Service notice –Testing testing

Limited liability companies (LLCs) – regulatory considerations

On 1 September 2022 the Limited Liability Companies (Jersey) Law 2018 (LLC Law) came into force. The LLC Law was amended on 14 February 2023 by the Limited Liability Companies (Amendment) (Jersey) Regulations 2023.

Legal status

In the LLC Law, a limited liability company has legal personality that is separate from that of its members.

From 14 February 2023, at registration an LLC may be either a -body corporate or an unincorporated body. No subsequent change is permitted.

Limited liability companies regulations

On 1 September 2022 three sets of regulations also came into force:

On 14 February 2022 two further sets of Regulations came into force:

  • Limited Liability Companies (Amendment) (Jersey) Regulations 2023
  • Limited Liability Companies (Winding Up and Dissolution) (Amendment) (Jersey) Regulations 2023

General Provisions Regulations

These relate to accounts and audit, prospectuses, takeovers, compromises and arrangements, mergers, demerger, continuance, economic substance test and investigations.

Winding Up and Dissolution Regulations

These relate to summary winding up, creditors’ winding up, transactions at an undervalue and preferences and liquidators. Further changes were made on 14 February 2023 by the Limited Liability Companies (Winding Up and Dissolution) (Amendment) (Jersey) Regulations 2023.

Consequential Amendments Regulations

These amend 35 laws, regulations and orders, such as the Alternative Investment Funds (Jersey) Regulations 2012, Control of Borrowing (Jersey) Law 1947 and its Order, Financial Services (Jersey) Law 1998 (FSJ Law) and a number of its Orders, including certain Exemptions Orders.

Further changes were made on 14 February 2023 by the Limited Liability Companies (Amendment) (Jersey) Regulations 2023 to ensure that the legal treatment of LLCs that are bodies corporate is broadly the same as for LLCs that are unincorporated bodies.

Comparison with Companies (Jersey) Law 1991 (Companies Law)

Limited Liability Companies are registered under the LLC Law and there are some similarities with the Companies Law but also differences, for example:

  1. a LLC has a manager(s) rather than directors (although it is not required to have a manager)
  2. in the absence of a manager, the management of the limited liability company shall vest in its members
  3. a LLC must have a secretary, but unlike in a company, the secretary is not a significant person for the purposes of the Financial Services (Disclosure and Provision of Information) (Jersey) Law 2020 (see below)
  4. members hold LLC interests rather than shares
  5. unlike corporate directors of a Jersey company which are required by the Companies Law to be registered by the JFSC to carry on trust company business (TCB), a corporate manager of an LLC is not required by the LLC Law to be registered by the JFSC to carry on TCB.

However, this is quite separate from a manager of an LLC acting “by way of business” who is required to be registered under the FSJ Law to carry on TCB. There are available exemptions that such a manager may be able to rely upon.

Limited liability companies are subject to the Financial Services (Disclosure and Provision of Information) (Jersey) Law 2020

Limited Liability Companies will be required to provide to us information on the beneficial owners and the significant persons (managers or managing members) and to give notification of any changes to that information within 21 days.

They will be required to submit an annual confirmation statement to confirm this information as well as the registered office address.

A nominated person must be appointed to act as the main contact with the Registry and to make submissions.

Use of limited liability companies only for financially sophisticated investors/customers

We understand from industry that the LLC is intended to be a vehicle used only for financially sophisticated investors / customers, where the proposed activities of the LLC are to be carried out mainly outside Jersey, with a focus on the North American market. Based on that understanding, we will require that the vehicle is used for such investors / customers only.

Permitted use of an limited liability company

Subject to our review of the application to register under the LLC Law and all other relevant legislation and regulatory requirements, such as the Sound Business Policy, the following is a brief and non-exhaustive summary of the permitted use of a LLC:

  1. Securities issuing vehicle - noting that Jersey’s Recognized Auditor regime is only available to companies incorporated under the Companies (Jersey) Law 1991 and therefore this does not include LLCs
  2. Jersey Private Fund as per the Jersey Private Fund Guide published by the JFSC
  3. Alternative Investment Fund under the Alternative Investment Funds (Jersey) Regulations 2012 (but not a collective investment fund as per the Collective Investment Funds (Jersey) Law 1988 (CIF Law))
  4. Manager to a Securities Issuing Vehicle
  5. Manager or AIF Manager (both sub-threshold under the Alternative Investments Funds (Jersey) Order 2013 or private placement under AIF Services Business under the FSJ Law to a private fund (but not a collective investment fund as per the CIF Law)
  6. A schedule 2 business requiring registration under the Proceeds of Crime (Supervisory Bodies) (Jersey) Law 2008

When use of a limited liability company will not be permitted

The following is a brief and non-exhaustive summary when use of an LLC will not be permitted:

  1. Please note that in accordance with the Trusts (Jersey) Law 1984 a Jersey LLC does not meet the requirements to be a corporate trustee.
  2. At present LLCs will not be permitted to issue Series under the LLC Law, although this position regarding Series may be subject to change once the implications for the Registry are more fully assessed
  3. Bank under Banking Business (Jersey) Law 1991
  4. Fund under the CIF Law
  5. Insurance business under Insurance Business (jersey) Law 1996
  6. Registered to carry on Investment Business, Trust Company Business, General Insurance Mediation Business, Money Service Business or Fund Services Business under the FSJ Law

Administration services must be provided to the limited liability company by a person registered to carry on TCB under the FSJ Law

In agreement with the Government of Jersey and the LLC Law Working Group, additional requirements will be imposed via conditions on the consent to be granted by the JFSC under Article 11A of the Control of Borrowing (Jersey) Order 1958 (COBO) upon the establishment of each LLC. These COBO conditions are to apply on an on-going basis and are as follows:

  1. Administration services are to be provided on establishment and on an on-going basis by a person registered by the Jersey Financial Services Commission under the Financial Services (Jersey) Law 1998 to carry on Trust Company Business; and
  2. The LLC agreement is to be in writing.

It is for industry to determine the type of those TCB administration services to be provided.

Provisions of services “by way of business” to a limited liability company requires registration under FSJ Law to carry on TCB

The following activities and classes of TCB under the FSJ Law have been amended to include the provision of services to a LLC:

  • Class F - Acting as a company, partnership or foundation formation agent or a limited liability company registration agent
  • Class I - Acting or arranging for another person to act as secretary, alternate, assistant or deputy secretary of a company, as secretary of a limited liability company or as secretary of a limited liability partnership.
  • Class J - Providing a registered office or business address for a company, limited liability company, partnership or a foundation.
  • Class K - Providing an accommodation, correspondence or administrative address for a company, limited liability company, a partnership or a foundation or for any other person.
  • Class M - Acting as or fulfilling or arranging for another person to act as shareholder, member or unitholder as a nominee for another person.
  • New Class OB - Acting as or fulfilling the function of or arranging for another person to act as or fulfil the function of a member or manager of a limited liability company.

Requirements for new Class OB

If this class of TCB is needed, you will need to apply to the JFSC Authorisations Team.

You must:

  • outline your intention
  • detail any capacity or competency considerations
  • attach an updated business plan and business risk assessment

The application will be subject to the relevant application fee.

Other consequential regulatory changes

A number of regulatory codes, fee notices, policies, guides and application forms are to be amended for consequential changes to make references to LLCs. These include, but are not limited to:

  • AIF and TCB Codes of Practice
  • COBO and AIF Fee Notices (references only)
  • Sound Business Policy
  • Jersey Private Fund Guide
  • AIF/AIFSB and TCB application forms

Register a limited liability company