The Guernsey company is still an extremely useful tax planning tool and in the first of a series of four articles about the Guernsey company, Mik Underdown of the Blenheim Fiduciary Group, outlines the key components that give the Guernsey company its flexibility.
During recent years the Guernsey company has been the cornerstone of much of the successful tax planning that has taken place, not only for private clients, but also for larger corporations.
The principal reasons for this success have been the flexibility provided by a beneficial tax environment, robust, yet pragmatic legislation, together with the ease of incorporation and administration.
The statutory legislation governing the formation, regulation and operation of Guernsey companies is The Companies (Guernsey) Law, 1994 (as amended). Although it is a modern and functional piece of legislation, it is worth noting that it is in the process of being further updated.
The first stage in the process of incorporation is the due diligence process. This will include the disclosure of the identity of the beneficial owner of the shares of the company to the Guernsey Financial Services Authority (‘GFSC’). If the shares are to be held by a trust as part of the overall structure, then the details of the trust (trust name, settlor, beneficiaries and so on) need to be disclosed. Should the company have a wider share ownership, then disclosure is only required for those individuals who will hold an interest greater than 5%.
Depending on the activity of the company, a license may be required. So, for example, if the company is involved in banking, investment management or insurance activities then an application for a license will need to be made to the GFSC.
Confirming the chosen name
Consent to the company name can usually be obtained within 24 hours and is a straightforward process provided the required name is not the same (or so similar as to be misleading) as another company, either in Guernsey or the UK. The name must end with ’Limited’, should not have references to royalty or be in any manner offensive.
Subscribers and registered office
Initially, subscribers are most easily and efficiently provided by utilising the services of Guernsey resident nominee shareholders (a service provided by Blenheim Group). The nominees will hold the shares on trust and then transfer them to the ultimate beneficial owner following formation of the company.
A Guernsey company is also required to have a registered office in Guernsey and the name must be displayed in a position available to the general public within office hours. Typically, the registered office address is that of the Guernsey financial service provider.
Memorandum and Articles of Association
There is nothing unusual about the M and AA and they will be familiar to financial advisors. Following the filing of the M and AA, the Registrar will issue the formal Certificate of Incorporation. The only point worth noting is that, unlike some jurisdictions, the Law does not include a standard list of articles that can be simply adopted by the company.
There is no minimum authorised or issued share capital requirement under the law so, unless there is a specific requirement, the easiest and most cost efficient route is to pay the minimum capital duty of £50 which provides for an authorised capital of £10,000 (or currency equivalent).
Different classes of share are available – for example ordinary, preference or redeemable preference – and different rights (for example voting and dividend) may be attached to the different classes. The main point of note is that bearer shares are not permitted and shares must be issued in a registered form. Shares of no par value and fractions of shares are allowed for under the legislation.
Directors and secretary
Generally, the company must have at least one director, who does not have to be resident in Guernsey, may be an individual or a corporate and can take part in directors meetings by telephone.
The secretary is appointed by the board and is required to carry out the normal duties of maintaining the share register, keeping minutes of meetings, filing the Annual Return and so on.
Annual Return and Accounts
A Guernsey company must hold an AGM each year although this does not have to be held in Guernsey. Accounts are normally presented to the shareholders at the AGM, although it is not necessary for them to be audited or filed with the registrar. The statutory requirement is for the maintenance of accounting records sufficient to show, with reasonable accuracy, the financial position of the company.
This overview is, of necessity, a very brief fly through some of the advantages of a Guernsey company to demonstrate the ease of incorporation and the flexibility. Blenheim Fiduciary Group is able to advise on all stages and assist with incorporation and ongoing provision of registered office, nominee directors and shareholders and full administration services including those of secretary.
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.