Update

Now in force: The Limited Liability Companies (Jersey) Law 2018

Introduction

The Limited Liability Companies (Jersey) Law 2018 (the LLC Law) was brought into force on 1 September 2022 (excluding its provisions relating to series). The LLC Law is modelled on the Delaware Limited Liability Company Act. The state of Delaware is considered to be one of the world's most popular jurisdictions for company formations and LLCs represent the most common choice of entity registration.

Historically, LLCs evolved due to a need to combine the limited liability of a company with the tax transparency of a partnership and a Jersey LLC achieves these ends. LLCs have been 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 companies outside the fund context as well.

Jersey LLC basics

A Jersey LLC may be formed for any lawful purpose or activity whether or not for profit. It is not necessary that all members of an LLC are entitled to a profit participation. Similarly, a person may be admitted as a member without having to make a contribution. 

Other key features of Jersey LLCs include: 

• • it is possible at the point of registration to elect whether an LLC will be a body corporate or a separate legal person;

•it is tax transparent for Jersey taxation purposes

•high degree of contractual freedom when determining the terms of the LLC agreement;

•an LLC agreement may provide for the management of an LLC by one or more managers and provide for the appointment of a person as a manager or the management to vest in its members;

•third parties upon whom rights are conferred may enforce those rights despite not being parties to the LLC agreement; and

•the LLC Law contains provisions (which are not yet in force) permitting the creation of series which are akin to protected cells in a company.

Economic substance

The Taxation (Companies- Economic Substance) (Jersey) Law 2019 has been amended to apply to LLCs.

Jersey LLCs and Delaware LLCs 

Conclusion

LLC's 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 company where greater constitutional flexibility is required or where greater simplicity and cost effectiveness are desired.

Our Client Guide on LLCs is available upon request by emailing Alistair Horn.