Since the Foundations (Guernsey) Law, 2012 (the Foundations Law) came into force in 2013, 107 foundations have been registered in Guernsey and we are witnessing a steady increase in the demand for legal advice in relation to both the creation and ongoing administration of foundations. This briefing note is intended both to provide examples of our involvement in Guernsey foundations and also to provide a general update on developments that practitioners need to be aware of:
1. To date the only major change to the Foundations Law has been the substitution of section 12 of the Foundations Law by the Beneficial Ownership of Legal Persons (Guernsey) Law, 2017 (the Beneficial Ownership Law). This had the effect of requiring foundations to have a resident agent whereas previously the office was only required where none of the other officeholders (council members and guardians) were Guernsey resident. The change was required in order to ensure that there was an officeholder obligated under the Beneficial Ownership Law to file information in respect of beneficial ownership of each foundation with the Guernsey Registrar.
2. We have assisted in all aspects of Guernsey foundations including migrations into the jurisdiction and on all migrations out of the jurisdictions; voluntary strike-offs and winding-up of foundations.
3. We have seen an increase in the use of foundations established specifically to act as trustee of one or more trusts. Similarly to private trust companies (PTCs), private trust foundations (PTFs) can offer bespoke solutions to individual private client needs. However, as with PTCs, PTFs acting as trustees in Guernsey will often be carrying out a regulated activity if they are acting "by way of business". To avoid the need to apply for a full fiduciary licence with the GFSC in respect of such PTFs, it is therefore often necessary to apply for a discretionary exemption (an Exemption) under section 3(1)(y) of The Regulation of Fiduciaries, Administration Businesses and Company Directors, etc. (Bailiwick of Guernsey) Law, 2000 (the Fiduciaries Law). There have been two recent developments in the GFSC's approach to Exemptions that practitioners should be aware of:
a. In June 2019, the GFSC published updated guidance in respect of the Exemption of PTCs. The revised guidance confirms that an Exemption may be granted where the following criteria are met:
i. the PTC will only act as trustee to a specific trust or a group of connected trusts with common interests (e.g. those established for the interests of one family);
ii. the PTC will not advertise or market its services to the public in any way;
iii. the name of the PTC is not misleading in giving cause to understand that the entity is licensed;
iv. the PTC is administered by a licensee under the Fiduciaries Law (a Licensee); and
v. the Licensee will retain sufficient knowledge and information about the PTC's ownership, control structure and activities to be satisfied that the PTC is effectively administered and governed and that the PTC complies with relevant laws and regulatory requirements. The Licensee may do this by any of, or a combination of, provision of a director to the board of the PTC, provision of a company secretary, provision of an authorised signatory, and close monitoring and oversight of the PTC.
Such guidance may be construed so as to apply mutatis mutandis to PTFs although the GFSC has confirmed that there are as yet no plans to introduce a PTF specific discretionary exemption form. Practitioners wishing to apply for an Exemption in respect of a PTF should continue using the PTC form for the time being.
b. The latest update was published by the GFSC on 1 October 2019 to:
i. clarify that any Exemption shall only extend to the subject matter of the original application and that where there is any material change to the activities or structure of the exempted entity, a new application will be required (along with the associated fee). The GFSC has confirmed that a change of the administrator or the addition of a connected party will only require notification and will not therefore require a new application for Exemption; and
ii. introduce a new 3 year limit to an Exemption such that Exemptions will now require renewal at least one month prior to the expiration of the 3 year period either by way of:
- confirming, by notification to the GFSC, that there has been no material change to the activities or structure of the exempted entity (in which case the GFSC may issue a renewal for a further 3 year period); or
- if renewal is used as an opportunity to make material changes to the activities or structure of the exempted entity, submission of a new Exemption application (together with the associated fee).
The GFSC has confirmed to us that the new 3 year renewal regime shall only apply to Exemptions granted from 1 October 2019 and that those entities already in receipt of an Exemption prior to this date will not be affected by the new approach.
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.