The Security Interests (Jersey) Law 2012 will come fully into force on January 2 2014 and provides for registration as a means of perfecting security over intangible moveable property (for further details please see "Registration under the Security Interests (Jersey) Law 2012"). The register of security interests will be maintained by the registrar of companies and will be a matter of public record.
Concern was expressed in the trust industry in Jersey as to what the new registration requirement would mean for trustees, and in particular whether trusts would need to be reflected on the register. Trusts are usually a private matter between the settlor and the trustee and not a matter of public record. However, a requirement to reflect trusts on the register of security interests would mean that their existence was made public. Therefore, competitor jurisdictions might argue that Jersey had introduced a form of trusts register.
This concern has been recognised in the Security Interests (Registration and Miscellaneous Provisions) (Jersey) Order 2013, which carves out most trusts (other than certain unit trusts) by providing an exemption from registration where a security interest is granted by the trustees of a trust over the trust property of that trust. In such circumstances, registration will not be required in order to perfect the security, and as a matter of law the name of neither the trust nor the trustee will need to be entered on the public register of security interests.
However, certain unit trusts (referred to in the order as 'prescribed unit trusts') will remain subject to the general provisions of the law. This is in recognition of the fact that such entities are of a more commercial nature, and thus the same sensitivities do not apply. A unit trust will be considered to be a prescribed unit trust where:
- it is a unit trust within the meaning of the Trusts (Jersey) Law 1984;
- express provision is made in the instrument by which the trust was created to the effect that the trustees of the trust may issue units in the trust;
- all of those units are registered in a register of holders of units in the trust in the name of one or more legal persons (ie, a company or other person, or an association of persons, that is not an individual, registered or otherwise formed anywhere in the world);
none of those legal persons:
- is a foundation that has as an object the benefit of one or more individuals;
- acts as trustee for the benefit of one or more individuals; or
- acts as the nominee of one or more individuals;
- the trust property of the trust includes immovable property (no matter whether that property is situated in Jersey);
- the trust property of the trust is held by the trustees of the trust, whether directly or indirectly through one or more legal persons; and
- the trustees of the trust have obtained consent under Article 9 of the Control of Borrowing (Jersey) Order 1958 in relation to the issue of the units in the trust.
It is expected that many lenders will require security taken pursuant to the law to be registered in the new registry of security interests, whether to perfect the security or to give notice to third parties. However, as noted above, it will not be necessary for security granted by trustees of a trust (other than a prescribed unit trust) to be registered in order to perfect security; indeed, registration of security granted by trustees of trusts (other than prescribed unit trusts) will not be permitted.
For further information on this topic please contact Steve Meiklejohn at Ogier by telephone (+44 1534 504 000), fax (+44 1534 504 444) or email (email@example.com). The Ogier website can be accessed at www.ogier.com.