Institutional investors that have investment vehicles domiciled in Jersey may have come across the conundrum of taking security over shares owned by Jersey vehicles. In order to gain a valid security interest in Jersey over shares, the security holder needs to either (i) hold the physical share certificates (which would require uncertificated shares held by a Jersey vehicle to be reissued in certificated form); or (ii) be registered as the legal title holder of the shares (which not all security interest holders would find desirable). These requirements may not be practical to implement, making it difficult for vehicles to grant security for borrowing, trading or other purposes.

The States of Jersey on 19 July 2011 approved the Security Interests (Jersey) Law 201- (the "New Law") which is likely to come into force, at least partially, in 2012 (it is currently with the Privy Council for approval). Under the New Law, the requirement to specify a method of creation (i.e. physical possession or assignment) will no longer be required and security may be taken over book debts and receivables.

When the relevant provisions of the New Law come into force, a borrower will be permitted to use collateral posted to a lender which under existing law would raise doubts as to the validity of the lender's security. There will also be a new electronic public register of security interests which will simplify determining priority although priority may still be maintained by other means, for instance by taking physical possession.

Some security interest holders will no doubt require new or amended agreements to be entered into when the New Law comes into force.