Guernsey: Expert View: Decision-Making Processes And Responsibilities

Last Updated: 20 June 2017
Article by Michael Adkins

Most Read Contributor in Guernsey, November 2018

Collas Crill Partner Michael Adkins considers the decision-making processes and responsibilities that affect private banks, asset/fund management companies including discretionary fund managers, family offices, depositories, wealth/financial advisors, paraplanners and relationship managers.

It is with much pleasure, anticipation and some trepidation that I write these first lines in a series of articles commissioned for Compliance Matters on the topic of regulation. To those who have worked in and around the Guernsey finance industry over the last few years, trepidation will be a familiar feeling. We, perhaps more than most, have been caught up in the storm of regulation and regulatory enforcement that has followed on from the global financial crisis and which has picked up pace with each big splash about leaked documents and such.

Never have the demands been so onerous, and the personal risk so great, as it is right now. Pleasure and anticipation are perhaps less commonly associated with regulation. However, to succumb to fear of regulation is to miss the opportunity that these conditions create. Regulation is a fact of life. If as a business, as a jurisdiction, we embrace the regulatory burden and discharge it better and more efficiently than our competitors, we create the kind of competitive advantage that will no doubt enhance the reputation of the island as a financial centre and benefit our collective top and bottom lines as a result.

This month, we look at three current themes in relation to 'decision making', drawing upon what we have seen coming across our desk from the 'pointy end' of the regulatory stick, that we think provide some useful guidance for industry.

Decisions, decisions...

Thus, a great step forward has been taken. Responsibility is personal and it will no longer be possible to inflict penalties on persons who have themselves not committed the acts complained of...[Collective Punishments] strike at guilty and innocent alike. They are opposed to all principles based on humanity and justice..

  • ICRC Commentary on Art 33, Fourth Geneva Convention, 1949 (Prohibition on Collective Punishments)

Directors should take collective responsibility for directing and supervising the affairs of the business.

  • Guernsey Financial Services Commission Code of Corporate Governance for Finance Businesses

The juxtaposition of the above two statements is a little cheeky. The eagle-eyed, and those with an interest in international criminal law, will immediately point out that those statements of principle are dealing with two distinct concepts. But, that is the point. Whilst undoubtedly all members of such decision-making responsibility, individuals can (or should) only be held to account, or punished, for what they personally did or did not do. The difficulty, for the regulated and the regulating alike, is to recognise this distinction in practice; when both taking and reviewing decisions taken by boards, trustees and other collective decision-making bodies.

We have seen a number of recent regulatory cases where the way in which decisions are made (or not) has been closely scrutinised, with a focus on the notions of exactly who is responsible for what, and to what degree.

  1. 'Apportioned' decision making

This issue most obviously arises in the investment sector, although a slight change of the facts will apply it to most trust business as well. The typical investment structure has an investment company (or cell) board. The board typically appoints a manager to manage the company's business, who in turn appoints an administrator to administer the company, and an investment advisor to invest the assets of the company. Responsibility for the success of the venture is peeled away like layers of an onion.

Now there is nothing wrong with this in principle – in fact, there is a lot right with it. I would rather have an investment expert looking after my investment than someone less qualified. However, the risk is that a firm that apportions responsibility can be confused as to who is responsible for any given tasks or, worse still, ignorant of particular responsibilities. It is all too easy for the board to consider that, having effectively outsourced the entire operation of the company to others, there is nothing left for them to do. On the other side of the equation, it would be nonsensical to ignore the legal and commercial realities of the structure and try to tie down responsibility for all failings, to all involved, at all levels.

In striving for a more sophisticated approach to the question of responsibility, we need to analyse the relevant jobs and responsibilities more closely. In the example above, where the substantive functions of the company have been apportioned out to others, it is these persons who should be held responsible for the performance of those functions. However, the board that ultimately appoints them must at the very least retain responsibility for the selection, monitoring and review of its appointees. Responsibility for running the company cannot be delegated entirely. A proper appreciation of these different jobs by both the regulated and regulators alike will allow directors to discharge their functions, secure in the knowledge that any review of the board's conduct should reflect this more restricted nature of their role in such circumstances.

  1. Corporate directors

As is typical in offshore structuring, the boards of client companies are comprised of corporate directors supplied by the Guernsey finance business – e.g. XYZ Nominees No 1 and No 2. That is perfectly fine from a company law perspective, and great from a risk, continuity and administrative perspective. The individuals actually operating the corporate directors can change as people come and go, or are in or out of the office on any given day, but the formal board structure remains unchanged. However, people can forget that even in this type of structure, at some level, somewhere, two or more real live people are sitting in a room making a decision.

The act of adopting the corporate director structure does not absolve these individuals from the usual types of obligation that directors must discharge when they take decisions on behalf of the company in question. It is the individuals who sit on that 'higher' level board who will be open to criticism and regulatory sanction for any failures at the next level down. Therefore, they ought to comply with those obligations by making rational decisions in a rational way. The production of bland standard-form minutes recording the fact that Nominee 1 Ltd and Nominee 2 Ltd made a momentous decision is no good at all.

The challenge, and the opportunity, lies in ensuring that corporate directors and their board members discharge their obligations within a system that retains all of the advantages of the corporate director structure in the first place. The obvious response is to prepare detailed minutes of discussions at both levels. This is unlikely to be practical in many situations and will cost the client money. There may be alternatives, though. One possible solution we have discussed with clients is to establish robust protocols that set out ways in which individuals make decisions on behalf of corporate directors. Such a process could set out levels and/or spheres of responsibility for the various individuals who discharge the functions of a director for client companies, which could be voted on once and then (subject to periodic review) left to run. These things are very fact-specific and there are no doubt other ways. The important message for businesses that run corporate directors, or those people who operate them, is that the responsibility exists and ought to be considered and addressed.

  1. Different skills, knowledge and functions

The 'sleeping' director used to be commonplace. In fact, as I and my colleagues recently discovered while preparing for a talk on directors' duties, in the 19th century the idea of an appointment providing an ignorant director with nothing more than 'a little pleasant employment without ...incurring liability' was a principle actively supported by the courts. Attitudes have, of course, changed and there have been numerous cases in the civil courts where the expectations of directors, and in this context particularly non-executive directors, have been spelt out clearly.

To avoid civil liability, all directors must meet a minimum 'reasonable' standard of rigour in the way in which they go about their jobs, but what about those directors with special skills, or a director whose designated role is 'legal director,' or those who know more or less about any area of this business? In the civil courts, the most recent case law suggests that the standard to be applied does include subjective consideration - taking into account this-or-that director's special skills, for example. The catch is that the standard only goes up – which is a pity for particularly unskilled directors, who are still obliged to achieve a reasonable level of competence in the discharge of their duties.

Most of this case law has been in the civil courts; it will be interesting to see how these issues are dealt with in a purely regulatory context. Directors of regulated entities do have specific duties they ought to discharge which are often set out in primary or secondary legislation. Often, however, directors of regulated entities bring their own very specific skills to the board – some might be experts on the underlying activity of the company, others may be experts in the regulatory mechanism itself, whilst others could be professional directors. In reviewing their conduct, will the regulator apply a basic minimum standard? Which skills will attract a higher standard, if any? To what extent can the directors rely on each other to discharge their functions in their respective areas of expertise?

To be a director is to do an important job. You have the financial fortunes of the members, employees and creditors, and in this jurisdiction, the jurisdiction itself, in your hands. It is, perhaps, only right to approach any appointment or any decision with an appropriate amount of caution, but not with fear. As long as directors have a close and careful understanding of the nature of their responsibilities and as long as they do all they personally (and reasonably) can to fulfill those responsibilities, they should have nothing to fear.

An original version of this article was first published by Compliance Matters, May 2017.

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
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