A Profile of Guernsey

Background 

Authorisation

Taxation 

EU Directives

Merger Control

The Channel Islands Stock Exchange

Financial Crime

Data Protection

Background

The Bailiwick of Guernsey comprises three main islands: Guernsey, Alderney and Sark.

Alderney and Sark are dependencies of Guernsey but have certain legislative powers of

their own.

The Bailiwick is not part of the United Kingdom and therefore is not represented in the

UK Parliament. Acts of Parliament do not apply in the Bailiwick unless extended by

Order in Council. The UK Government is, however, responsible for the Bailiwick’s

international representation and external defence. In the case of international

representation the Bailiwick is currently seeking to enhance and increase its international

profile.

Guernsey is not a member of the European Union. Terms were negotiated for the

Channel Islands on the UK’s accession to the Common Market. These are contained in

Protocol 3 to the Treaty of Accession. The effect of the protocol is that the Bailiwick is

within the Common Customs Area and the Common External Tariff (i.e. it enjoys access

to EU countries of physical exports without tariff barriers). Other Community rules do

not apply to the Bailiwick.

Authorisation

The Bailiwick regulatory authority for the finance sector is known as the Guernsey

Financial Services Commission (commonly referred to as the Commission). The

Commission was established by the Financial Services Commission (Bailiwick of

Guernsey) Law 1987, as amended. The Commission’s primary objective is to regulate

and supervise financial services in Guernsey. The general functions of the Commission

are set out at section 2 of the 1987 Law and include the regulation of the four main areas

of finance business being, investment business, banking, insurance business and those

areas of business covered under the Regulation of Fiduciaries, Administration Businesses

and Company Directors, etc (Bailiwick of Guernsey) Law 2000.

As mentioned above, financial services businesses carrying on activities regulated by the

Commission must be authorised.

Key legislation:

amended) (the “POI Law”)

Any person carrying on by way of business any controlled investment business in or from

within the Bailiwick is required to be licenced under the above law. Carrying on

controlled investment business means the carrying on of a “restricted activity” in

connection with a “controlled investment”.

For the purposes of the POI Law “controlled investment” includes collective investment

schemes and general securities and derivatives and “restricted activities” include the

activities of “Promotion”, “Subscription”, “Registration”, “Dealing”, “Management”,

“Administration”, “Advising”, “Custody”, and operating an investment exchange as

those terms are defined under the POI Law.

· The Banking Supervision (Bailiwick of Guernsey) Law, 1994, as amended

Any institution carrying on a deposit taking business requires a licence under the above

law. There is a minimum capital requirement for any institution wishing to be licenced in

Guernsey of £1,000,000. However, the Commission requires Guernsey banks to maintain

a minimum risk asset ratio of 8%, with many banks having higher minimum risk asset

ratio requirements. It is normal for a new bank to have capital in the range of at least

£5,000,000-£10,000,000. Branches are not required to hold nominal capital in Guernsey.

· Insurance Business (Bailiwick of Guernsey) Law, 2002

The Guernsey insurance sector can be broadly divided into two main areas:

(1) Domestic insurance - comprises local insurers, overseas insurers, recognised

insurers and intermediaries who advise on or arrange contracts of insurance in or

from within Guernsey.

(2) International insurance - includes captive insurers, protected cell companies and

life assurance companies who arrange contracts of insurance from within

Guernsey, covering international risks.

All insurance entities (domestic and international) operating in or from within Guernsey

require an insurance licence under the Insurance Law.

In addition to the above there is further legislation in force in the form of the Insurance

Managers and Insurance Intermediaries (Bailiwick of Guernsey) Law, 2002.

etc (Bailiwick of Guernsey) Law, 2000, as amended

Guernsey is a major centre for the provision of international trust and corporate services.

The Bailiwick was one of the first jurisdictions in the world to introduce a comprehensive

system for the regulation and supervision of trust and corporate service providers

(including company directors). The above law came into effect on 1 April 2001.

Taxation

Since 1960, companies and individuals have paid income tax at the rate of 20%. There is

no separate corporation tax. Guernsey levies no capital gains, inheritance, capital transfer,

value added (VAT / TVA) or general withholding taxes.

For companies registered in Guernsey there is the opportunity for exemption for the

purposes of liability to Guernsey income tax, in which case, the company in question will

only be liable to tax in Guernsey in respect of income arising in Guernsey, other than

bank deposit interest. It is a condition of exemption that no investment or other property

situated in Guernsey, other than the relevant bank deposit or an interest in another body

to which an exemption from tax has been granted, is required or held.

On 25 November 2002, the Advisory and Finance Committee (now the Policy Council)

of the States of Guernsey announced a proposed framework for a structure of corporate

tax reform within an indicative timescale. In September 2005, the Fiscal and Economic

Policy Steering Group published detailed proposals on Guernsey’s future economic and

taxation strategy. In March 2006 an independent Working Group set up at the request of

the Treasury and Resources Department confirmed the earlier recommendation that the

general rate of income tax to be paid by all Guernsey companies (other than certain

regulated banking entities and Guernsey utilities companies) would be reduced to 0 per

cent. in respect of the tax year 2008 and subsequent years. This recommendation was

approved by the States of Guernsey in June 2006. It is intended that companies and other

entities which operate as investment funds will continue to be able to apply for exempt

taxation status from 1st January 2008.

EU Directives

As described in “Background” above, Guernsey does not form part of the EU, but it may

from time to time implement the tenor of EU directives and legislation, such as

implementing equivalent measures to those of the European Union Savings Directive, by

passing the Ordinance entitled the Foreign Tax (Retention Arrangements) (Guernsey and

Alderney) Ordinance, 2005, which was enacted by the States of Guernsey on 29th June

2005. It has not adopted any of the legislation in respect of the Prospectus Directives, the

Markets in Financial Instruments Directive (MiFID) or UCITS Regulations.

Merger Control

The Takeover Panel accepts jurisdiction over Bailiwick registered companies in many

circumstances including if any of their securities are admitted to trading on a regulated

market in the United Kingdom or on any stock exchange in the Channel Islands.

The Channel Islands Stock Exchange

The Channel Island Stock Exchange (commonly known as the CISX) was launched on 27

October 1998. Based in St Peter Port, Guernsey, the CISX provides a listing facility and

screen-based trading. Trading members do not have to be established in the Channel

Islands, but must be licenced, regulated or supervised by a regulatory body in a

jurisdiction recognised by the CISX.

The CISX provides for the listing of the following core products:

· Specialist Securities, including, Eurobonds, Structured Debt, Warrants and SPVs;

· Investment funds;

companies;

and

The CISX is licenced to operate as an investment exchange under The Protection of

Investors (Bailiwick of Guernsey) Law, 1987, as amended, and is itself regulated by the

Guernsey Financial Services Commission. The CISX received approval from the UK

Financial Services Authority, with effect from the 1 February 2004, as a Designated

Investment Exchange within the meaning of the Financial Services and Markets Act

2000.

In September 2002, the US Securities and Exchange Commission designated the CISX as

a Designated Offshore Securities Market, within the meaning of Rule 902(b) under

Regulation S of the Securities Act of 1933.

The listing of securities on the CISX are governed by the Listing Rules, which set out,

obligations of listing, the enforcement of those obligations and suspension and

cancellation of listing of securities on the CISX.

Financial Crime

The Commission, and more specifically the Policy and International Affairs Division, is

specifically responsible for establishing and coordinating policies on countering financial

crime and the financing of terrorism.

The key laws in place to combat financial crime are contained in the following

legislation:

as amended;

(Proceeds of Crime) (Bailiwick of Guernsey) (Amendment) Regulations, 2002 which

provisions in Guernsey to those introduced in the UK in 1993, including the Money

Laundering Regulations. They contain investigatory, confiscatory and enforcement

powers and specific offences in connection with money laundering.

• The Money Laundering (Disclosure of Information) (Guernsey) Law, 1995;

• The Misuse of Drugs (Bailiwick of Guernsey) Law, 1974;

• The Drug Trafficking (Bailiwick of Guernsey) Law, 2000;

• The Terrorism (United Nations Measures) (Channel Islands) Order 2001;

• The Al-Qa’ida and Taliban (United Nations Measures) (Channel Islands)

Order 2002; and

• The Terrorism and Crime (Bailiwick of Guernsey) Law, 2002.

In addition to above the Commission endorses the Financial Action Task Force on

Money Laundering’s (FATF’s) Forty Recommendations, the Twenty-Five Criteria

Defining Non-Cooperative Countries or Territories and the Eight Special

Recommendations on Terrorist Financing.

Data Protection

The Data Protection (Bailiwick of Guernsey) Law 2001 came into force in 2002. The

Law requires data controllers to register with the Data Protection Commissioner and

confers rights in respect of personal data, including a right of access. The law is very

similar to that passed by the United Kingdom in 1998.

The Data Protection Commissioner is an independent public official appointed by the

States of Guernsey to administer the Law and the Regulations that implement the

Directive on Privacy and Electronic Communications that came into force in 2004.

The Commissioner is responsible for ensuring that organisations which process personal

data, both in the private and public sectors (data controllers) do so in accordance with the

Law and that individuals (data subjects) are able to exercise their rights under the Law.

This profile was provided by:

PO Box 186, 1 Le Marchant Street,

St Peter Port, Guernsey, CI, GY1 4HP.

Tel: +44 (0) 1481 723466 Fax: +44 (0) 1481 714653

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