Guernsey: A Case For Guernsey

Last Updated: 23 June 2011
Article by Paul Wilkes

You are an innovative fund manager looking to establish a new hedge fund, investing in a diverse pool of equities with a medium to high risk profile. You are looking to attract a wide range of institutional investors while retaining the option to market it to affluent and high-net worth individuals not averse to taking a financial risk for the potential of high return. Given recent troubles of hedge funds, you are looking to target investors seeking to invest in a fund established in a trusted jurisdiction with a robust regulatory regime. With this in mind, let us explain why Guernsey would suit your needs and suggest a suitable structure.

Why choose Guernsey?

The first question to be considered is what does the jurisdiction offer in terms of reputation and credibility with potential investors? Guernsey has a solid history in operating collective investment funds having been in the business for the past four decades, and with Guernsey based funds being promoted and sponsored by leading institutions in 38 countries it shows no signs of slowing down. The island has a reputation of providing a healthy choice of experienced fund services providers together with flexibility of structure and regulation, a stable government that meets internationally compliant standards, the option of access to the Channel Islands Stock Exchange (CISX) and preferential taxation.

Which legal structure to use?

In short, Guernsey is a jurisdiction with a reputation for providing a regulatory regime with real substance and service providers with high-end expertise. The flexibility of Guernsey's regimes can suit the needs and demands faced from investors and competitors.

Guernsey funds may be structured in the traditional way as companies, unit trusts or limited partnerships. The jurisdiction also offers the potential to structure the fund as a protected cell company (PCC), being a single legal entity with distinct cells, the assets and liabilities of each cell being segregated by law from the assets and liabilities of each other cell. The fund may also be structured as an incorporated cell company (similar to a PCC except that each cell is a separate legal entity, effectively a company within a company).

In short, Guernsey caters for the legal structures commonly used for funds and provides particular expertise with cellular companies. The choice of vehicle will depend on a number of factors (investor preference, familiarity and fund profile to name a few) and the jurisdiction can cater for each of them.

What level of regulation?

Once the vehicle has been chosen, it's a case of determining the level of regulation the fund should be subject to. Funds are regulated by the Guernsey Financial Services Commission (GFSC) under The Protection of Investors (Bailiwick of Guernsey) Law 1987.

Your hedge fund is, of course, open-ended. Guernsey offers four options for open-ended funds, three of those being authorised funds and the fourth being registered.

Authorised funds

Authorised funds are regulated and subject to continuing supervision by the GFSC. Within this category, open-ended funds are classified as A, B or Q funds and are subject to the Class A, B or Q rules respectively.

Class A Class A funds can be marketed to the UK retail mass market through a range of media including national papers and high street banks. It may then come as no surprise that, particularly given the potentially unsophisticated nature of those who may be interested in investing, the Class A Rules are rigorous and focused on producing accurate and timely investor information.

Class B This is the most popular and frequently used product for hedge funds being set up in Guernsey. While remaining investor focused, the rules are not as stringent as for Class A funds and a Class B fund can be marketed to both institutional investors and personal investors routed through an independent financial advisor.

Class Q As the most flexible of the authorised funds in terms of rules, Class Q funds are limited to qualifying professional investors. The qualified professional investor definition is restricted to government bodies, trustees of a trust or a corporate body or limited partnership having net assets in excess of £2m and to individuals with minimum net worth of £500,000 (excluding main resident and household goods).

Registered funds

Registered funds are subject to ongoing supervision, as opposed to regulation, by the GFSC. An open-ended registered fund will be subject to The Registered Collective Investment Scheme Rules 2008. These are generally regarded as being less onerous than the rules applicable to authorised funds and registered funds are more comparable to Caribbean open-ended fund products.

Service provider requirements

A Guernsey open-ended fund, whether authorised or registered, must have a Guernsey resident administrator and custodian trustee (exemptions apply in certain circumstances where an established prime broker is used).

There is no requirement for a Guernsey fund to have a separate investment manager. However, in practice, an investment manager may still be put in place for commercial and risk management purposes. Importantly, there is no regulatory requirement for the fund to have a locally licensed manager, meaning an established manager outside Guernsey can manage a Guernsey fund without having to obtain a separate licence from the GFSC.

What is the process?

Authorised funds

Once you have decided the level of regulation to opt for, the next step is to take the client through the standard three-stage authorisation process that usually takes between six to eight weeks to complete:

  1. Eight weeks to launch – outline consent. At this first step the GFSC is provided with outline details of the fund and, where the promoter is not already known to the GFSC, information in response to the new promoter's checklist. By six weeks to launch outline authorisation is granted by the GFSC.
  2. Six weeks to launch – interim consent. The GFSC is provided with a near final draft of the prospectus. A week to 10 working days later, the GFSC will respond and upon satisfactorily dealing with any queries they may have, interim authorisation will be granted.
  3. Three days to launch – application for formal authorisation. Certified copies of final versions of the prospectus and signed agreements with service providers are submitted to the GFSC. Final consent is obtained within two or three working days. The fund is launched!

Alternatively, if launch timetables are tight, the streamlined approval process, known as the qualifying investor funds (QIF) regime, is an option. The administrator of a QIF is responsible for collecting due diligence on the fund promoter and must make certain warranties to the GFSC as to your fitness and propriety. The QIF process should take no longer than five weeks from starting to launch and the GFSC will grant authorisation for a QIF within three working days of submission of a completed application.

The advantage of the QIF regime is that there is only one step in applying to the GFSC (as opposed to the three stage process outlined above). The time it takes to reach this point is completely within the control of you, your lawyers and your administrator. A fund using the QIF procedure can only be targeted at certain professional or experienced investors.

Registered funds

As with the QIF regime, registration is streamlined and quick. Upon submission of a registration application, which again requires the administrator to make certain warranties to the GFSC as to your fitness and propriety as a promoter, together with certified copies of final versions of scheme particulars and signed agreements with service providers, the GFSC will issue a declaration of registration within three working days.

And the answer is...

So, with the above information, you choose the following:

  1. Legal structure – protected cell company. This will save time and costs when you launch your next fund, which will simply be a new cell in this existing PCC
  2. Regulatory regime – authorised B scheme. This will give your target investors the confidence of a well recognised regulatory regime while retaining the flexibility to adopt the investment profile you are intending.
  3. Process – three stage process: As you intend to market the fund to more than professional or experienced investors, you have decided not to use the QIF fast track.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.