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Guernsey foundations legislation in force

Fiduciary professionals in Guernsey can apply for flexible alternative to trusts from tomorrow

8 January 2013

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Foundations law came into force in Guernsey today and the island’s Registry will accept applications from tomorrow (9 January).

Inspired by civil law, a Guernsey foundation has a quasi-corporate structure but operates in a similar way to a trust. It has a separate legal personality and is registered.

Guernsey was the first of the Crown Dependencies to consider a foundations law, but it was the last to enforce it. Jersey introduced the legislation in 2009 and the Isle of Man’s law came into force in January last year. Guernsey’s law is different from both of them.

Carey Olsen partner Russell Clark, a member of the foundations working group, said: “The distinction drawn by the Guernsey law between enfranchised beneficiaries, who have rights to information and standing to make certain applications, and disenfranchised beneficiaries, who have no rights to information, is innovative.”

This factor should appeal to clients who want to incorporate distinct beneficial class rights.

The foundation holds assets (in its own name) on behalf of beneficiaries, particular purposes, or both, and in accordance with its constitution.

Clark added: “We do believe that Guernsey offers something which looks and feels more like a traditional civil-law foundation but which incorporates some of the legislative defences to unwarranted foreign intervention by, for example, foreign courts or forced heirship rights, which are available in respect of trusts.”

Multiple uses

As with trusts, foundations can have multiple uses, including for private, charitable and corporate purposes. Unlike trusts, the beneficiaries cannot come together to collapse the foundation.

Fiona Le Poidevin, chief executive of Guernsey Finance, the promotional agency for the island’s financial sector, said: “Commencement of the law allows our fiduciary professionals to consider the use of a foundation as well as a trust when adopting wealth structures for their clients.

“Foundations may be particularly attractive to those based in civil-law jurisdictions in Europe and further afield in the emerging markets of China, Russia and Latin America where the foundation concept is more familiar.”

Clark added: “Guernsey started thinking about introducing foundations legislation because of client demand. Clients and their advisers wanted to be able to have a foundation solution rather than a trust solution to the clients’ particular needs but did not want to be compelled to go to the jurisdictions that were then offering foundations.”

Guernsey Finance held a launch event for the law in London last September.

Le Poidevin said there had been much interest already from clients looking to migrate foundations domiciled in other jurisdictions.

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Tax & Wealth structuring