Gavin Ferguson and Siena Gold of Appleby explore how the proposed Guernsey foundation can form part of a larger wealth management structure to help the Island target different markets.

The Guernsey foundation is an incorporated entity with a separate legal personality. Unlike a company, it does not have shareholders to whom the board are accountable. Instead, the foundation holds assets (in its own name) on behalf of beneficiaries, particular purposes, or both, and in accordance with the foundation's constitution. As such, although it looks similar to a company, its operation is more akin to that of a trust. However, a foundation is neither.

The foundation's constitution comprises (i) a charter setting out (broadly) the foundation's purposes, initial assets and duration (1), and (ii) rules prescribing (among other things) the functions of the council and procedures they must follow. There are no 'trustees'. Instead, council members perform much the same role, have a duty to the foundation to act in good faith, and cannot, without express authorisation, profit directly or indirectly from their position.

As with Guernsey law trusts, the level of involvement that the founder (the person settling initial assets into the foundation) or the beneficiaries may have in running the foundation is flexible. Subject to certain restrictions (2), the founder may reserve the power to amend, revoke or vary the terms of the constitution and, if the constitution allows, may also change the purpose of the foundation or terminate it altogether. Also, in principle, it is possible for the founder to appoint themselves as a beneficiary (subject to tax and professional advice) and to reserve powers such as the power to remove council members. Beneficiaries, in general, have the right to full and accurate information about the foundation property (within three months from the date of their request).

They may apply to court to amend the foundation's purpose or have it wound up. They can also be council members. However, it is possible for the constitution to 'disenfranchise' the beneficiaries, meaning they have no right to information at all. Then a guardian must be appointed. Their role is similar to that of an enforcer of a purpose trust, who has a duty to supervise the council and act in good faith and en bon père de famille (i.e. as a prudent administrator of family wealth).

Private, charitable and corporate potential of foundations

As with trusts, foundations can have multiple uses, including for private, charitable and corporate purposes, and they can be incorporated into a variety of potential structures tailored to suit a particular client's needs.

1. Private

Guernsey law foundations can be drafted and structured to address some of the chief wealth planning concerns of clients.


As outlined above, a foundation's beneficiaries may be 'disenfranchised', meaning they are not entitled to any information about the foundation. Although enfranchised beneficiaries have greater rights, pursuant to s27 of the law, they still have no statutory right to see any documents that reveal the deliberations or reasoning behind the council's exercise of its functions or decisions. Note that as the foundation is a separate legal entity, and not merely a legal obligation between a beneficiary and trustee, the beneficiaries have no specific interest in the assets, so councillors are answerable to the foundation itself and not the individuals personally – although the supervisory role of the guardian (if any) and the Royal Court ensures that council members can be held to account.

Some clients may worry that because foundations are registered entities, they are, unlike trusts, publicly visible.

However, under the Guernsey law, only the name and registered number of the foundation, details of the registered office and name and address of the councillors and guardian (if any) are available to the public. Unlike other jurisdictions, such as Jersey and the Isle of Man, the whole charter is not commonly visible – although it must be filed with the registrar. Any person (including councillors or guardians) who illegitimately discloses information held privately by the registrar will commit an offence, and there are very limited circumstances when such information may be legitimately disclosed (such as when relevant to a criminal investigation).

Although this limited visibility may be of concern to some clients, it is of great benefit when dealing with some third parties (such as banks in civil-law jurisdictions or potential purchasers of foundation property) to be able to quickly and formally prove the entity's existence (3). It can also save legal fees as there is less need for an additional company to be set up to provide a 'recognisable' owner to hold certain assets.


As mentioned, the law allows a founder to retain certain powers. Nothing in the law prevents a founder becoming a council member, guardian or (if the council reasonably considers them to be competent and qualified for the task) investment advisor. As with trusts, however, there may be tax or asset protection implications of reserving certain powers or combinations of powers. So it may be preferable to provide for the consent of the founder (or another third party) before the council can act in a particular way.

Where the settlor of a trust may retain control in the family (i.e. by setting up a private trust company (PTC) to act as trustee), this is not necessary with foundations as the council can consist of the same people who would have formed the board of the PTC. Indeed, it is possible to use the foundation as an alternative to the PTC: the foundation's purpose can be to act as trustee of underlying trusts. There is, however, the restriction that, if neither a council member nor a guardian is a Guernsey-licensed fiduciary, a Guernsey-licensed fiduciary must be appointed as a 'resident agent' with powers to request foundation documents and supervise its running (4).

Asset protection

Foundations are suitable for asset protection as they divorce ownership of assets from the founder. Like trusts, their ability to protect assets in the face of legal claims from outside the jurisdiction will depend on the location of the assets, the number of reserved powers and, if relevant, the purpose of the foundation (for example, whether the assets were placed in the foundation with the intention of defrauding creditors). Careful drafting and managing of the foundation will be needed, but there is little reason, in principle, why the foundation cannot be used as a suitable alternative vehicle to the trust in this respect.

Dynastic planning

On its own, the foundation is a great alternative to the simple discretionary trust for preserving the family wealth for future generations. Guernsey foundations have the benefit over more traditional foundation jurisdictions, such as Liechtenstein and Panama, in that the law, and associated service industry, operates in English and there is a well-developed, well-regulated fiduciary industry with an established, highly respectable judicial system.

More complicated succession planning structures can also use the foundation as an alternative to the trust; for example, the foundation can act as an umbrella entity holding companies, trusts or assets. A well-drafted hybrid entity (set up for beneficiaries and specific purposes) can also operate as an investment vehicle during the founder's lifetime without some of the possible constraints present in some trusts, such as the need to produce income, diversify or invest in lower-risk assets, while switching to operate for, or pay out to, the beneficiaries on the founder's death.

2. Charitable

The moniker 'foundation' is often used by charities set up as trusts as it suggests stability and has a public recognition that 'trust' perhaps lacks. For philanthropic founders seeking to form such charities in the future, a Guernsey law foundation, as opposed to a trust, is now a logical choice. There is also the benefit that the foundation's purposes do not have to be exclusively charitable, so the vehicle can be more flexible than the traditional 'charitable' trust – for example, it may not be necessary to set up a separate corporate entity for profit-focused aspects of the operation.

3. Corporate

A foundation is useful for corporates looking to, for example, create an orphan structure whereby the assets of a particular entity can be held in a foundation, rather than having a parent company and being an asset on that company's balance sheet. The foundation can, for example, have as its purpose the incorporation and ownership of a general partner of a fund. It is an alternative to the purpose trust for such structuring, and some consider it preferable. And there is potential for the foundation to be used for other corporate purposes, including subordinated debt, private equity structuring and providing employee benefits.


The foundation has many uses, including as an alternative to many of the functions of trusts. More uses will no doubt develop over time, especially in the corporate sphere, as the common-law jurisdictions (as they react to changing economic demands) get to grips with the foundation and its potential.

(1 - Which may be unlimited. 2 - If the founder is a natural person, the powers may only be reserved for a period not exceeding the duration of their life. If the founder is a corporation, the powers may be reserved for a period not exceeding 50 years from the date of establishment (s11(2) of the 2012 law). 3 - Like companies, the foundation will be issued with a certificate of registration. 4 - This contrasts with other jurisdictions, such as Jersey, where the qualified person must sit on the foundation's council)

Originally published in The Step Journal, November 2012

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.