Guernsey: An Essential Tool In Turbulent Times

Last Updated: 2 June 2009
Article by Martin Tolcher

Most Read Contributor in Guernsey, September 2018

Originally published in the HFM Week Guernsey Report, 2009, distributed May 2009

Corporate governance is an essential mechanism in enabling companies to minimise their risk of corporate failure, says Martin Tolcher of Legis Fund Services.

Corporate governance was defined by Cadbury in 1992 as 'the system by which companies are directed and controlled'. In this context, 'system' means both the structures that companies put in place (in particular, the composition of boards) and the processes they use (for example, regular board meetings, efficient information flow and accurate minutes).

Good corporate governance is an essential mechanism in enabling companies to minimise their risk of corporate failure – one only has to think back to the 1980s and the Robert Maxwell pension fund scandal to realise the catastrophic impact that such failure can have. More recently, the Enron situation arose, despite appropriate corporate governance structures being in place, because the board of directors did not robustly challenge questionable accounting and disclosure practices. Even more recently, many observers have blamed the current global banking crisis on poor corporate governance, citing the boards' inability to monitor risk management adequately, among a number of issues.

By demonstrably adhering to high standards of corporate governance, companies can mitigate these risks and, in the case of offshore funds, there are a number of stakeholders to whom good corporate governance is essential, namely: investors (existing and potential), directors, the investment manager and the administrator/company secretary.

In considering the corporate governance mechanisms in a little more detail, differentiation into three separate categories should be determined: 'why', 'by whom' and 'how' effective strategies may be put in place.


The purposes of a robust mechanism of corporate governance are to:

  • reduce the potential for management abuse or fraudulent activity
  • increase the confidence of prospective investors, particularly at the initial fund-raising stage; this can be a positive marketing element itself in attracting investors
  • provide shareholders with a system whereby they can understand the ways in which risk can be quantified and managed
  • assist with the elimination of potential breaches of ongoing legal and regulatory obligations

By whom?

Primary responsibility for the implementation, monitoring and effectiveness of the company's corporate governance regime firmly lies with the board of directors. It should be ensured that the constitution of the board has an appropriate mix of expertise, experience and independence (of the sponsor/promoter and investment manager). While there are no hard and fast rules, recommendations are often given that at least a third of the board should be independent and nonexecutive, though many institutions go further than that to put in place a majority of such directors.

These independent non-executive directors become even more relevant and important if and when a company looks to establish any committees (in particular, the audit committee and remuneration committee). Each such committee should have clear terms of reference which specify their functions, responsibilities and authorities. Increasingly, the directors look to the company secretary/administrator in facilitating strong corporate governance on behalf of the company. The company secretary will assume much of the responsibility for measuring compliance with the ongoing legal and regulatory obligations, as well as ensuring that it manages the board and committee meetings, producing timely and accurate minutes from them.


The directors, often, as mentioned above, with the assistance of the company secretary, would look to establish and develop the corporate governance systems that enable them to ensure that the necessary structures and processes are in place and are effective.

In particular, they should:

  • develop systems and processes that ensure the integrity of all financial information and the financial stability of the company
  • develop risk management processes to eliminate any potential defects in the products or services that are provided by and for the company
  • ensure that the company's constitution and regulatory regime is complied with
  • ensure that the board meet regularly and receive sufficient information in order to make appropriate informed decisions
  • ensure that timely communications with shareholders occur, such as annual and interim financial statements, within statutory deadlines, the publication of net asset values/prices and meaningful reporting from the investment manager

Board (or committee) meetings provide the directors with the opportunities to consider and, if deemed appropriate, challenge the information they are provided with. In the current climate, the reported net asset value will often be the focus of attention. In this regard, directors should be very keen to receive a report from the investment manager or adviser, detailing performance of the fund since the last meeting, what elements of the portfolio have performed well or poorly, what activity has taken place and what the views of the manager or adviser for the next period are.

While it would be best practice for a representative of the manager or adviser to be at the board or committee meeting, if the manager or adviser does not attend, they should be available by telephone for the relevant part of the meeting to allow them to respond to questions raised by the directors. Should the net asset value incorporate investments that are valued with anything other than prices obtained independently from third parties, then the directors would need to consider these separately to determine the suitability of their use and to be able to compare such historic values, if possible, with the final independently derived values, once those have been received.

Although the primary responsibility for a good system of corporate governance rests with the directors, the above brief outline of the mechanisms involved to help achieve this should highlight the extent to which the independent administrator, in its role as company secretary and producing valuations and financial statements, has a major part to play.

Legis Fund Services prides itself on having an excellent reputation, especially among independent non-executive directors, for taking this particular aspect of its role as an offshore service provider extremely seriously. Legis believes that the directors should be able to rely upon the company secretary to perform a co-ordinating role for this function, and thus employs a team within the corporate secretarial area of the business, who have proven experience in dealing with such aspects. Legis Fund Services is also a Category 2 Listing Member of the Channel Islands Stock Exchange, and so also ensures that the continuing obligations associated with a listing on the Exchange, as well as for listings on other exchanges, are met.

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