The Guernsey Financial Services Commission (the GFSC) has recently issued the final form of the Code of Corporate Governance for the Finance Sector (the Code) which will take effect from 1 January 2012. Its stated purpose is to provide boards and individual directors with "a framework for sound systems of company governance".
Who is covered by the Code?
The Code will apply to all companies which are licensed under the Protection of Investors (Bailiwick of Guernsey) Law, 1987 (the POI Law), the Banking Supervision (Bailiwick of Guernsey) Law, 1994, the Regulation of Fiduciaries, Administration Businesses and Company Directors, etc (Bailiwick of Guernsey) Law, 2000, the Insurance Business (Bailiwick of Guernsey) Law, 2002 or the Insurance Managers and the Insurance Intermediaries (Bailiwick of Guernsey) Law, 2002. In addition, the Code will apply to companies registered or authorised as collective investment schemes under the POI Law. Companies presently subject to the Licensed Insurers' Corporate Governance Code or which report against the UK's Corporate Governance Code or the Association of Investment Companies Code of Corporate Governance are deemed to meet the Code.
Structure of the Code
The Code is structured as a set of eight principles and corresponding guidance. The Code makes clear that the application of the principles is dependent on the nature, scale and complexity of the entity (giving the example of collective investment schemes which are unlikely to have their own business continuity plans). The guidance sets out how companies may meet the principles (recognising that there may be other ways by which the principles may be met). Accordingly non compliance will not automatically result in liability to any sanction or proceedings. However, the GFSC will take into account the manner and extent to which a company has adopted the principles.
The major difference between the draft Code issued in April 2011 and the final Code is the extension of the Code to collective investment schemes.
What to do next?
From 1 January 2012 all companies falling within the Code need to be in a position to discuss their corporate governance practices with the GFSC. The Code expects companies to prepare a selfassessment to assist their consideration of the Code. Accordingly, companies affected by the Code will need to consider its application almost immediately in order to meet the 1 January deadline.
"Assurance statements" will be required from companies confirming that its directors have considered the effectiveness of their corporate governance practices and are satisfied with the degree of compliance with the eight principles. However, the detail on how and when this is to be provided has not yet been published.
The GFSC's existing corporate governance guidance document "Guidance on Corporate Governance in the Finance Sector" issued in December 2004 will be repealed upon the Code coming into force.
The full text of the Code is available on www.gfsc.gg.