Guernsey: Corporate Governance In An Offshore Centre

Last Updated: 5 July 2005
Article by Paul Christopher


More is expected from directors now than in the past. Sir Howard Davies, the former head of the United Kingdoms Financial Services Authority, has said that "the Crown Dependencies [of which Guernsey forms part] continually have to go that extra mile just to prove that they are upright, honest and godly. Of course it is not fair, but it is realistic".

Directors of offshore companies should embrace the new reality for three very good reasons:

  1. the profile of offshore companies has increased;
  2. in order to fulfil their duties, directors need to understand the liabilities attaching to their position; and
  3. potential tax consequences.

To mix metaphors: these three corners, which are all addressed below, form a virtuous circle:


Offshore companies are used as vehicles for a wide range of activities ranging from operating businesses (commercial businesses such as banking, insurance, investment management and other financial services) to specific purpose companies established to engage in specific activities - for example to form part of a securitisation process or to issue bonds on shares and raise finance. Companies (along with unit trusts and limited partnerships) are also popular as vehicles for investment funds (closed or open ended funds) and Guernsey has always been a popular jurisdiction in which to establish investment funds for non-retail investors: particularly investment vehicles for venture capital, alternative investment strategy funds and property funds. At the end of December 2004 there were £56.6 billion of assets under management and administration in Guernsey domiciled funds. Guernsey companies are often listed on the United Kingdom’s Stock Exchange, our own Channel Islands Stock Exchange (the "CISX") or other exchanges around the world.


Guernsey imports the principles of English company law and the associated common law attaching to it. However, offshore companies have distinct differences from their traditional onshore counterparts. Most offshore companies will not normally have employees of their own. The company will operate by appointing service providers - for example to administer the company or provide investment advice to it. The company will have a board of directors to oversee its operations and those directors will typically be non-executive but professional directors who will have the same legal duties, responsibilities and potential liabilities as their executive (and non executive) counterparts in the onshore world. The directors’ duties broadly fall into fiduciary duties (the duties of loyalty, honesty and good faith) and the common law duties of care, skill and diligence. Where a company is listed, the directors will also have duties and responsibilities under the appropriate listing rules.

In the case of investment funds, there will be a requirement for the majority of directors to be domiciled offshore. There will also be "independent directors" - those who are not related to the managers of the company and who do not hold any business or other relationships related to the company and are therefore completely independent. The United Kingdom’s Financial Services Authority (the "FSA") in issuing statement 164 amended the listing rules on the independence of directors for investment companies listed in the UK. A UK listed company may now only have a maximum of one director who is associated with the investment manager. In Guernsey, whilst it is necessary to demonstrate that the majority of directors are independent, there is a less rigid approach to the definition of what may constitute independence from a regulatory and CISX perspective. However, a Guernsey company listed on the London Stock Exchange must still adhere to the UK Listing Rules.


Corporate governance and the duties and obligations of directors in offshore companies are not only a legal requirement: a failure of corporate governance may have significant fiscal consequences if there has been a failure to ensure that the mind management and control of the company has remained offshore. Cases where the United Kingdom’s Inland Revenue have failed to establish company’s onshore residence e have requested the directors to demonstrate that they have not only attended board meetings offshore, but have genuinely:

  1. considered decisions even if they have been asked to make the decisions by a third party (for example, in the case of the board of a subsidiary company where it is asked to consider implementing "instructions" of a controlling shareholder),
  2. obtained information they felt was necessary, and
  3. made decisions in the best interests of the company and the group. Records of board meetings demonstrated that there was discussion to consider that the directors’ policy was appropriate for the company to implement.

The cases underline the point that the directors of offshore companies need to meet and discuss important decisions affecting the company, and for such meetings to be conducted offshore. It will be necessary for boards to give themselves sufficient time for the decision to be taken - for example if a board is divesting itself of substantial assets, it would be inappropriate for the board to approve the transaction only at the last minute. A well-governed board would have been appraised and taken all of the relevant decisions throughout the life of the transaction from the decision initially to market the assets for sale, through negotiations and to the final resolution to approve the contractual documents.


It is critical that good corporate governance in an offshore context is not just carried out but it is visible and demonstrable (i.e. board meetings should be clearly and fully minuted). This visibility is vital to the protection of the individual directors who may be called upon to prove that they abided by the appropriate stricture of corporate governance, and may also be necessary to counter allegations by any investigating tax authorities.

The primary method by which a director demonstrates that he performs his duty is by board meeting participation. By locating in an offshore centre accessible to Europe (such as Guernsey) directors will have a simpler task in attending board meeting and have the ability to attend board meetings more frequently. Not only will a director be able to attend more board meetings in person, but he will also be able to visit the locally-based service providers and obtain for himself the information he feels necessary and raise matters directly with those service providers, further demonstrating good corporate governance.

It is the case that in certain circumstances the offshore world is more closely regulated than onshore.

Prospective directors of investment funds need to be approved by the Guernsey Financial Services Commission (GFSC) as being fit and proper. The GFSC has also issued guidance on the expectation of corporate governance for all financial services businesses in Guernsey.

The reputation and ongoing dynamism of offshore centres depend fundamentally on the quality and propriety of the local service providers and particularly the directors. In Guernsey, directors, service providers and their advisers have recognised this issue, have risen to this challenge and see visible and appropriate corporate governance as being fundamental to continuing success.

Paul Christopher is an English solicitor and an advocate of the Royal Court of Guernsey working for Ozannes’ Corporate Department. He has been with the firm for six years and specialises in corporate finance particularly investment funds and mergers and acquisitions.

© Ozannes

May 2005

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
Related Topics
Related Articles
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
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

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