCC) and

they are increasingly being explored by high net worth family

groups to deal with the asset protection, succession, general

management and privacy issues present in the region.

The traditional family office, that typically handles all

family affairs from the employment of household staff to

the management of real estate investments, is becoming

increasingly sophisticated and corporate in its approach.

Not only are family offices hiring senior qualified and

experienced tax, legal and investment practitioners,

but many are also adopting collective investment fund

structuring methods perhaps more usually witnessed in

the institutional asset management space.

Family offices are developing bespoke, complex and diverse

portfolio structures investing in a range of asset classes,

from vanilla equity and fixed income to hedge funds and

private equity. These investment platforms are commonly

formed as companies and trusts but, in recent years, family

offices are using more publically visible collective investment

funds vehicles and are allowing third parties to co-invest.

In the GCC, local ‘offshore’ special purpose companies are

being incorporated in these structures to house local assets

alongside internationally located investments and properties.

It could be said that this development is a product of the

increasing demand for the proper segregation of assets, for

transparency and for governance but also of a move to drive

efficiencies and reduce costs. In line with such advances,

Jersey has reacted well and continues to innovate. The local

By Richard Hughes Senior Manager, Vistra

“Family offices are increasingly being explored by high net worth family groups to deal with the asset protection, succession,

general management and privacy issues present in the region”

www.jerseyfinance.je Jersey Links | GCC

GCC succession planning is evolving in partnership with Jersey

“In the GCC, there is a strong desire to maintain businesses as family owned, rather than to focus on alternative exit plans such as listings”

The JFLP has a General Partner, normally a Jersey limited

company, which is responsible for managing the partnership

and its underlying assets. Family members can be on the Board

of the General Partner in accordance with the associated family

constitution, which would form part of the succession plan.

This can help to create a family meritocracy for those who

are involved in strategic decisions, in addition to any ongoing

involvement in the day to day management of the underlying

family businesses.

The Limited Partners of the JFLP, commonly the second or third

generation family members, will often have a clearly defined

direct interest in the JFLP and have limited liability similar to

that of a shareholder. They are not, however, involved in the

strategic decision making process unless they are specifically

appointed to assist with the management of the General

Partner.

A growing number of advisors now appreciate that to assist

GCC families with their succession plans they must first take

account of family culture and expectations. Trusts are not the

only answer. Evolving entities such as the JFLP ensure that

Jersey continues to play a leading role in assisting GCC families

and their businesses.

Running a successful family business is hard work and leaves

very little time to plan for the ownership and management

changes that will inevitably occur. Historically less than 30%

of family owned businesses survive to the second generation

and less than 12% to the third. In the GCC, there is a strong

desire to maintain businesses as family owned, rather than to

focus on alternative exit plans such as listings. Importantly,

with nearly 90% of all businesses in the GCC being family run,

maintaining long term family ownership requires a creative

approach to develop a succession plan that will allow the

family and the business to flourish together.

Discretionary trusts have, historically, been a successful

element of succession planning. However the concept of a

trust does not always sit comfortably with the Shari’a rules

of inheritance, as there is an expectation of direct ownership

and a level of day to day management that is not always

possible when a trust is in place. In response to this, Jersey

advisors have developed alternatives such as Private Trust

Companies, Reserved Powers Trusts and Foundations. There

is also a lesser well known solution, the Jersey Family Limited

Partnership (JFLP), which particularly has great potential in

the GCC.

By Robert Surcouf Director - Private Client Services, Jersey Trust Company

“Maintaining long term family ownership requires a creative approach to develop a succession plan that will allow the family

and the business to flourish together”

6

www.jerseyfinance.je Jersey Links | GCC

Council is accountable to a mandatory Guardian, but there are

no restrictions on who can hold this office so it can be fulfilled

by family members.

A Jersey Foundation has recently been prepared by this firm

for a wealthy GCC-based family with five branches, which

owns companies that operate trading businesses and hold

property portfolios and passive investments. The Foundation

will own the shares in all those companies but only as a

passive shareholder, and the family will continue to control

them at board level. In deciding the level of dividends that

the companies declare, the family controls the flow of money

into the Foundation. The Guardian is a committee with one

member from each branch of the family, and the Council

cannot make distributions without Guardian approval,

thus the family also controls the flow of money out of

the Foundation.

By using a Foundation, the succession and asset protection

objectives are achieved by transferring ownership of the

companies into it. Meanwhile the family retains control

of the businesses and of all money flows into and out of

the Foundation.

Jersey Foundations

Wealth planning for family businesses

Wealth planning is a long-term exercise to preserve wealth

while meeting the future needs of several generations.

The main reasons why an entrepreneur wishes to put his

business into a structure are succession planning and

asset protection – he wants to decide on the succession of

control and benefit, and he wants to make sure that what

he has worked so hard to build is protected if something

goes wrong for him or for a member of his family, such as

divorce. At the same time he wants to keep control of it.

During his lifetime and after his death he wants his family

to enjoy the fruits of his endeavours but he does not want

them to be able to sell the income generator he has created.

The question is how?

A trust may not be suitable because the duties owed to

beneficiaries are not consistent with a trading business as

a significant trust asset. The beneficiaries can collectively

determine a trust and thus sell the business, thereby

defeating a key wealth planning objective.

By contrast the Council of a Jersey Foundation does not owe

any duties to beneficiaries, unless the Regulations expressly

provide them at the request of the Founder. Instead the

By Richard Pirie Head of Trusts and Foundations, Collas Crill, Jersey

“The main reasons why an entrepreneur wishes to put his business into a structure are succession planning and asset protection”

“A Jersey Foundation has recently been prepared by this firm for a wealthy GCC-based family with five branches”

7

www.jerseyfinance.je Jersey Links | GCC 8

There are a number of reasons why Jersey continues to

be attractive to investors from this region for structuring

international investments, ranging from time zone and

convenience to confidentiality, flexible laws and robust

regulations.

Professional service providers are also very familiar with

and expect to administer structures with a high level of

corporate governance, thus providing comfort to clients

regarding the integrity of their asset holding vehicles.

This has been particularly important since the economic

downturn.

Flexible Companies Law

Jersey’s Companies Law is very flexible. Different classes

of shares can be issued with different rights. This practice

is not permissible pursuant to company law in certain GCC

states. It is often beneficial to use a Jersey company at

a ‘topco’ level to facilitate investment and to provide

the investors with certainty as to how the laws would

be interpreted (on English law principles) should any

dispute arise.

Jersey companies are also used by GCC investors

investing into international assets, including joint

venture arrangements for the same reasons.

Family Office structures

High net-worth families prefer to separate the family

business from the investments, business affairs and

philanthropic interests of the family by establishing a

Family Office and at the same time being able to control

succession planning in connection with international

“Jersey is well placed to continue the delivery of value added legal, administration and other professional services to GCC-based families and institutions”

By Paul Perris Managing Director, Ogier, Bahrain

Jersey has a long track record as a domicile for companies, funds, trusts and other structures used by GCC-based clients that stretches back to the 1980’s.

assets. Jersey’s financial services industry is well placed

due to the concentration of experienced professionals

in the field of trust administration, legal and accounting

services and private wealth management to provide

proactive, tailored and value added services to families

in a favorable time zone.

Real estate holding structures

High net-worth families and banks commonly invest in

UK and European based real estate due to the political

stability and transparency of the markets. Recent exchange

rates and suppressed property values have fuelled this

practice. Middle Eastern families also regularly visit those

jurisdictions. Jersey domiciled vehicles are often preferred

due to the proximity to the UK and Europe and professional

service providers have a long track record of administering

such vehicles. In order to provide family members

with a diversified interest in a portfolio of properties,

clients are becoming more sophisticated and are now

considering Family Limited Partnership and Family Unit

Trust arrangements, which can be structured in a Shari’a-

compliant manner and also allow for succession planning.

GCC-based banks commonly use Jersey companies for

investment in Europe and to structure their joint ventures

in order to avail of the flexibility of Jersey company law.

Structured finance products

Jersey allows clients to structure vehicles using a wide

variety of debt instruments, bonds and other types of

product. Structures are often established as ‘orphan’ or

off balance sheet structures. Due to the flexibility that

Jersey - An important jurisdiction for clients in the GCC

www.jerseyfinance.je Jersey Links | GCC

Jersey legislation provides, it is possible to structure

Shari’a-compliant structured finance vehicles such as

Sukuk through Jersey, and the Channel Islands Stock

Exchange (CISX) provides the ability to list certain products.

A recent example of this is the Emirates NBD auto loans

securitisation using an innovative dual Special Purpose

Vehicle structure. Arab Bank plc have also used the CISX

to list securities.

Trusts and Foundations

Trusts and Foundations are an important wealth and

inheritance planning tool and can be structured in a Shari’a-

compliant manner. Both can also be established to ensure

bankruptcy remoteness and protection of valuable assets.

Jersey is a popular jurisdiction through which to establish

trusts due to the comprehensive, flexible and tried and

tested Trust Law. Jersey Trust Law permits the use of

Private Trust Companies, which appeal to families in the

GCC who are keen to retain control over the structure and

avail of the benefits of a Trust. Unlike a Cayman Private

Trust Company, a Jersey Private Trust Company has no

restrictions on who can be a Director (in Cayman the

directors must be based in Cayman).

Jersey Managed Trust Companies have also been used by

several GCC banks through which they generate business

from their customers.

Employee benefit structures

In recent years, banks have established cash and share

plans in Jersey which are aimed at attracting, retaining

and motivating employees. Jersey has become a centre of

excellence for such structures and many service providers

have invested in IT platforms that deliver real time

reporting to employees.

Funds

Jersey has a history of working with the GCC in domiciling

funds stretching bank to the Dar Al Maal Al Islamic Fund

in 1982. More recently Emirates NBD Bank has structured

funds via Jersey. As clients in the GCC, particularly those

who are more sophisticated and risk conscious, begin

to appreciate the benefits of regulation and corporate

governance, combined with a favourable time zone, Jersey

should be able to attract new funds business.

Despite current upheavals in parts of the region, the

GCC market is predicted to continue to grow. Jersey, as a

safe and secure jurisdiction with its professional service

providers, is well placed to continue the delivery of value

added legal, administration and other professional services

to GCC-based families and institutions.

9

“Due to the flexibility that Jersey legislation provides, it is possible to structure Shari’a-compliant structured finance

vehicles such as Sukuk through Jersey”

Jersey

Jersey Finance Limited4th Floor, Sir Walter Raleigh House48-50 EsplanadeSt HelierJersey JE2 3QBChannel IslandsT: +44 (0)1534 836000F: +44 (0)1534 836001E: jersey@jerseyfinance.je

Mumbai

Jersey Finance Limitedc/o B 205 Dynasty Business ParkAndheri Kurla RoadAndheri EastMumbai - 400093 IndiaT: +91 (0)22 6742 3211 F: +91 (0)22 6742 3215E: india@jerseyfinance.je

New Delhi

Jersey Finance Limitedc/o 4th Floor, Statesman HouseBarakhamba Road, Connaught Place New Delhi - 110001 IndiaT: +91 (0)3044 6777 F: +91 (0)3044 6506E: india@jerseyfinance.je

London

Jersey Finance LimitedSuite 604, Tower 4225 Old Broad StreetLondon EC2N 1HNUnited KingdomT: +44 (0)20 7877 2317F: +44 (0)20 7877 2316E: london@jerseyfinance.je

Hong Kong

Jersey Finance LtdRoom 5, 20th FloorCentral Tower28 Queen’s Road CentralCentralHong Kong T: +852 2159 9652F: +852 2159 9688E: china@jerseyfinance.je

Abu Dhabi

Jersey Finance LimitedOffice 107, Bainunah St 34, Al Bateen C6TowerPO Box 113100 Abu Dhabi UAET: +971 2 406 9722F: +971 2 406 9810E: abudhabi@jerseyfinance.je