Guernsey's unique approach to the foundation regime

Guernsey has established itself as a prominent player in the wealth management sector with its innovative Foundations Law. Carefully crafted after reviewing the foundation regimes of other jurisdictions, Guernsey’s approach is distinguished by several unique features that set it apart from traditional models.

In this article, Leevyn Isabel, Commercial Director – Middle East and Jonathan Marquis, Client Director – Guernsey, delve into the key characteristics and advantages of Guernsey's foundation regime, highlighting why it is increasingly favoured by private clients and their advisers.

Optional Guardian requirement

Unlike most foundation jurisdictions, Guernsey requires the appointment of a Guardian only in specific scenarios: when a foundation has no beneficiaries, or when beneficiaries lack information rights. If beneficiaries are fully “enfranchised” with rights, there is no need for a Guardian. When appointed, the Guardian assumes clear fiduciary responsibilities both to the foundation and any disenfranchised beneficiaries, safeguarding their interests. This nuanced approach ensures oversight without unnecessary bureaucracy.

Enfranchised vs disenfranchised beneficiaries

One of Guernsey’s most innovative aspects is its legal recognition of two categories of beneficiaries: those with information and enforcement rights, and those without. The founder has the flexibility to define these rights in the foundation’s constitution, allowing for tailored arrangements. The requirement for a Guardian to protect disenfranchised beneficiaries further enhances the regime’s integrity. This level of customisation is not commonly found in other jurisdictions.

Time-limited founder’s powers

Guernsey restricts the duration of any reserved powers held by the founder to the founder’s lifetime, or up to 50 years in the case of a corporate founder. This limitation prevents indefinite or perpetual control, thereby promoting sound governance and reinforcing the independent nature of the foundation.

Resident agent oversight model

Another distinctive feature is Guernsey’s oversight model, which requires a resident agent (a licensed fiduciary) if there is no local fiduciary on the council. This allows the foundation to be managed by family members or trusted advisers, provided a local trust company acts in the background as resident agent, ensuring regulatory compliance. This “light-touch” approach appeals to clients seeking in-house administration without sacrificing oversight.

Migration flexibility

Guernsey law facilitates the redomiciliation of foundations, allowing them to move to or from other jurisdictions while maintaining corporate continuity. This flexibility is not always available elsewhere and provides a valuable exit strategy or opportunity for change should circumstances require it.

Use as a Private Trust Foundation

Guernsey has pioneered the use of foundations as trustees—known as Private Trust Foundations—offering an alternative to private trust companies. This allows a foundation to act as trustee for family trusts, combining the benefits of both structures. The Guardian’s role as an internal enforcer streamlines administration and removes the need for additional enforcement arrangements.

Balanced public disclosure

Guernsey strikes a balance between transparency and confidentiality. While the foundation’s Charter remains confidential, details of council members and any Guardian are publicly disclosed. This ensures credibility for dealings with banks and counterparties, while protecting sensitive information such as the founder’s identity, beneficiary details, and the foundation’s specific aims.

No “beneficiary clauses”

Unlike trusts, where beneficiaries can potentially terminate the structure if they are of age and unanimous (as per the rule in Saunders v. Vautier), Guernsey law prohibits beneficiaries from unilaterally terminating or altering a foundation. This ensures greater stability and adherence to the founder’s original intentions, safeguarding the longevity of the structure.

Perpetuity

Guernsey foundations can be established with unlimited duration unless the Charter specifies otherwise. There is no perpetuity period, providing the option for indefinite succession and the continued holding of family assets or businesses across multiple generations.

Regulatory stability and reputation

Guernsey enjoys a longstanding reputation as a stable and reputable offshore financial centre. Its regulatory regime adheres to international standards, including OECD and FATF compliance. Clients can be confident that their structures will benefit from legal certainty and are unlikely to face external compliance complications—an assurance not always available in other jurisdictions.

Tax neutrality

While not exclusive to Guernsey, it is noteworthy that foundations established here are generally tax neutral for non-residents. There are no local capital gains or inheritance taxes, and the corporate income tax rate is 0% for international activities. Foundations with no Guernsey-source income incur no local tax on income or accumulated wealth.

How can Ocorian support in structuring Guernsey foundations?

The Guernsey Foundation regime stands out as exceptionally flexible and founder-friendly, without compromising on oversight or integrity. By selecting the most effective elements from other jurisdictions and incorporating its own innovations, Guernsey offers what many practitioners regard as a “new and improved” version of the offshore foundation, ideally suited to the needs of today’s private clients.

Ocorian specialises in establishing and administering tailored foundations that align with your wealth planning goals and legacy aspirations, while adhering to all regulatory requirements. We empower you to confidently structure your business and succession plans for future generations. For more information on how Ocorian can support, reach out to the team.