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A Basic Guide to Companies

Introduction

A company is an institution recognized by law and created by persons united in pursuit of a common interest. A company is usually established for business purposes or as an asset holding vehicle.

A company, wherever incorporated, is operationally controlled by its directors who are appointed by the company’s owners. The directors are legally responsible to those owners (i.e. the shareholders).

Each company has a memorandum of association which sets out the company’s name, the location of its registered office and what it will do (it’s objects). The object of the company may simply be to carry on a business. Each company also has articles of association. This document sets out the rules for running the company’s internal affairs.

The registered office is the address, within the jurisdiction of incorporation, to which all official communications and legal documentation will be sent.

The company secretary (an individual or another company) is the person who is responsible for ensuring that the company meets its statutory obligations.

Shareholders sometimes wish to appoint nominees to hold their shares. Such nominee shareholders are bound to follow the instructions of the true shareholders. A nominee shareholder is appointed:

  1. to avoid disclosing the true beneficial ownership in a public registry and
  2. to ensure that nominees within the jurisdiction can act immediately without the need for certificates and / or documentation to be executed by overseas based beneficial owners. This is especially important where time is of the essence.

Whilst companies incorporated in different jurisdictions are subject to different formalities, laws and requirements, the basic rules are similar.

A Jersey company is merely a corporation formed under the Companies (Jersey) Law 1991. After its last major revision, Jersey Companies Law is now extremely flexible. For example, the merging of companies has been simplified and Jersey companies can be re domiciled into other jurisdictions. This avoids the costs and lengthy delays of liquidating in one jurisdiction and establishing in another.

The capital requirement for Jersey companies is extremely small and the annual registration fees are low. Whilst the use of nominee names precludes third parties determining the true ownership of companies via the public registry, true beneficial ownership has to be disclosed to the Jersey Financial Services Commission on a confidential basis.

All such companies have limited liability and the beneficial owners are only responsible to the extent that unpaid share capital remains outstanding.

Finance

Under the provisions of the anti-money laundering legislation in Jersey, the directors of any company managed in Jersey, be it Foreign or Jersey registered, must have full access to all the financial records of the company. In addition the directors of a company can only authorize bona fide expenditure made on behalf of the company or make appropriate payments to its shareholders (by way of dividends or loans).

Origin of cash flows and assets

All origins of cash flows and assets must be fully identified in order to comply with Jersey anti money-laundering legislation.

Disclosure

The records of the company can only be disclosed to third parties by order of the Royal Court of Jersey. Such court orders are only usual issued in the event of criminal activity.

Taxes

Jersey companies pay an income tax exemption fee of £600 per annum together with an annual registration fee of £150. No other taxes or governmental fees are payable unless Jersey assets (other than bank accounts) are held or where the beneficial owners of the company are Jersey resident.

Ability to Transfer Assets to other Territories

Jersey companies have the ability to hold virtually any asset in virtually any jurisdiction in the world.

The main benefits of companies are:

  1. they have limited liability. Thus trading activity in one company does not put at risk asset holding activities in another.
  2. they have perpetual existence.
  3. they have significant value for international tax planning.
  4. they provide confidentiality.
  5. they provide a legally recognized vehicle for business and asset holding purposes with the ability to sue or be sued and enter into contracts etc in their own right.
  6. they provide a vehicle for joint ownership in situations where persons which to pursue a common interest.

Used together with appropriate trust structures, the asset protection and wealth generation qualities of international companies can be very significant indeed.

This document is a brief guide to subject matter covered, and is not intended to be a detailed or comprehensive statement of the law. It should not be treated as legal advice. Clients are urged to take professional legal and other appropriate advice before pursuing any particular course of action. For more detailed information and professional advice on your own situation please contact Michael Blackie, Frank Gee or Julie Coward at Basel Trust Corporation.

Basel Trust Corporation (Channel Islands) Limited
PO Box 484
3 Old Street
St. Helier
Jersey
JE4 5SS

Telephone: +44 (0)1534 500 900
Facsimile: +44 (0)1534 500 901

E-mail: [email protected]

Regulated by the Jersey Financial Services Commission in the conduct of Trust Company business.