Company Formation and Management Services
Guernsey is a leading jurisdiction for company formation, based on its modern Company Law and a cutting edge Company Registry. Combining the advantages of legislation written for the current and future commercial environment with the latest on-line technology, Guernsey’s Registry is truly world class. Companies may be incorporated in various forms, such as:
- Limited by shares
- Limited by guarantee (with or without a share capital)
- Protected cell companies
- Incorporated cell companies
Companies that are owned by non-residents of Guernsey and do no business with Guernsey resident individuals or corporations will pay 0% tax in Guernsey, irrespective of profit. Guernsey has been endorsed by the OECD as continuing to meet international standards on transparency and tax information exchange and is on the OECD “white list”, one of only 40 jurisdictions placed on the original list.
Incorporation can be achieved within approximately three days. “Off the shelf” companies are not available because the requirement to reveal details of the beneficial owner before incorporation means that it is not possible to incorporate companies except upon the instructions of a client. However, subject to fulfilling certain conditions, 15-minute incorporations are available.
We have negotiated eligible introducer status with a number of banking institutions. Where we act as directors of a company, this status enables us to open a corporate bank account within two to five working days. Where we do not act as director, we can effect an introduction to the institutions we work with, although the banking relationship will be between the bank and the directors of the company.
Other legal entities available in Guernsey include:
- Limited Liability Partnerships
Created under the Limited Liability Partnerships (Guernsey) Law, which came into force on 12 May 2014, a limited liability partnership (LLP) combines the organisational flexibility and tax status of a partnership with limited liability for its members. This limited liability is possible because, like a company, an LLP is a legal person separate from its members. An LLP can do anything commercially that a natural person can do. It has the ability to enter into contracts, own assets and will continue in existence in spite of any change in membership. However an LLP is taxed like a partnership. Profits are only taxed in the hands of the members, so if a member is a non-Guernsey entity and does not trade in Guernsey, no Guernsey tax should be payable. AN LLP must maintain a registered office in Guernsey where its register of members, accounting records and minutes must be kept. The LLP must also have a resident agent based in Guernsey. The LLP must file an Annual Validation and Declaration of Compliance with the Registry before 30 June each year.
- Family Limited Partnerships
FLPs are limited partnerships formed under the Limited Partnerships (Guernsey) Law. There are many variations but typically a Guernsey company would be formed to act as the general partner with responsibility for managing the FLP. The other partners would be the limited partners, typically family members who wish to benefit from the assets but have no responsibility for managing, and no liabilities in relation to, the partnership. The general partner has unlimited liability for the debts of the FLP but as the partner is a limited company, so this liability is limited.If family assets are transferred into an FLP, it allows the head of family to retain control whilst passing the value in those assets to other family members in a controlled and orderly manner without tax consequence. The FLP behaves like a discretionary trust, with the general partner acting like the trustee and the limited partners like the beneficiaries. However if property were transferred to a discretionary trust there would be an immediate charge to lifetime IHT of 20% and ongoing tax charges. This is not the case with a transfer of property to an FLP.Although there are no restrictions on the nature of assets that can be placed into a FLP, they tend to be used to hold assets such as property, securities and shares in family businesses. The partnership agreement can allow for the FLP to be wound up after a certain period, on the occurrence of an event such as the death of the transferor, or provide for continuity of the general partner and the structure. The agreement and the articles of incorporation of the general partner can set out an investment strategy and a management mechanism that can be maintained over multiple generations.There will be no Guernsey taxes, except on certain types of income that are sourced in Guernsey, and therefore no requirement to file tax returns in Guernsey. There is no requirement for the FLP to be audited. If the general partner of a FLP is a Guernsey registered company, it will be subject to 0% rate of tax on its profits.The FLP must be registered in Guernsey and file an annual return with the Registrar before 31 January each year. The identity of the limited partners is not disclosed on any public register.
Once a Guernsey entity is incorporated, we provide a domiciliary service, which includes the provision of company secretarial, registered office and nominee shareholder services. Full management services from our own licensed corporate directors are also available and highly advisable in most cases. Re-mailing services are available at modest cost for all companies established by Sovereign.
Note: Ancillary services
In addition to providing incorporation, domiciliary and management (directorship) services, a range of ancillary services at competitive prices is available on request. These services include, but are not limited to: provision of dedicated telephone lines; office and personnel assistance; designated staff members (temporary or permanent availability); assistance with office relocation, introduction to real estate agents, government agencies and other third parties.
Trust Formation and Trustee Services
Trusts have many applications and advantages, including the protection and preserving of assets, tax planning or just avoiding the expense and delays of obtaining probate under a will. They also provide a high degree of confidentiality.
Guernsey is at the forefront of best practice development in the area of trusts and was one of the first jurisdictions to introduce the regulation and supervision of trust companies. Professional trustees must be licensed under the Regulation of Fiduciaries Administration Businesses and Company Directors, etc. (Bailiwick of Guernsey) Law 2000 and are regulated by the Guernsey Financial Services Commission (GFSC).
While Guernsey’s legal system is based on ancient Norman French law, the island’s trust law is derived from English common law and the rules of equity. Until 1989 the trust law was largely uncodified but in 1989 a formal trust law was introduced, which was amended and updated by the Trusts (Guernsey) Law 2007 that was brought into force on 17 March 2008. Under the Hague Convention, Guernsey law trusts are recognised by the signatories to the convention, which at present include the United Kingdom, Jersey, France, Italy, the Netherlands, Luxembourg, Switzerland, the United States of America, Canada, Australia, Cyprus, Malta and Hong Kong.
Guernsey law permits a variety of trusts to be established, including:
- Discretionary Trusts are the most commonly used, as they provide the most flexibility. The trustees of a discretionary trust are given wide powers as to how the trust fund may be invested and who and when beneficiaries may benefit, and how much. No one beneficiary has an absolute right to benefit as this decision is in the hands of the trustees. Whilst not binding on the trustees, the settlor may provide a note of his or her wishes, which the trustees may use as guidance when exercising their powers.
- Non-charitable and charitable Purpose Trusts – The 2007 law allows the creation of non-charitable purpose trusts, where the trust fund is to be used for a purpose that is not charitable. Under the 2007 law, the document establishing the trust must state the purpose or purposes for which the trust has been created and must appoint an enforcer, whose role is to enforce the terms of the trust. The enforcer cannot be the trustee. There is no requirement to appoint beneficiaries to a non-charitable purpose trust but they can be added at any stage after the trust has been created.
- Life Interest or Fixed interest Trusts – A trust can be created that provides income, capital or other benefit to a specific beneficiary, either during their lifetime or until a certain event occurs (e.g. marriage or reaching a certain age). The trustees then distribute the trust fund to the settlor’s chosen beneficiaries. The trustees have no discretion over the distribution of trust assets.
- Accumulation & Maintenance Trusts – This type of trust is used where a settlor wishes to provide for a beneficiary to receive the trust fund at a certain age, for example when grandchildren reach 18.
If all beneficiaries are resident outside of Guernsey, a trust will be exempt from both Guernsey income tax on income arising outside Guernsey and income on bank deposit interest arising from within Guernsey. Therefore, a trustee may make distributions out of a trust fund established in Guernsey without any withholding or deduction of Guernsey income tax. There are no inheritance, wealth, gift or capital gains taxes levied in Guernsey. Other indirect forms of tax, such as stamp duty and VAT, do not apply in Guernsey.
Regulations require trustees to know the identity of the settlor and ultimate beneficiaries of a trust. This information is kept completely confidential. Disclosure to third parties is only required in very particular circumstances and must be accompanied by a court order. There is no public register of trusts in Guernsey. The ownership of trust assets can remain entirely confidential in most circumstances.
Forced heirship is a particular problem in continental Europe and other civil law jurisdictions, as well as in countries of Islamic tradition, where mandatory laws dictate the persons to whom and proportions in which a settlor’s estate can pass. S14 of the Trusts (Guernsey) Law 2007 was enacted to provide that no Guernsey trust will be invalidated simply because the trust avoids or defeats claims which may arise under forced heirship rights.