Guernsey: Guernsey As An Alternative Hedge Fund Jurisdiction

Last Updated: 11 June 2009
Article by Gavin Farrell

Most Read Contributor in Guernsey, September 2018

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

Gavin Farrell of Ozannes outlines how Guernsey is perfectly set up as a European alternative to the traditional Caribbean hedge fund domiciles

Guernsey is a renowned European offshore jurisdiction, which offers a sound alternative to the Caribbean structure for establishing hedge funds. Indeed at a time of demanding corporate governance requirements, especially in light of the recent requests for greater regulatory oversight of hedge funds and the consequences of the Madoff experience, it is becoming increasingly important for some form of control over fund assets to be exercised and for directors to attend board meetings in person in order to query, among others, those custody arrangements.

This has led to a review of safekeeping procedures of assets and to domicile an offshore fund in a more accessible jurisdiction, allowing the investment manager and board to attend meetings more frequently and visit the administrator and custodian in that jurisdiction at the same time.

Guernsey has always been recognised as a well-, but not over-, regulated offshore jurisdiction with an infrastructure which lends itself to servicing clients on a full service basis. In terms of Guernsey products, hedge funds can either be open or closed-ended. The vast majority of hedge funds tend, however, to be authorised open-ended schemes, thus providing investors with a right to redeem their shares during the lifetime of the scheme, albeit restricted in practice through long redemption notice periods, redemption gates, redemption fees and/or other limited rights of redemptions.

Recent reforms in Guernsey have reduced the burden of regulatory approval in the case of hedge funds by setting these up as registered funds or qualifying investor funds. Such funds will benefit from a 'self certificated' and expedited process. In such cases, the Guernsey Financial Services Commission (GFSC) undertakes to issue appropriate fund authorisation, if the application is successful, within three working days of receipt of the relevant application documents. In addition, any required incorporation and licensing of a management company to the fund may also benefit from a fast-track approval regime. In circumstances where the fund does not wish to benefit from the 'self-certificated' regime, and prefers to go through an authorisation process and review of documentation by the regulator, the procedure continues to follow the three-stage process, the outline, interim and final stages.

Outline stage: requires the completion of a form setting out the basic details of the fund's structure and objectives together with details of all parties involved. Hedge funds will need to be administered by a Guernsey fund administrator and therefore the principals will need to have already chosen its local administrator. The Guernsey administrator can, however, delegate to administrators based outside of Guernsey if required by the commercial terms of the structure.

Interim stage: will see the filing of the near final draft prospectus with a form containing a checklist of the disclosure requirements in the prospectus. The GFSC has maintained a policy of fast tracking an application by combining the interim and outline stages, provided that both forms and relevant documents are filed together. This fast-track procedure would be advantageous for those funds that do not qualify as registered.

Final stage: once the GFSC has reviewed the draft prospectus and related forms, and has obtained satisfactory responses to its queries (if any), the filing of the final prospectus and certified copies of constitutive documents and material contracts disclosed in the prospectus are required. The granting of full approval will then be considered by the GFSC.

If the entity responsible for the fund's establishment is not already known to the GFSC, additional documentation and time to conduct due diligence on that promoter will be required at the time of, or before, the outline stage.

A welcome relaxed approach

In the past, open-ended funds in Guernsey have had to appoint Guernsey-regulated custodians. In February 2004, the GFSC relaxed its rules for hedge funds, the need for such relaxation being deemed to be particularly appropriate in the case of funds targeting institutional and/or expert individuals. Examples of this new relaxed approach include the waiver of the obligation to appoint a Guernsey custodian where a reputable prime broker has been appointed (although the GFSC will not require those prime brokers to take on formal duties of oversight over the fund manager) and the waiver of the obligation to have segregation requirements for prime brokers holding the fund's assets and for subscription and redemption monies.

As noted above, the GFSC has made changes to Guernsey's investment fund regulations with the registered regime. These changes have further streamlined the approval process for both open and closed-ended funds. The principal effect of the changes is that the onus will fall upon the licensed Guernsey fund administrator to conduct due diligence on the fund promoter and the fund structure, and to certify to the GFSC that the proposed fund satisfies the criteria for authorisation. The standard three-stage process will therefore not be applicable. Providing the fund administrator confirms to the GFSC that the criteria are met, the GFSC will grant the required approval within three working days. These changes should significantly accelerate the regulatory approval process.

As with many of the leading hedge fund jurisdictions, Guernsey plays host to a range of third-party service providers including approximately 40 different entities providing fund management, administration and custodial services to the industry.

Many of Guernsey's administration firms are part of global operations that can outsource to other centres of particular expertise where necessary. In addition, Guernsey is situated approximately 40 miles flying time south of London and, as a result, is an accessible jurisdiction for the holding of meetings as well as satisfying prudent corporate governance and fiscal 'arbitrage'.

For more information about Guernsey's finance industry please visit www.guernseyfinance.com.

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 Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
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

Mondaq.com (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 www.mondaq.com

To Use Mondaq.com 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.

Disclaimer

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.

General

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