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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
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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: [email protected]
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: [email protected]
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: [email protected]
London
Jersey Finance LimitedSuite 604, Tower 4225 Old Broad StreetLondon EC2N 1HNUnited KingdomT: +44 (0)20 7877 2317F: +44 (0)20 7877 2316E: [email protected]
Hong Kong
Jersey Finance LtdRoom 5, 20th FloorCentral Tower28 Queen’s Road CentralCentralHong Kong T: +852 2159 9652F: +852 2159 9688E: [email protected]
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: [email protected]