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13 March 2013

Guernsey Borrowing Simplified by COBO Repeal

The Control of Borrowing (Bailiwick of Guernsey) Ordinance, 1959, as amended, has been repealed with effect from 27 February, 2013 by the Control of Borrowing (Repeal) (Bailiwick of Guernsey) Ordinance, 2013. Now any borrowing transactions, share issues or company formations in the Bailiwick do not need COBO consent from the GFSC.

Please note that past failures to obtain consent are technically still punishable.

With effect from 27 February, 2013, the Control of Borrowing (Bailiwick of Guernsey) Ordinance, 1959, as amended (“COBO”) has been repealed. This follows today’s approval by the States of Guernsey of the Control of Borrowing (Repeal) (Bailiwick of Guernsey) Ordinance, 2013 (the “Repealing Ordinance”).

Welcomed by practitioners, the Repealing Ordinance completely removes the out-dated requirements of COBO and simplifies financing transactions and capital raising activities in the Bailiwick of Guernsey including Alderney.

Background

Originally designed to control foreign exchange movements following World War 2, the COBO Ordinance and its 1946 enabling law, the Borrowing Control (Bailiwick of Guernsey) Law, 1946 (the “1946 Law’), provided that consent from the Guernsey Financial Services Commission (the “GFSC”), on behalf of the States, was required for certain borrowing, capital raising and promotional activities in the Bailiwick subject to exemptions.

The sanctions for failure to obtain consent were and are considerable and include imprisonment with possible fines of up to the amount of any money borrowed or raised by the transaction in question or the value of any securities to the issue, sale or other disposal of which (whether actual or projected) the transaction in question related.

Since 1959, COBO has been the subject of various amendments and repeals of which the Repealing Ordinance is the last.  In 2008, certain sections of COBO were partially repealed by amendments to the Companies (Guernsey) Law 2008, as amended, and to certain protection of investor legislation in Guernsey.  Complete repeal of COBO was held up over the last few years by delays in introducing beneficial ownership controls into Alderney’s Companies Law.   These were eventually introduced earlier this year thereby opening the way for the Repealing Ordinance.

Transactions that no longer need GFSC consent

Up to and including the 26 February, 2013, the transactions which required GFSC consent included:

  • certain transactions treated as the borrowing of money in the Bailiwick where the aggregate amounts involved exceeded £500,000 in any 12 month period;
  • the raising of capital by certain companies, including the raising of  money by the issue of founder shares on the formation of Alderney companies;
  • the issue of certain shares including certain partly paid shares  and certain redeemable shares and securities; and
  • the issue of certain foreign government  securities which were to be registered in the Bailiwick.

In each case these were subject to the exemptions set out in COBO.  

Past breaches

The Repealing Ordinance is not retrospective and provides no amnesties for past breaches or failures to obtain COBO consent from the GFSC. Technically, such omissions are still actionable although the GFSC may choose not to pursue enforcement in light of the repeal of COBO.

Download Guernsey Borrowing Simplified by COBO Repeal as PDF

Please note that this briefing is only intended to provide a very general overview of the matters to which it relates. It is not intended as legal advice and should not be relied on as such.

© Carey Olsen 2013

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