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 permissions.
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 Meeting.
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.