Foundations have become an increasingly important structure in recent years. Ogier’s Marcus Lease explains why advisers should be steering clients towards them. W 8 Guernsey Report | eprivateclient www.eprivateclient.com While foundations (a unique structure with both certain company and trust-like features) are well known structures in many civil law jurisdictions, they are much less familiar to practitioners in the common law world. Accordingly, when foundations were introduced into the Guernsey legal system in January 2013, there was some uncertainty regarding how popular they would be and for what they would be used. Now having had the benefi t of approximately two years of the new regime that uncertainty is long gone and it is interesting to refl ect upon the experience we have had during that period. The single most interesting point is the shear breadth of uses to which foundations have been put – certainly a far wider range of applications than may have been envisaged originally. Foundations have been seen used frequently as simple asset-holding structures – such as for holding the shares in a PTC or an off-balance sheet SPV. The separate legal personality which foundations have (like a company), but absence of shareholders or other “owners”, make it an attractive structure for this use – being both potentially simpler to administer and understand than a charitable or non-charitable purpose trust which is traditionally used for these purposes. The last two years have also seen foundations used regularly as an alternative to a traditional discretionary trust. All the attractive and positive features of a Guernsey proper law discretionary trust are available with a foundation structure – largely unlimited fl exibility in both benefi cial and administrative terms under the constitutive documents; ability to benefi t benefi ciaries, purposes, or both; unlimited duration; etc. But in addition, the foundation structure offers some additional features which some settlor/founder clients have found attractive in this context. Notable in this regard is that foundation benefi ciaries have different rights from benefi ciaries of a trust – in particular it is possible for foundation benefi ciaries to be “disenfranchised” and have no information rights under a foundation. This is a feature some founders have seen as highly attractive by allowing the fl ow of information to foundation benefi ciaries (especially those who are young and impressionable or those who may become benefi ciaries by marriage) to be restricted in ways that may not be possible under a conventional discretionary trust. For clients seeking to retain involvement in a structure on an on-going basis, the foundation has also proved attractive. The Guernsey foundation regime expressly permits the founder to retain extensive powers. in the operation of the foundation without invalidating the foundation in any way. The founder can also have involvement via the foundation council (the principal governing body of a foundation – akin to the board of directors of a company). The founder can be one of the councillors and/or can hold powers to appoint and remove councillors. Moreover, there are no restrictions on who may serve as councillors – they can be individuals or companies, they do not have to be a Guernsey resident, they do not have to be licensed or regulated in Guernsey, and they can include family members or trusted advisers of the founder. A further use that we’ve seen foundations used for has been as a decision-making vehicle for certain private client and commercial jointventure structures. The parties involved in these matters were seeking an entity to have ultimate decision-making power in the event of certain deadlock situations. The entity had to provide a means by which the different parties could be represented on it (which was provided by allowing each party to put forward one person to be a councillor for the foundation), have separate legal personality and continuous existence, be registered but without publicly disclosing commercially sensitive information (which the foundation achieves by being registered but only requiring fi ling and public disclosure of extremely limited and non-sensitive information). Although the Guernsey foundation regime has only been in place for less than two years, it’s already beginning to be used for a wide range of purposes and its inherent fl exibility and unique combination of features is being appreciated by clients.