JERSEY Law and Practice Contributed by: Nienke Malan and Christopher Griffin, Carey Olsen
Borrowing Restrictions/Requirements From a regulatory perspective, there are gener - ally no restrictions in the context of non-retail funds. However, the JFSC may undertake addi - tional scrutiny where the permitted borrowing level is high (for example, where an Expert Fund or a Listed Fund is permitted to borrow more than 200% of the fund’s NAV). A full review of the limited partnership agreement (LPA) (or other constitutional documents) of the fund would be required to ensure that there were no restrictions on borrowing or granting secu - rity and, in the case of a feeder fund or parallel fund, that there were no restrictions on that fund granting security to secure the borrowings of the main fund. It is now common for LPAs, and constitutional documents of Jersey funds structured as com - panies and unit trusts, to contain provisions permitting borrowing (albeit with restrictions in some cases – for example, as to amount or term), the granting of security and the provision of guarantees in respect of borrowings. Securing Finance A typical security package would consist of the granting of a security interest over the general partner’s right to issue call notices to investors in respect of undrawn capital contributions, and the proceeds of the issuance of such call notic - es; as well as the bank account(s) into which capital call proceeds are paid. The security interest agreement would include the granting of a power of attorney from the gen - eral partner or manager of the fund so that the secured party could step into the shoes of the general partner to issue capital call notices to investors on an enforcement of the security, in
the event that the general partner or manager failed to do so. A financing statement in respect of the security would usually be registered on the Jersey Secu - rity Interests Register. Common Issues in Relation to Fund Finance Lenders will usually require a review of any side letters entered into with investors to ensure there are no provisions that may cut across any secu - rity which may be granted or which could affect the general partner’s rights to make capital calls from investors. In order to perfect any capital call security, it is not necessary that notice of such security be provided to investors. However, there remain advantages to electing to give notice to inves - tors. Any other relevant regulatory issues should be considered; for example, where a fund is an AIF, the AIFMD analysis may require that the fund is unleveraged or that leverage is kept to below a certain level. 2.6 Tax Regime Tax Framework Jersey funds (regardless of their structure) are not generally subject to any Jersey tax. No capi - tal gains, capital transfer, wealth or inheritance taxes are payable in relation to the issuance or realisation of investments in a Jersey fund (assuming that the fund does not invest in Jersey property or buildings). Additionally, no corpora - tion tax, profits tax or stamp duty is payable, and distributions may be made without withholding or deduction for payment of Jersey income tax. There is no distinction between the types of investor for tax purposes. If distributions are
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