INTRODUCTION OF FOUNDATIONS IN GUERNSEY

From January 9, 2013
On 7 January 2013 the Foundations (Guernsey) Law 2012, approved by the Privy Council on 12 December 2012, which legislates for the introduction of the foundations form in Guernsey, was registered in the Royal Court. From January 9, 2013 the Guernsey Registry has to begun to accept applications for the formation of Guernsey's foundations. 

Description of a foundation
There is no single legal definition of a foundation. However it may be described as a legal entity which is created when a person provides assets for a specific purpose. 

The foundation holds the assets for purposes set out in its constitutive documents and is administered according to contractual rather than fiduciary principles - principles that are more widely understood than those that underpin trusts. The foundation is a distinct legal entity but unlike a company, it has no shareholders.

Foundations are structures that can be used in similar circumstances to traditional family trusts. Moreover, a foundation has similar features to a trust in that it has a founder who is akin to a settlor, beneficiaries who have similar rights to those of a discretionary trust, and a foundation instrument and rules which are similar to a trust deed. As foundations, unlike trusts, have legal personality, they will be entered onto a public register which will be administered by the Guernsey Registry.

General uses of a foundation
A foundation is typically used for:

  • Wealth protection and asset management;
  • Inheritance/succession planning and the circumvention of forced heirship rules;
  • Charitable and non-charitable purposes;
  • Orphan vehicle for funds, private securitisation etc;
  • Pension funds;
  • Holding capital, income and specific assets;
  • As a trustee (as an alternative to a private trust company).

Other jurisdictions with foundation legislation
Other jurisdictions with foundation legislation include: Anguilla, Antigua, Austria, Curacao, Cyprus, Isle of Man, Jersey, Liechtenstein, Malta, Monaco, Nevis, Panama, St. Kitts, Sweden and Switzerland. 

Key features of the Guernsey foundation
The key features of the Guernsey foundation are the following:

  • An incorporated entity with separate legal personality but without any shareholders.
  • It is incorporated at the request of a founder. The founder of a Guernsey foundation may determine the purpose of the foundation, craft the foundation’s constitution and endow it with its initial capital. The founder (or his agent) must also subscribe his name, as the founder, to the constitution of the foundation by signing it. It is also the founder’s role to appoint the initial councillors and any guardian and to seek to have it registered. The founder can either be a councillor or a guardian (but not both simultaneously) in addition to being a beneficiary.
  • The foundation holds assets in its own name on behalf of beneficiaries, particular purposes, or both.
  • Generally, it cannot carry out commercial activities except those necessary for, or ancillary or incidental to, its purpose.
  • It is managed, in accordance with a constitution comprising of a charter and a set of rules, by a council comprised of at least two councillors unless the constitution permits a single councillor. If one of the councillors or the guardian is a Guernsey licensed fiduciary, the foundation will be brought into the ambit of the regulatory regime. If neither of the councillors, nor the guardian, is a Guernsey licensed fiduciary, then the foundation will require a Guernsey resident agent to hold the foundation’s records within the jurisdiction.
  • A Guernsey foundation must have a guardian only where there are either disenfranchised beneficiaries or where there is only a purpose but no individual beneficiaries. The guardian’s function is to enforce the purposes of the foundation on behalf of disenfranchised beneficiaries or, where there are no beneficiaries in substitution for them. Foundations that have beneficiaries but no disenfranchised beneficiaries are not required to have a guardian. The founder may act as guardian. The guardian will be named in the register and may not serve on the council at the same time. He must maintain accurate accounts and records of his guardianship.
  • There is no requirement for either a council member or the guardian (if any) to be a Guernsey licensed fiduciary, although in such circumstances a “resident agent” must be appointed. The “resident agent” must be a Guernsey licensed fiduciary, resident in Guernsey, and will have rights to view such foundation information as is necessary to ensure the foundation is complying with Guernsey Law.
  • Only a Guernsey licensed fiduciary may apply to register a foundation. 
  • The following information about the foundations will be publicly available in the Register: the name and registered number of the foundation, the name and address of the councillors appointed to act, the name and address of the guardian (if there is one) and the details of the registered office. 

An excellent opportunity for Guernsey 
The Minister for Commerce and Employment, Kevin Stewart said: “The introduction of Foundations in the New Year represents an excellent opportunity for Guernsey and is a welcome boost for the financial services industry as we enter 2013. Offering a new structure for financial services will increase Guernsey's competitive advantage and give industry an edge in an increasingly competitive global environment.”.


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