The government has initiated a series of reviews designed to increase Guernsey's attraction as a centre for offshore funds, trust business and company registration
Guernsey's agenda for the innovation and development of its financial services industry continues, with a number of sector reviews underway.
Drawing on the same spirit that produced such concepts as protected cell companies and qualifying investor funds, there are to be significant further strides in the near future to modernise and strengthen the attractions of the island's financial services industry.
At a conference organised by the Guernsey branch of the Institute of Financial Services, Jonathan Conder, a London private client lawyer, observed how the island had become less UK-centric and more global in its outlook.
He highlighted dedication and adaptability as two of Guernsey's key strengths in the face of major challenges and changes over the last 15 years.
It is this desire to be adaptable and responsive to its markets that has led Guernsey to launch a raft of root and branch reviews across the fund and fiduciary sectors and the Company Registry. However, this review period will not be possible without the closest co-operation and interaction between Guernsey industry practitioners, the regulator and government, working together to develop Guernsey's finance centre.
Funds Sector Review
There is no doubt Guernsey has become a jurisdiction of choice for fund managers wishing to domicile funds and have them administered offshore. Final statistics are expected to show the total of funds under administration exceeded £100bn by close of 2005.
Guernsey hosts a full range of investment businesses, from investment advisers, stockbrokers and asset managers to custodians, managers and administrators of traditional vehicles for retail and institutional investors it also caters for property, private equity, hedge funds and funds of funds.
The Department of Commerce and Employment and the Guernsey Financial Services Commission jointly commissioned a working party to review the Investment Sector Legislation and Regulation. The working party under the leadership of Peter Harwood, was constituted and had its first meeting in February 2005.
Its terms of reference included "to consider the investment industry in the Bailiwick of Guernsey and the conditions required for its continued prosperity". The review will include, but not be limited to, the legal and regulatory framework and how public policy relates to the industry, and is expected to make recommendations for change. The working party is due to present its report very soon. It is also anticipated it will propose fundamental changes to the system of regulation, particularly within the investment funds sector, considerably reducing the number and scope of investment funds regulated. It is also expected that the focus of regulation will change to be on licensed Guernsey administrators.
The working party is likely to recommend other changes to facilitate Guernsey licensed administrators to administer non-Guernsey domiciled investment funds as a means of ensuring it maintains a vibrant fund administration sector. The outcome of this review is sure to further underpin Guernsey's pre-eminent position in this highly dynamic area of financial services business.
Fiduciary business, is at present, the most advanced in terms of review. The period of consultation with industry was completed in 2005 and a specialist working party chaired by another senior Guernsey advocate, Rupert Evans, is finalising its recommendations to the island's Finance Sector Group. Notably, the review will recommend Guernsey introduces foundations and purpose trusts in the very near future, to add to the current range of products.
The working party also believes there is demand from countries such as Austria, Germany and Switzerland, where trusts do not exist, to establish foundations in a financial centre like Guernsey. These can then be used as estate-planning tools for clients unused to the Anglo Saxon concept of trusts. It is likely there will be an extension of the law to accommodate this new product to provide added value, a competitive advantage and new business opportunities for the island.
Purpose trusts are generally implemented for commercial transactions and have a defined beneficiary, whereas a traditional trust may be in place as a device to pass the settlor's assets on to his children in the future. However in a purpose trust, assets will be held for a period of time for a particular purpose. These are used extensively in commercial and often complex transactions.
An associated proposed development is to do away with the perpetuity period associated with purpose trusts. In Guernsey this is currently a period of 100 years, which is occasionally seen as a problem when dealing with trusts for commercial purposes.
In addition to these two major developments, the working party has also suggested some minor technical changes to the trust law that are explained in detail in the consultation paper on the States of Guernsey website (www.gov.gg).
These changes will ensure Guernsey as a centre for trust business remains in the premier division and continues to be innovative in seeking solutions for clients and receptive to the needs of new business streams.
Guernsey's company and intellectual property registry is the third area that has been subject to review and consultation, under the direction of Guernsey financial services practitioner Trevor Ash. It is hoped the review will modernise and streamline processes and enable the highest level of efficiency in the formation of companies, which better fits Guernsey's status as an international finance centre.
The whole process of registering companies in Guernsey is under review and, in addition, a new Companies Law will pass through the legislative process during the next 18 months. The objective is to facilitate the timely registration and establishing of companies and corporate vehicles for national and international trading purposes.
It is expected the new system will be IT-enabled and provide online access for registered providers of company services. This will assist in making Guernsey the jurisdiction of choice for company registration and the management of assets and products through registered companies in an offshore environment.
It will also be possible to register a company within a day and place assets within it, including intellectual property, and establish a trading arm. This will significantly increase the island's competitiveness in the financial and commercial sectors. Such developments are entirely in line with 21st century international opinion and standards.
A new Intellectual Property Law will cover copyright (including related internet rights), performance and database rights, registered and unregistered design rights, trade marks, patents, plant variety and integrated circuit rights and geographical indicators.
Intellectual property is the most valuable asset held by many companies, being the knowledge bank of the organisation. With these assets owned and protected by the company, the new legislation will facilitate the management and licensing of these assets from an offshore environment.
This culture of review and development that exists in Guernsey is indicative of a top-tier finance centre that recognises the need to constantly re-assess and evolve in line with international market expectations. All the indications are that those local practitioners demonstrating the professionalism, expertise and experience that have earned Guernsey its first class global reputation are poised to benefit further from this forward-looking and dynamic approach.
Guernsey planning fundamental regulatory overhaul of investments funds
Island intends to introduce foundations and purpose trusts
It also intends to improve protection of intellectual property
£300bn of liabilities
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