08 March 2023
This month the Government of Jersey approved the new Limited Liability Company (LLC) legislation, which it is expected will further strengthen Jersey’s position as a leading international finance centre for US alternative fund managers.
We caught up with Paul St Romaine, Associate Director within Fairway’s Fund and Corporate Services team to find out more:
So what is a Jersey LLC?
A Jersey LLC is a corporate entity with limited liability of its members. It offers a high degree of flexibility around its management and governance, and allocates profits like a partnership.
By default, a Jersey LLC has the tax transparency of a partnership. Since 14th February 2023, and uniquely to Jersey, it can elect to be a body corporate.
It is expected to be favoured by US private equity, venture capital and other alternative fund professionals given its similarities with Delaware LLCs. The Jersey LLC offers speed and ease of registration, whilst being a cost efficient product.
Why did Jersey launch the LLC?
The Jersey LLC bolsters the existing Jersey product offering, adding important features to our structuring toolkit.
For example, as LLCs are already very popular in the US, and a structure familiar to US fund managers, there is an opportunity for the Jersey LLC to become a viable alternative to existing LLC vehicles in other jurisdictions.
Furthermore, Jersey LLCs offer US fund managers the ability to easily market into the EU, via national private placement regimes, further strengthening Jersey’s position as providing seamless access into Europe.
Jersey’s funds industry has seen consistent growth in the US market, with funds business from the US more than doubling in the last five years, according to Jersey Finance.
Why use a Jersey LLC?
The Jersey LLC benefits from a simple registration process and flexible governance requirements.
Whilst a Jersey LLC has separate legal personality it is not by default a “body corporate” and is therefore treated as tax transparent, in the same way as a partnership. It can, however, elect to be a body corporate and be treated as a company for tax purposes. This is similar to the US “check the box” tax election. The election is only possible upon registration and cannot be changed once made.
This approach is designed to provide maximum flexibility in structuring options for an LLC. As such, an LLC may be an appropriate vehicle for a range of uses in investment funds, joint venture companies, private equity transactions, securitisations and other corporate transactions and international structures.
“Bridging the gap”
Jersey LLCs share similarities with leading regimes such as Cayman LLCs and Delaware LLCs. The product provides certainty for US managers looking to fundraise within the EU and expand their investor base. With the Jersey LLC able to market into Europe (subject to the usual fund permissions from the Jersey Financial Services Commission (JFSC) under the Alternative Fund Managers Directive (AIFMD) third country private placement rules), it can act as an alternative route to market whilst providing the comfort of a jurisdiction renowned for its regulatory regime and future certainty for marketing under AIFMD.
In conclusion we are delighted to be providing Jersey LLCs to our international client base. It’s a robust vehicle that complements the already respected stable of Jersey vehicles. It provides Jersey the opportunity to tap into the US market with a familiar vehicle which could lead to greater US investment into the island.
Key features of the Jersey LLC
For more details please see the >Jersey Finance factsheet
For more details please contact Paul or the Funds and Corporate team.
Fairway Fund Services Limited, a regulated company under the Financial Services (Jersey) Law 1998, provides an experienced team that can assist with the set-up and administration of LLC’s.