BKS Welcome Changes to the Jersey LLP Law
With effect from 17 January 2013 Jersey has updated its Limited Liability Partnership (LLP) law, the revised law now provides Jersey with a complete offering of limited partnership vehicles each with helpful and unique features.
In 1997 Jersey enacted a LLP law with a view to enabling the use of Jersey limited liability structures by professional firms and other partnerships in which the partners take an active management role. However, to provide protection to the creditors of Jersey LLPs, the 1997 law required a Jersey LLP to maintain a £5,000,000 bond from a bank or other financial institution, which would pay out on the LLP’s insolvency. That requirement proved to be very expensive and as a consequence no Jersey LLPs have been set up in the last 15 years
The revised LLP Law
Following an amendment to the 1997 law, which came into effect on 17 January 2013, the requirement for the £5,000,000 bond has been removed.
In place of the bond, creditor protection is achieved through the filing by the LLP of a “specified solvency statement” . This solvency statement is a 12-month forward-looking statement which states that, in its opinion, having regards to :-
The prospects of the LLP and the intentions of the partners with respect to the management of the LLP’s business; and
The amount and character of the financial resources that will be available to the LLP,
That the LLP will be able to Continue to carry on business, and Discharge its liabilities as they fall due for the period of 12 months immediately following the date of the specified solvency statement or until the dissolution of the LLP, whichever occurs first.
Withdrawals of LLP property or its value by partners or former partners are (as a general rule) only permitted in circumstances where a solvency statement has been filed in the 12-month period immediately preceding the withdrawal. The amendment thus brings creditor protection for LLPs in line with the provisions that apply to Jersey companies, and will be familiar to those who already use Jersey as a jurisdiction of choice.
It is hoped that the changes summarised above, coupled with Jersey’s internationally recognised regulatory framework and its proximity the both the UK and European financial centres, will result in Jersey LLPs being used for a variety of purposes, including private equity, asset holding and professional services structures.
A consequential amendment have also been made to Jersey’s income tax regime, which came into effect on the same date confirming that profits and gains arising from the international activities of a non-Jersey resident partner in a Jersey LLP are not subject to taxation in Jersey.