Guernsey has become a favoured jurisdiction for the establishment of trusts. A long history of political and economic stability, an excellent legal framework and the high quality and range of trust companies on the island have all played a part in bringing the island to the attention of professional advisers and their clients. The supporting services of legal and accounting firms and the ease of communication with London and other European cities have also been important factors.
Guernsey will be the first to admit that it never set out to be an international financial centre. However, low taxes applicable to residents of the island since the 1950's together with the security and stability which is felt when visiting have resulted in finance becoming the major contributor to the island's economy, replacing to a large extent the previous industries of tourism and horticulture.
A historical reluctance to change laws purely to attract financial business explains why Guernsey was not the first offshore jurisdiction to introduce a trust statute. Trusts had been established under Guernsey common law since the early 19th Century and certainly during the 1970's the trust industry had seen significant expansion. So the question of why a trust law was needed was a matter which received considerable debate.
The concern was whether a statute would restrict the development of trust business. Previously trust deeds, whilst being exceptionally long documents, included every conceivable power and therefore the trusts created were extremely flexible. This adaptability was also seen as a competitive edge against other jurisdictions which had chosen to codify their law.
The Trusts (Guernsey) Law 1989 was therefore introduced only after lengthy consultation with the professional community on the island. In practice the law has provided a simple and effective basis for administering trusts. The law requires the highest standards of conduct from trustees. It includes a unique concept of a trustee acting 'en bon pere de famille', that is, as a good father would act in the best interests of his children. What better way to explain the responsibilities of a trustee.
The Law has only been amended once when The Trusts (Amendment) (Guernsey) Law 1990 was enacted to clarify the right of settlors to establish trusts in Guernsey which may contradict the testamentary laws of their own country.
Guernsey has not followed the majority of other offshore jurisdictions in putting in place legislation, on such matters as the establishment of asset protection trusts and purpose trusts, designed to attract very specific types of new business. A strong concern that such legislation would not necessarily attract the quality of business which the island seeks has governed this decision.
Whilst no new trust legislation is contemplated, pending corporate legislation should be mentioned as Guernsey companies are often utilised in conjunction with a Guernsey trust. Under the legislation companies will be able to be limited by guarantee and by shares (hybrid companies), to migrate to and from other jurisdictions, to issue no par value shares, and to be established as protected cell companies, a feature specifically designed for the captive insurance sector.
Trusts in Guernsey have developed into sophisticated structures being utilised by both private individuals for wealth management and multi-national corporations for pension trusts and other employee related plans. The trust sector on the island is working together through The Association of Guernsey Trustees and a well established branch of The Society of Estate and Trust Practitioners to ensure that Guernsey continues to be regarded as a first class trust jurisdiction.
This article provides a general outline on the subject at the time of writing (April 1996). It is not intended to be exhaustive nor to provide legal advice in relation to any particular situation and should not be acted on or relied upon without taking specific advice.
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