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 changes.
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 below:
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 Islands, stated:
"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 system."
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."
Guernsey's 10-Year-Old Trusts Law 'Ahead Of Its Time' Friday 23/3/2018Guernsey's trusts law, which came into force 10 years ago, has been described as "ahead of its time" and "a reminder of the jurisdiction's ability to innovate and adapt to changing market conditions" by leading trust and fiduciary lawyer Russell Clark.