16 July 2020

A guide to private client structuring in Guernsey: private trust companies and private trust foundations

Guernsey is renowned for being one of the leading jurisdictions for fiduciary work having built a strong reputation over decades and providing private clients with the right wealth structures quickly and with a high degree of expertise and professionalism.

One of the trends in recent years has been the emergence of the private trust company (PTC). Its popularity has grown as ultra-high net worth families look to consolidate their various family interests in a bespoke private structure. The PTC offers many benefits such as the ability of the settlor or his or her trusted advisers to be closely involved with the structure, in-house specialist knowledge and expertise, continuity, flexibility and potential cost efficiencies.

Many jurisdictions have actively been trying to attract and encourage the establishment and administration of PTCs by excluding or exempting PTCs from their regulatory and licensing regimes. Regulations in the British Virgin Islands provide for an automatic exemption from licensing for PTCs provided certain conditions are met. The Cayman Islands allows for two types of PTCs (licensed and registered). Cayman-registered PTCs are subject to minimum regulation. Jersey enables PTCs to be established provided they meet tests set out in a trust company business exemptions order. In Guernsey, a PTC does not need a fiduciary license if the PTC is not remunerated for its services as a trustee. If the PTC is remunerated it may apply for a discretionary exemption by the Guernsey Financial Services Commission (the Commission) and, failing that, it would need a fiduciary licence.

Local licensed trust professionals, who are subject to oversight and inspection by the Commission, continue to play a central role in PTCs by delivering administration services and/or providing the necessary trust experience and expertise on the boards of PTCs.

As mentioned the Fiduciaries Law[1] only applies to fiduciary services provided by way of business. If a PTC is paid, directly or indirectly, it will be deemed to be carrying on business and subject to the Fiduciaries Law. PTCs generally need on-going funding, particularly in complicated structures and, rather than having to fund the PTC upfront, the PTC may wish to charge administrative or management fees to the structures under its control. In that case the PTC will either need to apply for a fiduciary license or alternatively an exemption under the Fiduciaries Law.

The Commission has discretion as to whether or not to grant such an exemption. The Commission evaluates each application on its own merits but historically exemptions have generally been granted on the condition that the PTC does not offer its services to the public and limits its services to trusts for a particular family or connected group of persons. The Commission would normally require that the PTC is administered by a company holding a full fiduciary license, that fiduciary will confirm to the Commission that it will retain sufficient knowledge and information about the PTC’s ownership and control structure and about its activities to be satisfied that the PTC is effectively administered and governed and complies with relevant laws. Although Guernsey therefore does not have a statutory exemption regime as is found in the BVI, Cayman as well as Jersey, the discretionary regime does allow for the Commission to grant exemption and to respond appropriately after evaluating the merits of each application.

To read the full guide please use the download link on the right hand side of this page (or at the bottom if viewing on a mobile device). 

 

[1] The Regulation of Fiduciaries, Administration Businesses and Company Directors, etc (Bailiwick of Guernsey) Law, 2000.

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