Guernsey: Strong Foundations

Last Updated: 10 October 2018
Article by James Crawford
Most Read Contributor in Guernsey, September 2019

In eprivateclient's 2018 Guernsey report 'Building on Trust', James Crawford of NWH Global explains why clients should choose to structure foundations in Guernsey over other jurisdictions.

Five years since The Foundations (Guernsey) Law came into force foundations are now an established tool in the Guernsey private client practitioner's arsenal - as an alternative solution for protecting and preserving private family wealth. While only 88 Guernsey foundations have been registered at the time of writing, they are recognised as a valuable option especially when providing high value and highly complex structures for ultra high net worth businesses.

Foundations allow clients more direction of power over assets compared to traditional trust structures. They are typically used for wealth protection or asset management within bespoke, high value structures, inheritance and succession planning, the circumvention of forced heirship rules or for either charitable or non-charitable purposes.

The Guernsey Foundation is an "orphan" vehicle in that, unlike a trust where the trustees own the assets, no individual or legal entity owns a foundation. This difference lends itself to the structuring of funds, private securitisation, pension funds and the holding of capital, income and specific assets. For the trustee, a foundation is an alternative to a Private Trust Company.

It has the advantage of being a very flexible structure, while also benefitting from the robust legal and regulatory environment in Guernsey, which enables it to provide for bespoke estate planning mandates. A Guernsey Foundation has its own separate personality which is appealing to those clients who are familiar with civil law concepts.

The main attractions of Guernsey Foundations are that they can be used instead of purpose trusts for structuring purposes, they come with a certificate of registry which suits families with a Civil Law background and there is the option of establishing a Private Trust Foundation instead of a Private Trust Company.

The use of a Private Trust Foundation is often preferable to a Private Trust Company for the simple reason that a Private Trust Foundation does not require an "owner". A Private Trust Company will require at least one shareholder; often this will be a Purpose Trust which itself will require a trustee. Conversely, whilst a Private Trust Foundation, similarly to all Guernsey Foundations, will have a council, a founder and a guardian, it is a true orphan vehicle so no additional layer of ownership/control is present. This not only provides simplicity at the head of a structure, it also provides greater comfort for those used to civil law concepts.

While Guernsey is a common law jurisdiction, the law was drafted to reflect legal drafting in civil law jurisdictions which do not usually recognise the concept of a trust, but which are familiar with foundations. The Guernsey Foundations Law does not require a qualifying fiduciary member to sit on the Foundation Council and it does not need a Guardian as it is established for the benefit only of enfranchised beneficiaries; i.e. those entitled to certain information about the Foundation.

The industry has not experienced any major drawbacks to Guernsey Foundations, but it should be understood that they are still relatively new.

Private wealth Guernsey Foundations are administered in the same way as a private wealth Trust. To administer the Foundation may require more thought simply because the administrator is not familiar with the new concept but, over time, once they become commonplace, there will be more administrators with relevant expertise. Guernsey Foundations may have more involvement from family members sitting as council members alongside a fiduciary which makes them more complex to administer than Guernsey Trusts, although this same feature may make foundations more attractive to some families.

One potential hurdle for clients with UK connections is that the UK tax authorities don't have extensive experience in taxing Common Law Foundations and have not yet classified all of them. While this is not really a drawback, Guernsey Foundations haven't had much exposure to common law courts to date and this may be perceived by some as a disadvantage.

When Guernsey Foundations came into effect there was an initial slow uptake as it was a new concept introduced into a challenging market. In recent years there has however been an upturn in activity with more Guernsey Foundations being incorporated. The Guernsey Foundation Law came into effect after the Jersey Foundation Law and so the Guernsey Law draftsmen have benefitted from taking into account the experiences of Jersey practitioners. For example the concept of enfranchised and disenfranchised beneficiaries in Guernsey Foundations was borne out of the Jersey experience and their inability to differentiate between beneficiaries' information rights and the need for a qualified member or guardian.

Unlike Trusts, Foundation law is specific to a particular jurisdiction. Unless any councillor or guardian is a Guernsey licensed fiduciary (regulated by the Guernsey Financial Services Commission), the foundation must have a local resident agent to maintain its records. A Guernsey Foundation must also have a registered office in Guernsey.

The combination of a solid, stable and mature financial jurisdiction and strong estate planning expertise will mean that Guernsey will long remain attractive to significant families with complex, high value assets and the Guernsey Foundation is likely to remain the favoured structure for some years to come.

An original version of this article first appeared in the eprivateclient 2018 Guernsey Report 'Building on Trust', May 2018. Click here to read the full report.

For more information about Guernsey's finance industry please visit

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.

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