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The growing appeal of the Guernsey foundation

02 June 2016

Written by Dominic Wheatley

Guernsey Finance’s Dominic Wheatley explains why foundations are proving popular on the island.

THE FOUNDATIONS (GUERNSEY) LAW, 2012 came into force at the beginning of 2013. Since then, we have seen steady growth in the number of foundations being registered in the island. We have also witnessed the migration of foundations from other jurisdictions to Guernsey. The Law has certainly given Guernsey service providers an added level of flexibility and expanded the menu of options available for best meeting client needs via Guernsey structures.

Service providers have reported that the Guernsey foundation is particularly appealing to clients in the Middle East, Asia and South America. This is primarily because of how the foundation can offer a similar feel to a private family company set-up, unlike trusts, which are rooted in common law. However, a foundation differs from a company in that it does not have shareholders to whom the board is accountable but instead holds assets (in its own name) on behalf of the beneficiaries or for particular purposes, or both. Similarly, a Guernsey foundation offers many of the benefits of the reserved-powers trusts in the Caribbean, but in terms better understood by those in civil-law jurisdictions.


The foundation’s constitution comprises a charter setting out the foundation’s purposes, initial assets and duration, which may be unlimited. The constitution also includes rules prescribing the functions of the council members and the procedures they must follow. Council members provide much the same role as trustees, must act in good faith and cannot, without express authorisation, profit from their position.


As with Guernsey-law trusts, the level of involvement that the founder may have in running the foundation is flexible. Nothing in the Law prevents a founder becoming a guardian, council member or, if suitably qualified, an investment advisor. Also, in principle, it is possible for the founder to appoint themselves as a beneficiary. The founder may reserve a number of different powers too. As with trusts, however, there may be tax or asset-protection implications of reserving certain powers.

Beneficiaries have a number of rights, including the right to full and accurate information about the foundation property. They can also be council members. However, it is possible for the constitution to ‘disenfranchise’ the beneficiaries, meaning they have no right to information at all.

In the case where all beneficiaries are disenfranchised, or if there are no beneficiaries, a guardian must be appointed to supervise the council members. Ordinarily, there is no requirement for a guardian but some lawyers are advising that it is prudent to appoint a protector to act in good faith as an administrator of family wealth. One way a settlor of a trust may retain control in the family is by setting up a private trust company (PTC) to act as a trustee. This is not necessary with a foundation as the council can include the founder and/or the beneficiaries. It is also possible to use the foundation as an alternative to the PTC; the foundation’s purpose can be to act as a trustee of underlying trusts.


Some clients may worry that, because foundations are registered entities, they are, unlike trusts, publicly visible. However, under Guernsey law, only limited details are publicly available and, while the whole charter is filed with the Guernsey Registry, it is not visible to all, unlike in other jurisdictions. This limited visibility is also of great benefit when dealing with third parties (such as banks), in order to quickly prove the entity’s existence.


The foundation provides a great alternative to the discretionary trust for preserving family wealth for future generations. One of the reasons it is particularly attractive to high-net-worth clients is that it allows the patriarch to be prescriptive about succession planning rather than being required by law to follow their country’s forced-heirship rules.


Guernsey has significant expertise in servicing structures for protecting and preserving private family wealth, and the foundation has provided another alternative. The Guernsey legislation not only provides some aspects that differentiate the Guernsey foundation from others in the marketplace but there are also provisions that allow for the easy migration of foundations already established elsewhere. In this regard, Guernsey has the advantage of offering political and economic stability and a highly respected judicial system, experienced in making judgments on fiduciary matters.

An original version of this article was published in the STEP Journal, May 2016.

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