Offshore foundation navigation

Wednesday, 02 April 2014
The Crown Dependencies of Guernsey, the Isle of Man and Jersey have enacted foundations legislation in recent years. Here, an industry expert from each of the Dependencies reviews their island’s foundation regime.


Guernsey is the most recent of the Crown Dependencies to enact foundations legislation, the Foundations (Guernsey) Law, 2012 having come into force on 7 January 2013. Although Guernsey was the first of the islands to look at bringing foundations onto the statute book, the law was long in the making, allowing Guernsey to see how the laws of its sister islands were received.

Unsurprisingly, a few keen clients, who had been eagerly awaiting the law coming into force, registered foundations on the earliest available date, 9 January 2013. Since then, the number of foundations being registered has been fairly steady, although not high in number. There are, at the time of writing, around 17 foundations registered with the Guernsey Foundations Register. A continually increasing interest is being showing in establishing Guernsey foundations.

In terms of the uses of the foundations that have been registered and also those that are in the pipeline for registration (of which there are a number), a crude estimate would be that roughly just under one-third are set up for philanthropic purposes (both local and international); just under one-third for use in the corporate context, including holding shares in a private trust company (PTC) and indeed replacing a PTC, i.e. a private trust foundation; and just over one-third for private wealth structuring. A number of the registered foundations have assets, or are part of structures with a variety of assets, that are very substantial, e.g. in two foundations the value of the assets exceeds GBP1 billion.

In terms of the ultimate clients behind the registered foundations, they emanate predominately from the likes of the CIS, Latin America and the Middle East. It is probably no surprise that there are no foundations set up for UK-resident individuals, although this may change as the uses of foundations develop, especially in the corporate context.

What is unique about Guernsey’s foundations law is that it permits having two different classes of beneficiary: an ‘enfranchised beneficiary’, who is entitled to information relating to the foundation, and a ‘disenfranchised beneficiary’, who is not entitled to such information. Where there is a disenfranchised beneficiary, a ‘guardian’ will be required. A guardian will also be required if there are no beneficiaries but instead a purpose. Another benefit of the Guernsey law is that the foundation can be administered off-island, e.g. from Switzerland, provided there is a licensed Guernsey fiduciary acting either as guardian or resident agent. Gavin Ferguson

Isle of Man

The Isle of Man has never been part of the UK and the origins of its laws are quite different from those of English law. Still, it is a common-law jurisdiction, its laws are strongly influenced by English decisions and the ultimate appeal from the Manx courts lies to the Privy Council in London. Hence, English law is highly influential.

The development of legal entities in the Isle of Man has been much more conservative than elsewhere, partly owing to the caution with which unfamiliar entities are viewed and partly owing to an evolutionary approach rather than a revolutionary one. How has this translated in trust and foundation offerings in the Isle of Man?

Trusts have always been part of Manx common law. There has been legislation affecting the basic position. The principal interventions by statute have had the following consequences:

  • There is a common-law perpetuity restriction on trusts, but a period of up to 150 years may be selected in the trust instrument (a review is under way that may lead to the abolition of these restrictions).
  • It is possible to create trusts for non-charitable purposes (Purpose Trusts Act 1996).
  • There is firewall legislation to exclude foreign law (Trusts Act 1995).

Common-law principles are applied in wider contexts, resulting in consistency across Manx law. Hence, one of the aspects deliberately introduced in the Foundations Act 2011 was maintaining foundations’ integrity by rights for beneficial objects. It is possible to limit the rights of beneficial objects to information, but this is subject to a right to canvass the court for assistance. This means that those establishing or interested in Manx foundations can be more confident that they have genuine substance and should be less open to abuse.

Another element carefully imported from civil-law principles (under which foundations have their origins) was the clear distinction from companies. The legislation is therefore consistent with their use as broadly equivalent to trusts.

It has been possible to establish foundations under Manx law since the beginning of 2012. Their objects can be beneficial, charitable or for non-charitable purposes. So far, 37 have been registered, a rather greater number than forecast (although rather fewer than the 20,000 or so trusts reported as being in existence in government statistics). The permissive nature of the legislation means they can, in some circumstances, be used with greater imagination and confidence than trusts might. Their use continues to develop, though, as advisors become more familiar with them. They have so far been established for mainly charitable or family wealth purposes, but they are also being established to hold and manage commercial undertakings with wider objects.

The Manx legislators drew gratefully on the Jersey experience when drafting the Manx Act. Two key differences are:

  • There is no need for a Manx council member (called a ‘qualified person’ in Jersey). Instead, there is a requirement to have a registered agent in the Isle of Man who fulfils certain statutory requirements to ensure effective oversight.
  • An enforcer (called a ‘guardian’ in Jersey) is only required for non-charitable purposes (i.e. objects for which there are no beneficial objects who can enforce against the foundation), but not otherwise (although one can be provided for).

John Rimmer


There are 252 Jersey foundations on the registry, as at 26 February 2014. Around one Jersey foundation has been established each week since the Foundations (Jersey) Law 2009 came into force nearly five years ago, on 17 July 2009. The average rate of new incorporations is therefore just over 50 new Jersey foundations a year. The rate of increase has remained steady despite the introduction of the Guernsey and Isle of Man foundation laws. The Jersey, Guernsey and Manx laws are different and there is a strong local domestic administration element in terms of choice of law to govern the foundations, driven in part by the service providers’ suite of licences to conduct foundation business and staff familiarity with local solutions.

The use of Jersey foundations for the first few years was broadly one-third philanthropic, one-third private client and one-third orphan structures for specified purposes (e.g. PTC or special purpose vehicle holding foundations). Over the past two years, it seems that the private client share has increased slightly and the orphan share has reduced slightly, with philanthropic uses remaining at around one-third. The underlying instigators are, as expected, predominantly from civil-law jurisdictions in Europe, Russia, Switzerland, and South America, and, in addition, a number have been set up for the Middle East Shariah law market. With the new Jersey charities law coming up, it looks like the philanthropic sector will see a boost in work, as Jersey foundations work so well for organised giving.

The value under Jersey foundations is significant. In one case, a single Jersey private wealth foundation had a value exceeding USD500 million. Other foundations have included higher-risk and/or wasting assets, such as private aircraft, super yachts and trading companies. It is probable that several billion USD worth of assets are now held under Jersey foundations. It is a mark of confidence in the law and the structure’s appeal that sophisticated gatekeepers are referring such high-quality ultra-high-net-worth clients to Jersey for foundations work. The Jersey law has stood up to its first five years very well. The mandatory requirement in Jersey for a regulated person (the qualifying member) on the council of the members has been well received, bringing with it, reassuringly, the kitemark of quality of the Jersey Financial Services Commission regulations and safeguards for consumers, which should result in a consistently high quality of administration. Giles Corbin

Author block
Gavin Ferguson, John Rimmer and Giles Corbin

Gavin Ferguson TEP is Managing Partner for Appleby Guernsey, John Rimmer TEP is an Advocate in the Isle of Man and Giles Corbin TEP is Joint Head of International Trusts & Private Client, Jersey, Mourant Ozannes.

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