Luxembourg
How Luxembourg 1929 holding companies migrate to become Jersey companies
Simon Perchard, director of wealth structuring, Volaw Trust Company in Jersey, commenst on a new trend in corporate domicile
Luxembourg, acting under pressure from the European Commission, has agreed that from the end of 2010 the favourable tax treatment given to Luxembourg Holding 1929 companies will be removed, as their tax-exempt status violates EU state aid rules and the Code of Conduct for Business Taxation. These holding companies have for the past 80 years been used as tax-efficient vehicles for private wealth investments; and whilst the tax benefits for existing Holding 1929 companies will be grandfathered until 31 December 2010, the owners of such companies and their directors should now be seeking an alternative form in which to continue whilst still enjoying a favourable tax regime. Jersey offers one of the best alternative jurisdictions to Luxembourg and this article seeks to explain this and also what such companies need to do in order to migrate to Jersey.
The benefits offered by Jersey
Companies that choose to migrate from Luxembourg to Jersey will benefit from a zero-tax regime, just as they have in Luxembourg, provided that they do not operate as a regulated financial services business. In this respect, their tax costs will be no different to those that they have benefited from under the old Luxembourg tax rules. Moreover, they will be moving to a jurisdiction that is on the OECD’s white list of jurisdictions that have substantially implemented the internationally agreed tax standard set by the OECD; this is in contrast to Luxembourg, which is on the grey list of jurisdictions that have committed to implement the standard but have not yet substantially implemented the standard.
Other benefits that would be gained by migrating from Luxembourg to Jersey are that:
• Jersey has a modern Companies Law that is in most material respects similar to the UK Companies Acts;
• Jersey has also been recognised by the IMF and other organisations as an international finance centre that meets the highest standards;
• Jersey has a stable political and economic environment;
• Jersey is a long-established finance centre with a large pool of well qualified, experienced and highly skilled professional advisers able to assist in the management of such companies and of the assets owned by such companies; and
• Jersey is geographically close to continental Europe and easy to reach both from London and from other European centres.
The migration process
Migrating a Luxembourg Holding 1929 company to Jersey will result in the company ceasing to be a Luxembourg company (it will be considered in Luxembourg to have been liquidated) and instead becoming a Jersey company. From the perspective of Jersey’s Companies Law, the company will be treated as having continued in existence without break, from the date of its original incorporation in Luxembourg: in particular:
• the company, now incorporated in Jersey, will continue to own all property and rights that it owned immediately prior to the migration;
• the company will continue to be liable for all contracts, debts and other obligations for which it was liable immediately prior to the migration;
• the company will continue to have liability for any civil or criminal proceedings that might have been brought against it for acts committed whilst it was domiciled in Luxembourg; and any legal proceedings already commenced by or against the company prior to the migration may continue as if there had been no change in the company’s domicile..
This migration process (termed “continuance”, as the company continues in existence but in a new jurisdiction) must be approved at a shareholders’ meeting, after which an Application for Continuance into Jersey should be made to the Jersey Financial Services Commission to obtain a Certificate of Continuance. The following documentation or information should accompany this application:
• a certified true copy of the company’s current Memorandum and Articles or equivalent constitutional documents (M&A), together with “Articles of continuance” that state the amendments to be made to the M&A necessary to ensure that they conform to Jersey law. In practice, companies seeking continuance in Jersey will often adopt new M&A that conform to Jersey’s laws;
• the new name by which the company will be known once it has migrated to Jersey;
• a statement of solvency signed by each director and each proposed director of the company, in the form set out in the Companies Law;
• particulars of the current directors and secretary and any changes to these officers that will come into effect upon continuance in Jersey;
• evidence (usually in the form of a letter of confirmation from Luxembourg legal counsel) that (i) the company is authorised under Luxembourg laws to make the application; (ii) the company may migrate, that all necessary authorisations have been given in Luxembourg to enable the migration to take place and that, on continuance in Jersey, the company will cease to be incorporated in Luxembourg; and (iii) the interests of members and of creditors will not be unfairly prejudiced as a result of the migration.
• a copy of the company’s most recent accounts (audited, if available) not older than 12 months from the date of application;
• such other documents as the JFSC might reasonably request in regard to the application;
• the application fee.
If the Application is a Société Anonyme (SA), it will become a public company upon migration to Jersey, and it will also be necessary to file a statement of particulars with the JFSC.
To comply with Luxembourg’s laws, a Notary will have to attend the meeting at which shareholders are asked to approve the migration and the Notary will prepare a deed for registration at the Luxembourg registry; a certified true copy of this deed must, when available, be delivered to the JFSC.
Once the Certificate of continuance has been obtained, the company becomes a company incorporated under Jersey Companies Law, and would then be liable to 0% tax and other advantages under Jersey law.
Conclusion
While each case should be considered on its merits, the directors and shareholders of Luxembourg Holding 1929 companies should consider migration to Jersey as a good option to follow, prior to the cessation at the end of 2010 of the current tax regime in Luxembourg.
For further information please contact Simon Perchard: email: sperchard@volaw.com or call 00441534 500400.
