Offshore Trusts Report: Guernsey
Guernsey Trusts Law 2007
In September 2005, the Guernsey FSC launched a consultation
with trust professionals, lawyers, accountants and regulators to:
investigate the requirement for changes to enable new trust products
and services to be available to the Fiduciary Sector in Guernsey;
to consider the availability of competitor trust products and services
from other jurisdictions; to consider marketing requirement for
the Fiduciary Sector; and to make recommendations for the desired
The introduction of the new trust legislation in Guernsey
was viewed by practioners in the field as a demonstration of the
jurisdiction's adaptability and flexibility in reacting to changing
market situations and conditions.
The Trusts (Guernsey) Law, 2007 was designed to create a more flexible
framework for the local trust industry, and to ensure that Guernsey,
as a jurisdiction for the establishment and administration of fiduciary
structures, remained well placed and competitive.
Some of the key major changes incorporated in the new law are summarised
The introduction of (non-charitable) Purpose Trusts;
Removal of limits on the length of a trust’s duration
– allowing perpetual trusts;
Clarification of the position of retiring trustees, making
the transfer process more streamlined;
Clarification of the circumstances under which information
has to be given to beneficiaries;
Abolition of the liability of directors of corporate trustees
based in Guernsey or acting as trustees of Guernsey law trusts,
particularly as a way to encourage greater use of Private Trust
Companies (PTCs); and
Revision of arrangements regarding limitation periods and
Alternative Dispute Resolution (ADR).
The new law has its roots in a series of proposals made in the
‘Evans Report’, which was published following a root
and branch review of the Island’s trust legislation by a working
party under the chairmanship of Guernsey advocate Rupert Evans.
“This is yet another example of how the Guernsey government,
the Island’s financial regulator and its industry practitioners,
continually work together to maintain an environment that maximises
business flows,” stated Peter Niven, Chief Executive of GuernseyFinance
– the promotional agency for the Island’s finance industry.
One of the most significant changes brought about by the new law
was the introduction of non-charitable purpose trusts. Commenting
on this change, Carey Olsen, the largest law firm in the Channel
"Rather than bringing in a completely separate regime for
purpose trusts - a route preferred by certain other jurisdictions
such as Cayman and the BVI - Guernsey has simply revised the law
to remove the requirement for there to be beneficiaries to a trust."
"Purpose Trusts are commonly employed to incorporate private
trust companies which in turn act as trustees to specific trusts
(or groups of trusts). Private trust companies in Guernsey may apply
to the Guernsey Financial Services Commission for a discretionary
exemption from licensing. As part of the exemption process the Commission
will normally impose restrictions on the activities of the company
to prevent it providing services to the public."
Another major change was the removal of the 100 year time limit
for newly-formed trusts.
"It was never really clear why in 1989 the draftsman limited
the duration of Guernsey trusts to 100 years as the rules against
perpetuities have never formed part of Guernsey law," commented
Carey Olson. "Perpetual obligations were well known to Guernsey's
customary law and formed the bedrock of our land law and conveyancing
The firm continued: "Instead of extending the period during
which a trust can exist, the new law reverts to the status quo ante
and removes the previous 100 year time limit for Guernsey trusts
allowing perpetual trusts to be created. The limit of 100 years
for existing trusts is retained."
"It will of course be possible for the draftsman of a trust
to provide for a limited trust period where, for example, it is
necessary to consider the application of a foreign rule against
perpetuities in relation to the transfer of assets from a foreign
trust to a Guernsey trust. The revised legislation also permits
assets to be decanted from one trust to another even where the second
trust is of a longer duration than the first - putting an end to
the ongoing debate amongst local practitioners as to whether this
was allowed under the original 1989 law."