Guernsey: New Direction

Last Updated: 16 November 2012
Article by Gavin Ferguson and Siena Gold

Most Read Contributor in Guernsey, November 2017

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

For more information about Guernsey's finance industry please visit

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
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
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 you may opt out by clicking here

    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.

    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.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    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.

    By clicking Register you state you have read and agree to our Terms and Conditions