Development Securities: What Directors Of Jersey Companies Should Continue To Do

Don't worry, this isn't another briefing that anxiously sets out new standards of corporate governance required as a consequence of the recent Development Securities judgments. On the contrary, our view is that those English judgments tell us little about corporate governance of Jersey companies that was not already known, and in fact support our long-held view that what some may see as corporate governance 'best practice' should instead be considered as the 'only practice'.

Key points

The key points that come out of the Development Securities judgments in a corporate governance context are as follows:

A court may examine pre-incorporation planning in determining whether a company's board was operating on an ongoing basis or to undertake another's plan: future board members should be sufficiently involved. The court may review board minutes and handwritten notes of board minutes: avoid conflicting records and prepare long form draft minutes in advance. The court may be critical of material matters discussed in board meetings not being recorded in board minutes, and of directors not being sent relevant emails or spending sufficient time considering matters: again, prepare long form draft minutes in advance and, where meetings must be held at short notice, company advisers can attend the meeting to brief directors. It could be argued before the court that directors with numerous directorships were not abreast of and focused on relevant transactions. Shareholder resolutions authorising directors' actions may be the subject of lengthy arguments and comprehensive analysis: they can be authorisations but not instructions. Provided a Jersey company's directors exercise proper judgment, its central management and control does not vest in its sole parent even where it carries out the purpose for which it was set up in accordance with the intentions, desires and even instructions of the parent. Directors of a Jersey company that is a wholly-owned special purpose vehicle and which is to enter into a transaction that does not prejudice its creditors act in the best interests of the company where they act in the best interests of the company's sole shareholder. Further details follow.

What are the Development Securities judgments?

The Development Securities judgments are three judgments of the UK Tax Tribunal, a first instance judgment and two appeals, which looked at whether three Jersey companies (the "Jcos") were tax resident in the UK at the time...