Key takeaways
- There are various safe harbours from the Jersey prospectus regime, with a light regulatory approach applying in most cases.
- Debt securities issuers are, generally, not in scope for the purposes of the Jersey AML/CFT Regime.
- Jersey continues to be a jurisdiction of choice as a sophisticated international financial centre.
Introduction
Jersey is a well-established jurisdiction of choice for issuing debt securities in international finance transactions. Recently, we have seen a steady increase in interest in Jersey debt securities issuers either for a standalone issuance or complementing a broader debt package, and we expect that trend to continue. This guide contains information relevant to a range of products, from a straightforward loan note issuance, to a complex structured securities programme.
This guide provides an overview of the Jersey landscape for professional advisers, financiers and sponsors assessing the pros and cons of available incorporation jurisdictions for their debt securities issuer. This guide will cover:
- The Jersey prospectus regime and safe harbours
- Regulatory consents required from the Jersey Financial Services Commission ("JFSC")
- The Jersey AML/CFT regime and when debt issuers fall out of scope
- Ability to avoid audited accounts
- Tax neutrality
- Further considerations
Prospectus regime
Overview
In October 2021, Jersey adapted its prospectus regime to bring its exemptions closer to those available in the UK and the EU. The October 2021 updates amended the law applicable to a Jersey issuer making an offer to the public, which in turn redefined what constitutes a prospectus for Jersey purposes (a different regime applies in the case of foreign issuers with a Jersey nexus, which this guide does not apply to). Currently, "prospectus" is defined as "an invitation to the public to become a member of a company or to acquire or apply for any securities..." and therefore on the face of it, debt securities issuances are in scope for prospectus regime purposes.
Consequences
If an offer of debt securities to the public occurs, a Jersey issuer must produce a prospectus. In turn, this means:
- The prospectus will be required to include certain wording prescribed by the JFSC;
- Formal regulatory approval of the prospectus for the purposes of circulating it to the public will be required from the JFSC; and
- The issuer will need to be, or will be treated as, a public company with additional associated obligations under the Companies (Jersey) Law 1991 (the "Companies Law").
Offer to the public and exemptions
Prior to October 2021, an offer to the public would be deemed to have occurred whenever more than 50 holders were offered debt securities. However, the welcome updates in October 2021 enhanced Jersey's reputation as a jurisdiction of choice for debt securities issuances, adding new exemptions to the prospectus regime which will be familiar to professional advisers, financiers and sponsors operating in the UK and the EU. The exemptions apply when:
(a) the invitation is addressed to either or both:
- Qualified investors as defined in Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market OJ L 168, 30.6.2017, p.12, as amended from time to time, and/or
- Professional investors as defined in the Financial Services (Investment Business (Special Purpose Investment Business – Exemption)) (Jersey) Order 2001
(b) the number of persons (other than qualified investors and
professional investors) to whom the invitation is addressed does
not exceed 50 in Jersey or 150 elsewhere
(c) the minimum consideration which may be paid or given by a
person for securities to be acquired by that person is at least EUR
100,000 (or an equivalent amount in another currency)
(d) the securities to be acquired or applied for are denominated in
amounts of at least EUR 100,000 (or an equivalent amount in another
currency)
(e) the invitation relates to the issue of shares or other
securities by a company to its members satisfaction, in whole or in
part, of a distribution to be made by that company
(f) the invitation relates to a scheme specified in Article 3(2)(c)
of the Companies (General Provisions) (Jersey) Order 2002, or
(g) any combination of exemptions detailed in sub-paragraphs (a) to
(f) apply.
When an exemption is available:
- No prospectus need be produced and the consent of the JFSC to the issue of a prospectus is therefore not required;
- The issuer can be private rather than public (with fewer associated obligations under the Companies Law); and
- The transaction timetable can be expedited.
Regulatory Consent – Control of Borrowing (Jersey) Order 1958 ("COBO")
Whilst in most cases the need for JFSC consent to the circulation of a prospectus will not be required, where more than 10 holders of the debt securities are contemplated, COBO dictates that a separate JFSC consent must be obtained.
This, however, is typically a straightforward process for debt securities issuances. It involves applying to the JFSC (via the issuer's legal advisers) using a prescribed form. Turnaround times can be expedited where transactional pressures require. The JFSC is, as you would expect, familiar with a wide range of securities issuances and, in the case of debt securities, typically consent can be obtained in short order. The form of consent is typically one or two pages in length and will usually specify conditions. Those conditions are not onerous and, often, will be in the same form applied to the vast majority of debt securities issuers.
AML/CFT Regime
Jersey's proceeds of crime and anti-money laundering regime was updated in 2023 to accord with Financial Action Task Force Recommendations and to align with international standards. Those legislative and regulatory updates were made ahead of an assessment by the Council of Europe's anti-money laundering body MONEYVAL in late 2023, and in July 2024 MONEYVAL's Fifth Round Mutual evaluation report was published, setting out its findings, and commending Jersey for its strong legal and regulatory framework.
The JFSC updated its guidelines on interpretation of the updated Jersey AML/CFT regime in October 2024, which clarifies that debt securities issuers are not in scope of the AML/CFT regime provided:
- A prospectus consent has been obtained; and/or
- Such securities are only issued to either or both (i) qualified investors as defined in Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market, as amended from time to time or (ii) professional investors as defined in the Financial Services (Investment Business (Special Purpose Investment Business — Exemption)) (Jersey) Order 2001; and/or
- The minimum consideration which may be paid or given by a person for such securities acquired by that person is at least EUR 100,000 (or an equivalent amount in another currency); and/or
- Such securities are denominated in amounts of at least EUR 100,000 (or an equivalent amount in another currency).
A number of these exemptions mirror the safe harbours available under the Jersey prospectus regime, further streamlining the legal and regulatory approach in Jersey for debt securities issuances. Care should, however, be taken to determine if one of the above exemptions applies or whether registration under the Jersey AML/CFT regime is in fact required. Each issuer should be considered on a case-by-case basis.
Audited accounts
A key consideration when structuring a Jersey debt securities issuance is whether the issuer can be formed as a private rather than a public company. There are various obligations under the Companies Law that apply to public but not private companies, including whether audited accounts must be maintained.
It has long been the position in Jersey that, in general, public companies are required to maintain audited accounts whereas private companies are not, unless the private company's articles of association or shareholder(s) require it to. It is, therefore, typical for Jersey debt securities issuers to be incorporated on a private basis where the issuance can be structured using an exemption to the prospectus regime. As a consequence of the October 2021 prospectus regime updates, the JFSC also helpfully revised its requirements that Jersey securities issuers (including debt securities issuers) include provision in their constitutional documents allowing 10% (by value) of the securities holders to require the issuer to produce audited accounts (at the requesting holders' expense). That requirement is now waived where certain of the prospectus regime safe harbours apply, specifically when:
- Such securities are only issued to either or both (i) qualified investors as defined in Regulation (EU) 2017/1129 and of the Council of 14 June 2017 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market, as amended from time to time or (ii) professional investors as defined in the Financial Services (Investment Business (Special Purpose Investment Business — Exemption)) (Jersey) Order 2001; and/or
- The minimum consideration which may be paid or given by a person for such securities acquired by that person is at least EUR 100,000 (or an equivalent amount in another currency); and/or
- Such securities are denominated in amounts of at least EUR 100,000 (or an equivalent amount in another currency).
- There is, therefore, consistency in approach across the Jersey legal and regulatory landscape when it comes to Jersey debt securities issuers ensuring a light touch regime applies, when structured appropriately.
Tax
A final notable attraction for those considering incorporating their debt securities issuer in Jersey is the tax environment. Jersey meets international standards for tax transparency, including in respect of information exchange and economic substance requirements. Further, no liability to Jersey tax arises in respect of debt securities including no applicable withholding tax (provided the debt security holder is not Jersey resident).
Further considerations
This guide is not exhaustive and tailored advice should be sought on a case-by-case basis. In particular, depending on the nature of the debt security, consideration may also need to be given to:
- Availing the issuer of the Collective Investment Funds (Restriction of Scope) (Jersey) Order 2000 (the "Order") (whilst generally debt issuances are not within scope of the Jersey funds regime, the Order provides a useful exemption in certain situations);
- Exemptions available to service providers to the issuer under the Financial Services (Investment Business (Special Purpose Investment Business – Exemption)) (Jersey) Order 2001; and
- Data protection, FATCA and/or CRS obligations.
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.