Draft Companies (Amendment No. 9) (Jersey) Law 200- and the Draft Companies (Amendment No.2) (Jersey) Regulations 200-

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A decision made to approve the Draft Companies (Amendment No. 9) (Jersey) Law 200- and the Draft Companies (Amendment No. 2) (Jersey) Regulations 200-

Decision Reference MD-E-2007-0213

Decision Summary Title :

Amendments to the Companies (Jersey) Law 1991 (“the Law”)

Date of Decision Summary:

15 November 2007

Decision Summary Author:

James Mews

Finance Industry Development Executive

Decision Summary:

Public or Exempt?

(State clauses from Code of Practice booklet)

Public

Type of Report:

Oral or Written?

Written

Person Giving

Oral Report:

Written Report

Title :

Amendments to the Companies (Jersey) Law 1991 (“the Law”)

Date of Written Report:

15 November 2007

Written Report Author:

James Mews

Finance Industry Development Executive

Written Report :

Public or Exempt?

(State clauses from Code of Practice booklet)

Public

Subject:

Approval of the Companies (Amendment No 9) (Jersey) law 200- (“the Amendment”) and Companies (Amendment No 2) (Jersey) Regulations 200- (“the Regulations”).

Decision(s):

The Minister has approved the Amendment and the Regulations, signed the declaration of compatibility with the European Convention on Human Rights and for the Financial Industry Development Executive to take such steps as are necessary to lodge them au Greffe by 20 November 2007 for the States to debate at the first sitting in 2008 or first available sitting thereafter.

Reason(s) for Decision:

The Amendment and Regulations modernise aspects of the Law in accordance with international developments to introduce more flexibility and simplicity into the Law.

The proposals have been through the normal consultation process including comprehensive discussion by a steering group, industry and the Commission neither of whom object to their adoption.

The Law Officers Department have indicated that the Amendments do not raise any Human Rights issues and that all tariffs for new offences created are commensurate with similar existing offences.

Resource Implications:

No measurable cost or manpower implications arise for the Commission, the States or industry.

Action required:

The Finance Industry Development Executive take such steps as are necessary to lodge the Amendment and Regulations au Greffe by 20 November 2007 for the States to debate at the first sitting in 2008 or first available sitting thereafter.

Signature: Senator P.F.C.Ozouf

Position: Minister

Date Signed:

Date of Decision (If different from Date Signed):

Draft Companies (Amendment No. 9) (Jersey) Law 200- and the Draft Companies (Amendment No.2) (Jersey) Regulations 200-

MINISTER FOR ECONOMIC DEVELOPMENT

AMENDMENTS TO THE COMPANIES (JERSEY) LAW 1991

1 THE ISSUE AND RECOMMENDATION

1.1 It is proposed to amend the Companies (Jersey) Law 1991 (“the Law”) through the Companies (Amendment No 9) (Jersey) law 200- (“the Amendment”) and Companies (Amendment No 2) (Jersey) Regulations 200- (“the Regulations”).

1.2 It is recommended that the Minister for Economic Development approves the Regulations and the Amendment, signs the statement of Human Rights compliance and that the Finance Industry Development Executive takes the necessary steps to lodge the Regulations and Amendment au Greffe by 20 November 2007 to be debated by the States as soon as possible thereafter.

2 BACKGROUND

2.1 The purpose behind the Amendment and Regulations is to modernise aspects of the Law in accordance with international developments to introduce more flexibility and simplicity into the Law.

2.2 The proposals have been through the normal consultation process. The proposals have been subsequently comprehensively discussed with industry following a consultation paper published in 30 April 2006. The draft legislation has been considered by a steering group, industry and the Commission neither of whom object to their adoption.

2.3 There are no financial or manpower implications arising from the proposals.

2.4 The Law Officers Department have indicated that the Amendments do not raise any Human Rights issues and that all tariffs for new offences created are commensurate with similar existing offences.

3 THE AMENDMENT TO THE LAW

3.1 The Amendment makes a number of changes to the Law, both minor and important.

3.2 The most significant change is the amendment to Articles 114 and 115, which will permit a Jersey company to make a distribution provided the directors make a statement in relation to the company’s solvency. This will greatly simplify the ability of a company to make payments to its shareholders while maintaining protection for creditors and is in accordance with a general trend in corporate law worldwide.

3.3 The amendment also simplifies the ability of certain types of company to reduce their capital accounts, again with the focus being on creditor protection.

3.4 Finally, there are a number of minor changes aimed at increasing the law’s flexibility. Examples include allowing a public company to include the abbreviation “plc” in its name and reducing certain notice periods to 14 days.

3.5 Taken together, the amendments will further encourage the use of Jersey companies, and be beneficial to the Island.

4 REGULATIONS

4.1 The Regulations set out a number of substantial and important changes to the Companies Law, all encouraged to ensure that Jersey companies remain flexible vehicles suitable to the widest possible range of corporate activity. The most significant changes are set out below.

4.2 Regulation 6 removes the prohibition against a company giving financial assistance for the purchase of its own shares. This has been a longstanding problem, as it effectively makes it difficult for a person to acquire a company using a loan and at the same time using the shares in the company as security for that loan. As with many changes to the new Law, the principle is that, provided the company remains solvent, the actions of a company are its internal affairs. The prohibition against financial assistance has been lifted in the UK and it will significantly assist the finance industry to follow suit in Jersey.

4.3 Regulation 7 introduces treasury shares, which will permit a company that purchases its own shares to hold them for a limited duration, rather than cancel them. This means that a company can purchase its own shares and them transfer them to a new investor much more easily, which will be of particular use to the funds sector.

4.4 Regulation 8 permits a regulated financial services business to act as a corporate director of a Jersey company, which will again assist industry. In practice, many directors are provided by regulated businesses, and it makes sense that those businesses, rather than its employees, should act as directors.

4.5 Regulation 12 permits cells of cell companies to have different boards of directors.

4.6 There are also a number of minor changes of a technical nature. The majority of these arose from the introduction of Amendment No.8 to the Companies Law and suggestions that have been received in relation to how these provisions could better operate in practice.

5 SUMMARY

5.1 In summary, the changes will further encourage the use of Jersey companies, and be beneficial to the Island.

5.2 No measurable cost or manpower implications arise for the Commission, or the States .

6 RECOMMENDATION

6.1 It is recommended that the Minister for Economic Development approves the Regulations and the Amendment, signs the statement of Human Rights compliance, and that the Finance Industry Development Executive takes the necessary steps to lodge the Regulations and Amendment au Greffe by 20 November 2007 to be debated by the States as soon as possible thereafter.

JAMES MEWS

Finance Industry Development Executive

15 November 2007