Location
Language
Currency and Exchange Controls
Government and Relationship with the United Kingdom and the European Union
Legislation
Law/System Of Law
Legal Professionals
The Judiciary
Company Laws
Taxation
Regulation of the Financial Services Industry
Banking
Insurance
Collective Investment Schemes/Mutual Funds
General Securities and Derivatives
Trust, Fiduciary Services and Pensions
Guernsey is the second largest of the Channel Islands. The Bailiwick of Guernsey, of which Guernsey is the principal island, includes the islands of Alderney, Sark and certain other smaller islands.
Guernsey has a total land area of approximately 24 square miles (63 square kilometres) and lies 30 miles (48 kilometres) off the Normandy Coast of France in the English Channel. It is approximately 100 miles (160 kilometres) off the South Coast of England.
Guernsey is not part of the United Kingdom but is part of the geographical area known as the British Isles.
English and French are the official languages. English is the language of business and commerce.
Currency and Exchange Controls
The local currency is sterling. There are no exchange controls in force in Guernsey.
Government and Relationship with the United Kingdom and the European Union
Guernsey is neither a sovereign state nor a British colony but a dependent territory of the British Crown.
Guernsey has its own government (the States of Guernsey) and its own parliament, the States of Deliberation.
Guernsey is not part of the European Union. The United Kingdom, acting on behalf of the Island, negotiated a special relationship for the Channel Islands and the Isle of Man with the European Economic Community. By way of an amendment to the Treaty of Rome and a Protocol to the United Kingdom Treaty of Accession, the islands were excluded from all aspects of the Treaty of Rome other than those relating to the free trade of agricultural and industrial products.
Although Guernsey has its own legislature, the States of Deliberation, most legislation does not have the force of law until sanctioned by Her Majesty in Council. Acts of the United Kingdom parliament do not apply automatically. The UK parliament, as a matter of convention, does not legislate for Guernsey without consent in matters of domestic concern, and never in taxation matters.
Law/System Of Law
Guernsey's legal system developed from Norman customary law. It is now primarily based on English law. For land law and inheritance law, however, the customary law of Normandy, as it has evolved in the island, is applied.
The local lawyers are termed advocates. The role of an advocate in Guernsey combines the functions of both a barrister and solicitor. To qualify as an advocate one must have qualified as either a barrister or solicitor in the United Kingdom, passed the Guernsey Bar examination and have successfully studied at the University of Caen in Normandy. There is also a large number of UK-qualified solicitors practising on the island.
The Royal Court of Guernsey sits as a court of Chief Pleas, a Full Court, an Ordinary Court or a Matrimonial Court.
The Ordinary Court has original jurisdiction in all civil suits commenced in Guernsey.
The Court of Appeal comprises an uneven number of judges, not being less than three. The Bailiff (the head of the Judiciary in Guernsey) is a judge of the Court of Appeal and its president. The other judges of the Court of Appeal are appointed by Her Majesty and generally comprise the Bailiff of Jersey and English and Scottish Queens Counsel.
From the Court of Appeal there is a right of appeal to the Judicial Committee of the Privy Council in London which remains the ultimate court of appeal for some British Commonwealth jurisdictions.
The principal law is the Companies (Guernsey) Law, 1994, as amended.
A company can only be incorporated in Guernsey if full details of the beneficial owners are provided to the Guernsey Financial Services Commission ('the Commission'). These details are confidential, and specifically are not made available to the Administrator of Income Tax in Guernsey. The law provides that a company must have a minimum of two shareholders. Each company has a Memorandum and Articles of Association, one or more directors and a company secretary.
A Guernsey company is required to have a registered office in Guernsey and must hold an Annual General Meeting each year.
Each Guernsey company must file an Annual Return each year setting out details of its directors, share capital and members. There is no requirement to disclose beneficial ownership nor to make accounts available to the public.
There is no requirement that any of the company's shareholders or directors be resident in Guernsey.
It is permissible for a company registered in another jurisdiction to be re-registered in Guernsey (or vice versa) pursuant to the Migration of Companies Ordinance, 1997 provided that the requisite formalities are complied with.
It is also possible to amalgamate companies by operation of law in accordance with the provisions of the Amalgamation of Companies Ordinance, 1997.
Guernsey law permits the incorporation of protected cell companies or the conversion of companies into protected cell companies pursuant to The Protected Cell Companies Ordinance, 1997.
A protected cell company or 'PCC' may create cells for the purpose of segregating and protecting assets attributable to the cell. A creditor of a company in respect of a cell may have recourse only to the assets of that cell and if these are insufficient to the PCC's non-cellular or core assets.
Currently, only insurance companies and authorized open-ended investment schemes may be created as, or converted into, a protected cell company.
The standard rate of income tax of 20% applies to companies.
A resident company is chargeable to income tax on its world-wide income at the standard rate.
An exempt company is exempt from income from sources outside Guernsey and pays an annual fee (currently £600) for this status. All companies other than banks, fund management companies and international companies can elect for exempt status provided that no Guernsey residents have a beneficial interest in the company, disclosure of the ultimate beneficial owners have been made to the Commission and the existence of any Guernsey source income (other than bank interest) is disclosed to the Administrator of Income Tax.
An International Company is resident in Guernsey for the purpose of income tax but it is taxable at an agreed rate being more than zero but less than 30%.
The rate of tax is agreed with the Administrator of Income Tax. The Administrator of Income Tax has discretion whether to award International Company status. To qualify as an International Company, the company concerned must be liable to pay tax in Guernsey, must derive no income from trading with a Guernsey resident (other than another International Company), must not be a bank or insurer, must never have been an exempt company and must never have carried on business or exercised functions in Guernsey (or in the case of a Guernsey incorporated company, anywhere in the world) without international tax status.
Regulation of the Financial Services Industry
The Commission was established by statute in 1987 and commenced operations on February 1 1998. It is charged with the task of "taking such steps as the Commission considers necessary or expedient for the development and effective supervision of finance business". The Commission regulates banks, insurance companies and collective investment companies and it is proposed that it will regulate the provision of fiduciary services.
Guidance Notes on the Prevention of Money Laundering have been issued by the Guernsey Joint Money Laundering Steering Group in recognition of the risk to which the finance sector is exposed. The Notes represent a standard of best practice and focus on the process of client verification and due diligence.
All Crimes Money Laundering Legislation is proposed to enable the Royal Court to make orders, for instance, for disclosure and confiscation of the proceeds of criminal conduct.
Banking business in the form of deposit taking is licensed under and regulated by the Banking Supervision (Bailiwick of Guernsey) Law, 1994 which came into force on October 1 1994. Its is a modern well drafted piece of legislation modelled on the United Kingdom's Banking Act 1987.
Insurance
Guernsey is one of the Europe's largest offshore insurance centres with over 350 insurance companies. Most of these companies are pure captives ie., wholly owned subsidiaries of overseas industrial and commercial companies writing their parent's or associated companies' risks.
The Insurance Business (Guernsey) Law, 1986 ('the Insurance Business Law') which came into force on December 31 1986 regulates insurance companies in Guernsey.
Collective Investment Schemes/Mutual Funds
Regulation of open ended collective investment schemes and those involved in their operations is the responsibility of the Commission under the Protection of Investors (Bailiwick of Guernsey) Law, 1987 ('POI Law') under which, inter-alia, managers, trustees/custodians of schemes are licensed and the schemes are authorized and regulated.
General Securities nd Derivatives
The POI Law was amended in 1998 to extend the scope of licensing and regulatory requirements to general securities and derivatives (as defined in the legislation).
In essence, any person who engages, by way of business, in certain activities (promotion, subscription, registration, dealing, management administration, advising, custody) in connection with general securities and derivatives will be required to hold a licence issued by the Commission.
Trust, Fiduciary Services and Pensions
The law relating to trusts is contained in the Trusts (Guernsey) Law 1989, as amended, ('the Trusts Law'). Currently, the provision of fiduciary services is not an activity regulated by the Commission. The Commission have recently published a consultation paper on the regulation of Fiduciaries on the Island and is therefore likely that the persons carrying on fiduciary business will require to be licensed. The island attracts a significant level of international pensions business, and there are also many schemes established for local employees.
For further information on this topic, please contact Ian Kirk at Collas day by telephone (+44 1481 723191) or by fax (+44 01481 711880) or by e-mail ([email protected]). The Collas Day web site can be found at www.collasday.com
The materials contained on this web site are for general information purposes only and are subject to the disclaimer.