NEWS “without comment”
Developments In The Disclosure And Provision Of Legal Entity Information In Jersey
21 September 2020
by Jonathan M. Heaney , Rachel Amos and Tom Fothergill of Walkers
The Government of Jersey has recently closed a consultation on draft subsidiary legislation under the Financial Services (Disclosure and Provision of Information) (Jersey) Law 2020 (the “Registry Law”). As part of the consultation, the government published drafts of the Financial Services (Disclosure and Provision of Information) (Jersey) Regulations 202- (the “Regulations”) and the Financial Services (Disclosure and Provision of Information) (Jersey) Order 202- (the “Order”).
The Registry Law gives greater legal clarity around disclosure of company information and provides a foundation for future changes, including in relation to beneficial ownership and foundations. Its introduction should be understood within the context of ongoing pressure on offshore jurisdictions to be seen to be squeaky clean as regards compliance with the Recommendations of the Financial Action Task Force (“FATF”) on anti-money laundering and terrorist financing measures1, and consequential developments which may impact the Island’s finance industry in the future.
The Registry Law applies to all types of legal entities which have legal personality, namely companies, LLCs, foundations, incorporated and separate limited partnerships, and LLPs. It does not apply to limited partnerships.
Register of directors
The Registry Law creates the concept of a “significant person”. Loosely speaking, significant persons are the directors and secretary of a company. However, the term “significant person” has been used in the law in order to encompass other entity types, and therefore includes:
the managers of an LLC;
the council members of a foundation;
the general partner of an incorporated or separate limited partnership; and
a limited partner of an LLP who is able to participate in its management.
The draft Regulations provide for information on significant persons to be made public on the Companies Register. In other words, a public register of directors. The information which will be published about directors includes their name, date of birth, correspondence address, nationality and occupation.
Nominated persons and annual confirmation statements
The Registry Law provides for the appointment of a “nominated person” to act on behalf of a company for the submission of filings to the Companies Register. The nominated persons will, by and large, be the trust company providing administration services to the company, or the directors or secretary of the company. The significance of the role of the nominated person is that they will also be able to inspect the records of the company held by the Registrar of Companies. For the first time, this will allow trust companies to check the accuracy of the beneficial ownership information held by the Registrar and update it if necessary.
One of the roles of the nominated person will be to submit each company’s annual confirmation statement which will replace the annual return. As with a similar change in the UK a few years ago, the annual confirmation statement will emphasise confirmation of no change in relevant information, rather than requiring that information to be re-submitted each year.
Balancing privacy protections
Under the Regulations, an application can be made to the Registrar of Companies to request that certain information be kept private which would normally be made public. This is an important privacy protection: concerns had been raised that increased transparency potentially gives more information to those who would seek to cause harm, particularly to celebrities and high profile individuals.
An application to keep information on the Companies Register private can be made where:
there is a serious risk that the applicant, or a person who lives with the applicant, will be subjected to violence or intimidation as a result of information being made available for public inspection;
there is a serious risk of damage or threat to property as a result of the information being made available for public inspection; or
there are exceptional circumstances that justify the making of the application.
The Regulations also set out an appeals process against a decision of the Registrar in relation to such applications.
The transparency requirements set out in FATF Recommendation 24 have hitherto been largely shoe-horned into Jersey’s COBO regime. Whilst that might have worked fine in Jersey, it presents a potential challenge in the face of international assessments of Jersey’s AML/CFT regime where COBO’s seemingly opaque requirements aren’t set out clearly in primary law. With Jersey’s next Moneyval assessment likely to take place sometime around 2022-2023, the Island is in a preparatory phase where everything that can be done to put its compliance with the FATF Recommendations beyond doubt is being done by the Government and the JFSC. No country gets a perfect Moneyval/FATF report, but Jersey has a good track record of doing better than most, and the pan-agency Financial Crime Strategy Group has continued work to preserve that record.
Alongside this the Crown Dependencies have faced increasing political pressure in the UK to make beneficial ownership registers public. With an eye on protecting constitutional independence, the Crown Dependencies last year announced a joint road map towards the establishment of public registers, after the European Union has completed a review on the implementation of the 5th Money Laundering Directive (“5MLD”) in 2022.
Whilst the Registry Law doesn’t make Day 1 changes to Jersey’s beneficial ownership regime for companies, it does provide a clearer foundation from which to start the journey towards public registers and porting beneficial ownership registers with their EU equivalents under 5MLD. The flexible way in which the Registry Law provides for finer detail on disclosure and publication requirements to be set out in the Regulations and the Order means it can be anticipated that the public register will be implemented by amending the Regulations. It may be hoped that, when the beneficial ownership register does become public, a similar mechanism for protecting information where there is a risk of violence or harm as is being created for directors will also be created for beneficial owners.
The Registry Law, which was adopted in July, is expected to be brought into force on 1 December 2020, absent any further delays resulting from the Covid-19 pandemic. Although the Regulations stipulate that the publication of significant persons information on the Companies Register may not take place before 1 June 2021.
The Registry Law, Regulations and the Order make various provisions for the JFSC to issue guidance supplementing the legal requirements, including guidance on the definition of beneficial ownership, and what can be considered “exceptional circumstances” for non-disclosure of information. Whilst the publication of the Regulations and the Order is a helpful step forward in understanding how the regime will work, it can be expected that further clarity will also be provided when the JFSC’s guidance is published. For now, it would seem that the biggest adjustment will be the new register of directors.
Footnote: For this reason the Registry Law also bans the use of “bearer” shares.
Jonathan M. Heaney, Rachel Amos, Tom Fothergill of Walkers
PO Box 265GT, George Town, Grand Cayman
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.