Guernsey, has introduced a law for Foundations, The Foundations (Guernsey) Law 2012, which has come into effect as of 7 January 2013.
Generally speaking, a Foundation is an entity which is used to hold assets and which has its own legal personality (unlike Trusts). Some of the common uses of foundations include wealth protection, asset management and asset holding, inheritance planning, protection against forced heirship rules, charitable purposes and pension funds.
Guernsey anticipates that the new Foundations law will create interest amongst wealthy individuals and family businesses in civil law jurisdictions, which are not very familiar with Trusts, a common law vehicle.
We set out below the main characteristics of Foundations in Guernsey under the new legislation:
A Guernsey Foundation is formed by the Founder.
A Guernsey Foundation should be registered with the Registrar of Foundations in Guernsey. This can only be carried out by a Guernsey Fiduciary licensee.
It should be noted that the Foundation will come into existence only after registration with the Registrar of Foundations.
A Foundation has its own legal personality, which means that it can contract, sue or be sued under its own name.
A Guernsey Foundation is formed by 1 or more Founders. The Founder can be an individual or a body corporate and can be resident in any country of the world.
Actions of the Founder usually upon formation:
The Founder can also be the Guardian, the Councilor and the Beneficiary. This allows the Founder to retain control over the Foundation and supervise it. However, the Founder cannot be the Guardian and Councilor at the same time.
There is no minimum initial endowment and may comprise any property, movable or immovable, tangible or intangible in any country.
A Guernsey Foundation can have two types of Beneficiaries: enfranchised and disenfranchised beneficiaries.
An enfranchised beneficiary is entitled to a copy of the Constitution of the Foundation, records and accounts and to apply to the Court to change the purposes or dissolve the Foundation.
A disenfranchised beneficiary is not entitled to any information. This feature is useful and appealing to those Founders with minor children or where the Founder does not want each of the Beneficiaries to know their interests or the interests of other Beneficiaries.
A Guernsey Foundation is managed by its Council. The Members of the Council are called the Councilors.
Each Foundation in Guernsey should appoint at least 2 Councilors unless the Constitution permits a single Councilor.
The Councilor of a Foundation can be an individual or a corporate body and be resident in any country of the world. However, unless one Councilor or the Guardian is a Guernsey licensed fiduciary, the Foundation must have a local resident agent to maintain the Foundation's records.
Councilors have the duty to act in good faith in exercising their functions. These duties are owed to the Foundation itself and not to the Beneficiaries.
A Guernsey Foundation is required to appoint a Guardian only if it has disenfranchised beneficiaries or if it was created for a purpose and does not have individual beneficiaries.
The duties of the Guardian are to ensure that the purpose or benefits of the Foundation are always enforced.
A Guernsey Foundation is administered in accordance with its Constitution, which comprises two parts; the Charter and the Rules.
The Charter contains the name and purpose of the Foundation, its initial endowment and duration.
The Rules include more detailed information and they set out the operating provisions of the Foundation. Such information includes the functions of Councilors, appointment of officials, remuneration of officials, obligations of Beneficiaries etc.
A Founder can retain certain powers in the Constitution. If the Founder is an individual then he/she can retain these powers whilst alive whereas a corporate founder can hold these powers for a maximum period of 50 years. Such powers include:
The following information is provided to the Registry and is available on public record:
The Founder is named in the Constitution but even though the Constitution is submitted to the Registrar it is not available on public record.
An individual who wishes to retain his/her confidentiality can incorporate a company, which will act as the Founder of the Foundation, and its name will appear in the Constitution.
A Guernsey Foundation is not liable to any tax in Guernsey.Back to Articles
The information provided in this article is for general information purposes only. The information is not intended to be comprehensive or to include advice on which you may rely. You should always consult a suitably qualified professional on any specific matter.
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