This memorandum has been prepared for the assistance of our
clients in connection with the introduction of the Companies
(Guernsey) Law, 2008 (the "Companies
Law") and the repeal of the previous legislation. It
is intended to provide only a summary of the main legal and general
principles and it is not intended to be comprehensive in scope. It
is strongly recommended that you seek specific legal advice on such
matters and we would be pleased to assist in this respect. A series
of briefings on other specific aspects of Guernsey companies has
been produced by Ogier and is available on our website
www.ogier.com. Transitional provisions have also been made (a
separate briefing addresses the operation of these).
The memorandum has been prepared on the basis of the law and
practice in Guernsey as at 1 July 2008.
The Companies Law came into force on 1 July 2008.
The key changes of the Law are as follows:
1. Streamline the incorporation process
Incorporation will no longer be a judicial process, but an
administrative one conducted through a new company registry. The
current requirement for Advocates to incorporate companies will
also disappear and regulated company formation agents will be
enabled to incorporate companies. The company formation agents are
to be designated "corporate service providers"
("CSP") and will be required to hold a
fiduciary licence regulated by the Guernsey Financial Services
Commission. Incorporation will be allowed to take effect, within
reason, upon a day of the applicant's choosing.
2. Creation of Registrar of Companies
The Registrar of Companies will be appointed as a statutory
official. All company information will be held electronically, with
standard documents being received in an electronic form. Standard
forms and processes will be available to be completed on line, as
well as the ability to undertake searches based on levels of
3. Replacing capital maintenance with a solvency test
A "solvency test" will become a precondition to the
payment of dividends, distributions, reductions of capital,
redemption of shares and the giving of financial assistance.
Subject to compliance with the appropriate procedure, companies
will be able to distribute capital.
4. Directors' liability
A company will be unable to indemnify its directors who have
acted negligently or in breach of their duty to the company,
although it may purchase professional indemnity insurance for them.
The Royal Court will also have the power to excuse a director from
civil liability to the company where it is satisfied that the
director, having acted honestly and reasonably, should fairly be
excused. The Law also introduces the concept of a "shadow
director" (i.e. a person, not being a director, in accordance
with whose directions or instructions the directors of a company
are accustomed to act) who is treated as a director for certain
purposes under the Law.
Members may, by "waiver resolution" (requiring a 90%
majority), waive the requirement to hold an Annual General
6. Beneficial ownership
The Law includes a requirement for all Guernsey companies, other
than those whose shares are listed on a recognised stock exchange
or collective investment schemes, to have an agent resident in
Guernsey, who must be either a CSP or a locally resident director.
These agents will be under an ongoing duty to take reasonable steps
to ascertain the beneficial ownership of the company and ensure
that up to date information on the beneficial ownership of Guernsey
companies is available locally. This information may be passed on
to relevant law enforcement and regulatory authorities in the event
of an investigation.
7. Exemption from Audit
Guernsey companies may also resolve (by waiver resolution) to be
exempt from audit. However, the Law contains a provision that
allows the Commerce and Employment Department to issue regulations
requiring certain types of companies to produce audited accounts,
for example regulated companies.
8. Takeovers and Mergers
The Law introduces "squeeze-out" provisions, whereby
the maker of an offer which has been approved by shareholders
comprising 90% or more in value of the shares affected may
compulsorily acquire the remaining shares.
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.
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