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Jersey legislature passes limited liability companies law

Thursday, 13 September, 2018

The States of Jersey, the jurisdiction's Parliament, has approved the Draft Limited Liability Companies (Jersey) Law, supplying a legal framework for the establishment of limited liability companies (LLCs).

According to law firm Mourant, the LLC regime will give advisors, investors and businesses a new legal vehicle combining features of companies and partnerships. The vehicles are already widely used in other jurisdictions, especially the US, in roles such as general partners, management vehicles, carried interest vehicles, portfolio holding vehicles, joint venture vehicles and private equity vehicles. LLCs currently account for over two-thirds of all new transparent business structures formed in the US each year, according to Jersey Finance. They are particularly popular as a structure for hedge fund managers.

'We are confident that the Jersey LLC can provide an attractive proposition for US-based hedge fund managers, particularly in operating master-feeder structures', said Geoff Cook of Jersey Finance. 'We anticipate strong growth in this area.'

According to law firm Carey Olsen, LLCs combine the limited liability protection of a company with the constitutional flexibility and privacy of a partnership, while also enabling a choice between the management structures and tax treatments of both.

'LLCs can therefore vary greatly in form depending on the purpose for which they are created, and it is that flexibility that helps make them so attractive. As such, they are used for a variety of purposes, from simple businesses undertaken by one or more persons to being the ultimate holding vehicle of large public company structures', it says.

The LLC law offers another option to those looking to do business in Jersey, combining many of the more desirable features of companies and partnerships into one vehicle, says Mourant. However, Jersey is not the only international financial centre to introduce LLCs. It will face competition from, among others, Bermuda and the Cayman Islands, which introduced similar legislation in 2016.

New legislation enabling the formation of limited liability partnerships (LLPs) came into force in Jersey in August 2018.

Sources