The Limited Liability Companies (Jersey) Act 2018 (the LLC Act) came into force on 1 September 2022 (excluding its series provisions). The LLC law is modeled after the Delaware Limited Liability Corporations Act. The state of Delaware is considered one of the most popular jurisdictions in the world for company formation and LLCs are the most common choice for entity registration.
Historically, LLCs evolved due to the need to combine the limited liability of a corporation with the tax transparency of a partnership and a Jersey LLC achieves these goals. Limited liability companies were introduced in Jersey primarily as an alternative investment fund vehicle for US investors. However, it is expected that, given their flexibility, LLCs will also prove to be a useful alternative to corporations outside of the fund context.
Jersey LLC Basics
A Jersey LLC can be formed for any lawful purpose or activity, whether for profit or not. It is not necessary that all members of an LLC be entitled to a profit share. Similarly, a person can be admitted as a member without having to contribute.
A Jersey LLC has separate legal personality but is not a corporation. It is expected that the LLC Act will be amended in 2023 to introduce an LLC which is a body corporate so that it will be possible at the time of registration to choose whether an LLC will be a body corporate or a separate body corporate. Other key features of Jersey LLCs include:
- • high degree of contractual freedom in determining the terms of the LLC agreement;
- • a SARL contract may provide for the management of a SARL by one or more managers and provide for the appointment of a person as manager or the management devolved to its members;
- • Third parties to whom rights are conferred may enforce those rights even if they are not parties to the LLC Agreement; and
- • the LLC law contains provisions (which have not yet entered into force) allowing the creation of series which are similar to protected cells in a company.
The Taxation (Companies – Economic Substance) (Jersey) Act 2019 has been amended to apply to limited liability companies.
LLCs are a welcome new addition to Jersey’s product offering and should provide a viable alternative through which US investors in particular can invest. In addition, LLCs also provide a useful alternative to a corporation when greater constitutional flexibility is required or when greater simplicity and profitability are desired.