This memorandum has been prepared for the assistance of clients considering establishing a fund under the laws of Guernsey. It is intended to provide only a summary of the main legal requirements and general principles applicable to the establishment of an investment fund in Guernsey and it is not intended to be comprehensive in its scope. It is recommended that a client seeks legal advice on any proposed transaction prior to taking steps to implement it.
A series of briefings on other aspects of Guernsey law have been produced by Ogier and are available on request.
This memorandum has been prepared on the basis of the law and practice as at 1 July 2008
Registered funds regime
Closed-ended funds may elect not to complete the usual consent process which can take some weeks. Instead consent may now be obtained from the Guernsey Financial Services Commission within 3 days of filing the required documents with the Commission. Closed-ended funds which have received consent in this way will be called "registered" funds. Open-ended funds may not use the registered funds regime. However, a similar regime for qualifying investor funds is available for both open-ended and closed-ended funds and is the subject of a separate briefing.
Certification of the Administrator
All funds incorporated in Guernsey must have a Guernsey resident administrator.
The registered funds regime places great reliance on the certification by the administrator of the fund.
The Commission have issued guidelines as to the due diligence that the administrator is required to perform. This is similar to that required in respect of qualifying investor funds. The main criteria is that the promoter is fit and proper which means that the administrator is satisfied with the integrity, solvency and competence of the promoter.
The following must be filed with the Commission:
- certified final copy of the prospectus, offer document or equivalent, including the application form, subscription agreement or equivalent;
- certified copies of the constitutive documents (memorandum and articles, limited partnership agreement or unit trust deed);
- certified final copies of all material agreements such as management agreement, investment management agreement, administration agreement, custodian agreement, etc.;
- the required fee;
- a certificate from the administrator of the fund confirming that the administrator has performed sufficient due diligence to be satisfied that the promoter of the fund and the associated parties to the fund are fit and proper, that the fund will not be offered directly to the public in Guernsey and the prospectus contains the relevant disclaimers required by the Commission;
- forms GFA and APC (which forms will, as usual, be prepared by Ogier);
- forms PQ completed by any directors of a corporate fund; and
- forms PQ for any controllers, directors and senior managers of the promoter.
Promotion of the fund
- A registered fund may not be offered directly to the public in Guernsey. The "public" will not include any entity or person which is licensed under the Banking Law, Protection of Investors Law, Insurance Laws or Fiduciaries Law in Guernsey.
The following must appear in the prospectus:
"Consent under the Control of Borrowing (Bailiwick of Guernsey) Ordinance, 1959-1989 as amended has been obtained to this issue. To receive such consent application was made under the Guernsey Financial Services Commission's framework relating to Registered Closed-ended Investment Funds. Under this framework neither the Guernsey Financial Services Commission nor the States of Guernsey Policy Council have reviewed the prospectus but instead have relied on specific warranties provided by the Guernsey licensed administrator of the Fund. Neither the Guernsey Financial Services Commission nor the States of Guernsey Policy Council takes any responsibility for the financial soundness of the Fund or for the correctness of any of the statements made or opinions expressed with regard to it."
It is likely that the regime will be suitable for many closed-ended funds. However, it will not be appropriate for funds where the Commission's usual consent process is required by another regulator. For example, where a fund lists on Euronext, the Dutch regulator expects that the Commission's full processes will have been completed.
Unlike qualified investor funds, however, there is no minimum subscription or any requirement that investors be professional, experienced or knowledgeable employees.
Where a new manager or general partner is incorporated in Guernsey, that new entity will continue to require a licence under the Protection of Investors Law. The application process relating to the issue of a licence under the Protection of Investors Law will normally take longer than three working days. However, the Commission have published proposals to provide for formal consideration of any licence within 10 days of receipt of the relevant documentation. The proposals will require the Guernsey licensed administrator to perform similar due diligence in respect of the beneficial owners or controllers of the licensee and to confirm that the application is complete and accurate.
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.