Guernsey has implemented its own foundations law. Butterfield Trust managing director Paul Hodgson believes the island's version brings something new to the foundations market.

The decision to proceed with the drafting of what is called The Foundations (Guernsey) Law, 2012 (the Law) was taken following a review of the local law governing trusts and has taken five years to conclude following the revisions to that law. Some of that time was spent reflecting on the benefits of the Law but most of the time was spent in understanding why a Guernsey Foundation would attract individuals, and their advisers, to establish structures here.

Why choose Guernsey to establish a foundation?

An individual who is considering establishing a structure, such as a foundation, to hold their wealth is usually doing so with a view to passing assets on to future generations. In light of the international nature of most wealthy families it is usual for such planning to assume that individuals may be resident in and, or, hold assets in a number of jurisdictions. These factors inevitably result in a need for legal advice to identify the most appropriate structure in order to avoid detrimental effects of issues such as taxation, asset protection or forced heirship.

Guernsey is one of a small number of top tier jurisdictions which offer the opportunity to create effective structures for this purpose and, as such, is well known to those who are advising on them. Private International Foundations have a long history as vehicles for holding family wealth for succession purposes in jurisdictions which did not recognise the concept of a trust. Guernsey has a similarly long history in wealth structuring but, as a Common Law jurisdiction, the vehicle of choice has been the trust. It is therefore a natural step for Guernsey to introduce the option of using a foundation where it better suits the requirements of the wealth owner.

The announcement of Guernsey's intention to offer foundations was welcomed by the advisers who have historically introduced their clients to Guernsey structures and initial indications are that, where they believe that a foundation is the most appropriate structure, a Guernsey foundation will be one of a small number of options considered.

Ultimately, this decision will be influenced by factors such as the calibre of potential service providers they already know, or are introduced to, as much as the points of difference between Guernsey and other jurisdictions which offer foundations. However, there are a number of characteristics which distinguish the Guernsey foundation from foundations in other jurisdictions. These can be broken down into those which relate to the structure itself, as framed by the draft Law and those which relate to the Guernsey environment for fiduciary structuring. The Law has been carefully considered over a number of years and has, in contrast to many other "new" foundation jurisdictions, placed significant emphasis on ensuring that a Guernsey foundation is recognisable as a foundation from the perspective of a lawyer from a Civil Law background. This is regarded as being an important consideration for advisers recommending such a structure to an individual who either lives, or holds assets, in a Civil Law country, a group which the Guernsey foundation is expected to attract.

Guernsey differences

Beyond this general approach to drafting the Law there are a number of specific ways in which a Guernsey foundation structure can be said to differ from foundations in other jurisdictions. For example, the Law includes provisions which protect assets held in a Guernsey foundation from foreign rules of forced heirship and foreign court orders.

In addition, a founder can determine whether the individuals who are intended to benefit from the structure should be enfranchised beneficiaries, who have rights to information in relation to the structure, or disenfranchised beneficiaries, who have no immediate rights to information but may in future be able to become an enfranchised beneficiary under certain circumstances. This distinction is unique to Guernsey and is expected to offer advantages to individuals establishing foundations who may wish to ensure that rights to information about the extent of assets held within a structure are very limited.

However, it is also noteworthy that the Law provides that where a Guernsey foundation has disenfranchised beneficiaries there must also be a guardian who owes fiduciary duties to both the foundation and the beneficiaries to enforce the terms of the foundation. In addition to the specific features offered by the new structure, the strength of the Guernsey fiduciary industry remains a significant distinguishing feature of the jurisdiction. Local fiduciary service providers, who were among the first in the world to be subject to regulation in 2000, have adapted their businesses to be able to offer advisers, and their clients, a high levels of service, particularly to individuals seeking sophisticated structures. This has been built on a solid base of experienced practitioners within the fiduciary sector, in addition to access to high quality legal and accounting, as well as banking and investment management services within the jurisdiction.

Guernsey is also highly regarded for its stability in an uncertain global environment and the independence and integrity of its judiciary. With specific reference to foundations, there is a high degree of confidence that the local courts will approach disputes which may arise in the future using the same toolkit they already apply in considering disputes involving similar structures, including trusts. This is expected to be relevant to advisers considering alternative foundation jurisdictions.


As the newest of the "new" foundation jurisdictions, Guernsey is entering an already crowded marketplace and expects to face stiff competition. However, the industry has a history of ongoing innovation and is extending its reach into jurisdictions which have either not historically required fiduciary structures, or have not had connections with Guernsey.

As these are often jurisdictions where familiarity with the trust is low, the Guernsey Foundation is expected to assist in the expansion of the marketplace for Guernsey fiduciary service providers. Based on the distinct characteristics of the Guernsey Foundation, which are referred to above, along with a number of other differentiators, and the reputation of the jurisdiction and its service providers, there is a high level of confidence that advisers, and their individual clients, will choose to establish new foundation structures in Guernsey.

Originally published in Private Client Practitioner, January 2013

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