Guernsey: Guernsey Funds

Last Updated: 17 August 2015
Article by Kate Ovenden

Why Guernsey?

Guernsey is, for many, the jurisdiction of choice for the establishment and/or administration of all types of collective investment vehicle, including private equity, hedge and property funds, across a wide range of asset classes. So why do so many promoters, investment managers and investors choose Guernsey?

  • proven track record as a leading fund and financial services jurisdiction over many years;
  • a critical mass of world quality and experienced fund professionals;
  • numerous options in terms of structuring and authorisation / registration of vehicles;
  • speed of formation of vehicles;
  • fast-track regulatory registrations;
  • pragmatic, independent regulator: the Guernsey Financial Services Commission ("GFSC");
  • robust corporate governance;
  • high quality pool of non-executive directors;
  • independent local exchange, the Channel Islands Securities Exchange Authority, for listing Guernsey and other vehicles;
  • ability to adapt and innovate; and
  • proximity to the UK and also to Europe, but positioned outside the European Union.


Regulatory overview

If a vehicle established in Guernsey satisfies the criteria for a "collective investment scheme" (see below) or "fund", it must either be registered or authorised by the GFSC and no Guernsey-licensed entity can provide services to such a vehicle without it being so registered or authorised.

Generally, all Guernsey-domiciled funds must be administered by a locally licensed administrator and open-ended funds must also have a locally-licensed custodian. Fund promoters new to Guernsey will have to demonstrate a proven track record.

What is a collective investment scheme or fund?

The GFSC applies the following criteria in determining whether or not an entity is a collective investment scheme or fund: 

  • pooling of contributions of investors;
  • third party management of the portfolio assets; and
  • spread of risk.

If any of these features is lacking, the structure will not be regarded as a fund. For example, the GFSC is usually prepared to regard a structure as not requiring to be regulated as a fund where there is a limited number of investors, particularly where they are related parties, or where there is only one investment asset.

Difference between open- and closed- ended funds

Guernsey makes a fundamental distinction between open-ended funds and closed-ended funds.

An open-ended fund is one in which the investors are entitled under the terms of the scheme to have their units redeemed or repurchased by the fund or to sell their units on an investment exchange at a price related to the value of the property to which they relate. In a closed-ended structure, there is no right to have one's shares redeemed although, usually, the fund will have a predetermined life.

A Guernsey closed-ended fund is not required to appoint a local custodian or a local manager or adviser. Unlike a closed-ended fund, every open-ended fund generally must appoint a Guernsey licensed custodian to hold its assets on trust. Both open-ended and closed-ended funds are required to appoint a locally licensed administrator (referred to as a "designated manager" both in the relevant legislation and in this briefing). Previously, every open-ended fund also had to appoint a Guernsey licensed principal manager. This requirement was removed at the beginning of 2007 but, nonetheless, some promoters are continuing to use principal managers within their structures.

Distinction between authorised and registered funds

The Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended (the "POI Law") creates two categories of Guernsey fund:

  • authorised collective investment schemes; and
  • registered collective investment schemes.

Both open-ended and closed-ended funds may be either authorised or registered schemes under the POI Law and funds may take the form of companies, limited partnerships, unit trusts or other entities.

Categories of open-ended fund

Open-ended funds may be:

  • authorised:
    • class A: eligible for marketing to the general public in the UK and certain other jurisdictions. There are comprehensive rules which regulate the documents by which a class A scheme is established, the content of the relevant scheme particulars, the general administration of the scheme and the investment parameters;
    • class B: not usually for sale to the general public and typically established for marketing to institutions and high net worth/sophisticated investors. The rules applying to class B scheme documents and administration are less comprehensive than those applying to class A schemes; or
    • class Q: restricted to qualifying professional investors. The rules governing such schemes are less prescriptive than those for class A and class B schemes and a fast track approval process should be available; or
  • registered.

Categories of closed-ended fund

Closed-ended funds may be:

  • authorised; or
  • registered.

The rules applying to Guernsey funds

The following rules apply to Guernsey funds, depending on the type of fund:

  • Registered Collective Investment Scheme Rules 2015: apply to open-ended and closed-ended registered funds (the "2015 Rules");
  • Authorised Closed-Ended Investment Schemes Rules 2008: apply to authorised closed-ended funds;
  • Authorised Collective Investment Schemes (Class A) Rules 2008: apply to authorised class A  open-ended funds;
  • Authorised Collective Investment Schemes (Class B) Rules 2013: apply to authorised class B open-ended funds;
  • Collective Investment Schemes (Qualifying Professional Investor Funds) (Class Q) Rules 1998: apply to authorised class Q open-ended funds;
  • The AIFMD (Marketing) Rules, 2013: apply to any Guernsey alternative investment fund managers ("AIFMs") who propose to market alternative investment funds ("AIFs") to professional or retail investors in one or more EEA member states; and
  • The AIFMD Rules, 2013: govern an opt in regime for the purpose of the Alternative Investment Fund Managers Directive ("AIFMD") for Guernsey fund managers and depositories.

Regulatory process

Regulatory process for authorised funds

For authorised funds (save in relation to qualifying investor funds ("QIFs") (see below)), a traditional three stage approval process must be followed:

  • outline consent: this involves providing detailed information in connection with the promoter and some general information in relation to the proposed fund; followed by
  • interim consent: once the promoter has obtained outline consent, draft documentation relating to the fund structure itself is submitted to the GFSC for review. If successful, this application will result in notification that the GFSC will be minded to grant final approval upon receipt of final certified documentation; and
  • final consent: final signed/certified documentation is lodged and the GFSC's consent is issued within two business days.

The overall timing for this process is usually in the region of six weeks.

Regulatory process for registered funds

Under the registered fund regime, responsibility for ensuring that the promoter of the fund is fit and proper and that the fund documentation complies with the relevant regulatory requirements lies with the designated manager of the fund. The designated manager must provide warranties to the GFSC verifying those matters and in reliance upon those warranties, the GFSC will issue the necessary registration within three working days. This process has moved responsibility for compliance on to the designated managers and leaves the GFSC free to inspect, investigate and audit those designated managers to ensure that the warranties being provided to it and upon which it will rely in granting registration are accurate and backed up by the necessary documentation.

Previously, the one restriction on registered funds was that they could not be marketed directly to the public in Guernsey. However, the GFSC has monitored the standard of due diligence collected by designated managers as part of the registered fund application process and determined that certification process by designated managers has been a success. Accordingly, the GFSC has now lifted the prohibition on direct offerings in Guernsey pursuant to the 2015 Rules.

The most significant advantage that registered schemes have over authorised schemes is the fast-track three day approval process for the fund and a fast-track ten day approval process for service providers (see below). Authorised funds, on the other hand, are generally subject to a lengthier approval process (save in the case of QIFs).

Qualifying investor funds

A faster approval route is available to certain authorised funds, known as the qualifying investor fund or "QIF" process. This enables approval to be obtained within three working days.

The QIF approval process is only available to funds limited to qualified investors, who are professional investors, experienced investors and/or knowledgeable employees. An individual investor investing US$100,000 or more is a qualified investor. QIFs can only be marketed to qualified investors and warranties must be given by the fund's Guernsey administrator that the requirements have been complied with.

Authorised or registered?

The policy of the GFSC is to subject authorised schemes to closer supervision than registered schemes. In the case of closed-ended schemes, there is little of substance to distinguish between the two categories, other than the fast-track approval process for registered funds. However, in relation to open-ended funds, the registered regime provides a lighter touch than the authorised category which, until the end of 2001, was the only form of regulation available to an open-ended fund in Guernsey.


A person who provides services in Guernsey to a closed-ended or open-ended fund must hold a licence under the POI Law (a "POI Licence"). This applies to fund administrators, who must be licensed under the POI Law to provide administration services to fund entities. It also means that, for example, an investment adviser providing services in Guernsey to a Guernsey fund or the general partner of a Guernsey limited partnership which is a fund must also be licensed under the POI Law.

Notably, real property is not a controlled investment under the POI Law. Accordingly, the provision of services in connection with real property is not caught by the POI Law and does not require a POI Licence.

Often, the investment adviser to a fund will be a UK regulated entity. Provided that no activities are being conducted by that adviser in Guernsey, then there should be no Guernsey regulatory obstacles to this.

POI licensing

It is important to note that the fund approval processes described above do not encompass the obtaining of a POI Licence for any adviser, manager, administrator or general partner. Traditionally, the obtaining of a POI Licence could take around four to six weeks.

However, a fast-track process exists under which the GFSC will consider an application for a POI Licence within ten business days of the receipt by it of a fully completed application, together with warranties from the designated manager that it has conducted due diligence on the beneficial owners of the applicant and that the application is complete in all respects.

Notably, the fast-track process only applies to applicants who are seeking to provide services to QIFs or registered closed-ended investment funds.

Other considerations

Prospectus Rules 2008

The Prospectus Rules 2008 prescribe the information that must be contained in:

  • a prospectus issued by a Guernsey registered fund (open-ended or closed-ended);
  • a prospectus issued by any other Guernsey entity; and
  • a prospectus in respect of any offer of securities made to the public in Guernsey by a Guernsey or non-Guernsey entity. The public is defined as 50 or more people in Guernsey.

For registered closed-ended funds, the Prospectus Rules 2008 replaced the old minimum disclosure guidelines issued by the GFSC.

There is an exemption in respect of a prospectus offering shares which are to be listed on a stock exchange in an International Organisation of Securities Commissions ("IOSCO") member country. The GFSC considers AIM listings to fall within this exemption, provided that the UK's prospectus rules have been complied with.


It is possible for the holder of a POI Licence, such as a fund administrator, to outsource certain of its functions to an entity outside Guernsey. However, such delegation of activities must be done in compliance with outsourcing guidelines issued by the GFSC. In particular, it is worth noting that the licensee must retain sufficient expertise to oversee any such delegated functions.

Corporate governance

With effect from 1 January 2012, the GFSC's Code of Corporate Governance for the Finance Sector (the "Code") came into effect. The Code applies to all companies which hold a licence from the GFSC under Guernsey's regulatory laws or which are registered or authorised as collective investment schemes under the POI Law. It does not apply to Guernsey branches of foreign domiciled companies or to partnerships. The Code sets out eight principles and guidance on how to meet the principles. Each company's approach to the Code should reflect its legal and operating structure, as well as the nature scale and complexity of the business. Non-compliance with the principles set out in the Code does not automatically make a company subject to the Code liable to any sanction or proceedings, but the GFSC will require an assurance statement from companies confirming that the directors have considered the effectiveness of their corporate governance practices and are satisfied with their degree of compliance in the context of the nature, scale and complexity of their business. Companies should prepare a self assessment in order to assist the board in its consideration of the Code. The Code should be considered periodically at a board meeting and the discussion minuted.

Hedge funds

Guernsey has long been recognised as a premier jurisdiction for private equity funds, but is also a domicile of choice for many hedge funds. To address the fact that in some respects hedge funds require a different regulatory approach, the GFSC has adopted a flexible approach to hedge fund authorisation in certain key areas:

  • custodians and prime brokers:
    • for institutional and expert investor hedge funds, the GFSC will be prepared to waive the requirement for a locally licensed custodian and will be prepared to designate as a custodian a prime broker regulated in an acceptable jurisdiction and having substantial net worth. In addition, the GFSC would not require a prime broker to offer physical segregation of fund assets from its own assets; and
    • for hedge funds targeted at retail and less sophisticated investors, the GFSC would normally require a traditional custodian, although it will be prepared to waive the requirement that the custodian takes control of the fund's property provided that the property is held by a prime broker regulated in an acceptable jurisdiction and having substantial net worth. The GFSC would normally expect a custodian to be a licensed Guernsey institution but will be prepared to consider requests to designate custodians from another jurisdiction, provided it can be satisfied that the custodian's role in overseeing the fund manager will be subject to monitoring by the custodian's regulatory authority. For funds of this type the prime broker would be expected to provide clear segregation from its own assets of all fund assets exceeding the amount required for collateral against credit extended by the prime broker;
  • net asset value and share price estimation:
    • for the broad spectrum of funds, the GFSC will be prepared to permit arrangements which allow preliminary estimation of net asset value, provided such arrangements are fully disclosed in fund documentation and the risks to investors  are fully set out; and
    • for those funds aimed at retail and less sophisticated investors, the GFSC would not accept arrangements under which the fund itself bore any risk of loss through overpayment on redemption; and
  • client money rules: the GFSC is prepared to consider waivers from the operation of client money rules, provided it is satisfied as to the robustness of estimation procedures to be used.


The Directive on Alternative Investment Fund Managers (the "AIFMD") entered into force on 21 July 2011 and had to be implemented by EU member states by 22 July 2013. A transitional period ended on 22 July 2014. Although not strictly required to do so certain EEA member states have also implemented the directive and its application is therefore wider than just EU member states.

AIFMD affects AIFMs and also AIFs themselves. It has introduced a harmonised regulatory framework for EEA established AIFs including requirements relating to authorisation, administration, remuneration, marketing and depositaries. AIFMD also applies to non-EEA AIFMs that manage or market AIFs in the EEA, subject to a number of conditions.

Guernsey has embraced AIFMD by introducing a dual regime so that Guernsey AIFMs can distribute into both EEA states and non-EEA states. The two regimes are:

  • the existing regime which will remain for those investors and managers not requiring an AIFMD fund including:
    • those using EEA national private placement regimes; and
    • those marketing to non-EEA investors.
  • an opt-in regime under the Guernsey AIFMD Rules, 2013 which is fully AIFMD compliant and can be used where there is a particular commercial reason to do so, e.g. for investor relations.

With regard to marketing in EEA states, AIFMs can continue to use existing national private placement regimes for as long as they exist and Guernsey will look to transition to full passporting as and when that regime is implemented for third countries.

The AIFMD (Marketing Rules), 2013 ensure that any Guernsey AIFM and Guernsey AIF to whom they apply shall take all reasonable steps with a view to ensuring that any form of marketing in a country or territory within the EEA is effected in accordance with the laws and regulations in force in the relevant state and that the GFSC is notified of that marketing within 14 calendar days of commencement. The AIFMD (Marketing) Rules, 2013 do not apply to AIFMs managing AIFs with assets under management which in total do not exceed one of the following limits:

  • EUR500 million, provided the AIFs are not leveraged and investors have no redemption rights for the first five years; and
  • EUR100 million (including assets acquired through leverage).


From 1 January 2008, Guernsey moved to its "Zero 10" taxation regime. Under this regime, all Guernsey registered companies (other than exempt companies) are taxed at zero percent on their profits except for:

  • income from banking business and lending activities (taxed at 10%);
  • income from activities regulated by the Office of Utility Regulation (taxed at 20%); and
  • income from ownership of land and buildings in Guernsey (taxed at 20%).

In addition, from 1 January 2013, an income tax rate of 10% was extended to the activities of licensed fiduciaries (in respect of regulated activities); licensed insurers (in respect of domestic business); licensed insurance intermediaries; and licensed insurance managers.

The ability for Guernsey companies to be exempt from Guernsey income tax on their non-Guernsey sourced income and to be non-resident in Guernsey for taxation purposes was abolished except in relation to funds. Accordingly, it is still possible for an open-ended or closed-ended fund to be exempt from Guernsey taxation in respect of its non-Guernsey sourced income. This exemption is also available to fund established as unit trusts. Guernsey limited partnerships do not constitute separate taxable entities under current law and practice in Guernsey and therefore are not liable to tax in Guernsey. Income and gains arising in respect of the limited partnership fund would only be taxed (if at all), in accordance with the particular circumstances of each partner of the fund.

Guernsey does not levy any taxes in respect of capital gains, nor does it levy VAT or any goods and services tax.

In most circumstances, a Guernsey fund will make dividend payments to non-Guernsey residents free of any withholding tax.

No Guernsey stamp duty will be payable upon the issue of shares. In the event of the death of a sole holder of shares, a Guernsey grant of probate or administration may be required in respect of which certain fees will be payable to the Ecclesiastical Registrar in Guernsey.

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.