Guernsey: Types of Company
Guernsey introduced a '0/10' corporate tax regime from January 1, 2008 under which normal companies pay no tax, and companies regulated by the Financial Services Commission pay 10% tax. From that date the exempt company and international business company regimes (other than for Exempt Collective Investment Schemes (CISs)) were abolished. As a consequence, most Guernsey registered companies are treated as resident for tax purposes. In addition, the GBP600 annual exempt fee ceased to be payable (again, other than for exempt CISs).
The change in the tax regime affects only companies and so unit trusts - which apply for exemption under Category A of the 1989 Ordinance - are not affected and they are able to continue to apply for exemption in the normal way.
Companies which were exempt under Category B (Guernsey registered companies) and under Category C (non-Guernsey companies) are able to continue to apply for exemption if they wish to do so.
Companies which were exempt under Category D are, as indicated above, now resident for Guernsey tax purposes (from 1 January 2008) and their income is chargeable at 0% unless it consists of income from: specified banking activities; profits derived from activities that are regulated by the Office of Utility Regulation; and income derived from Guernsey land and buildings.
On July 1, 2008 a new Guernsey Companies Law was introduced in parallel with a new Guernsey Registry. This saw the Island’s system for company formation and administration move from a court-based model to a streamlined statutory process. The Registry is utilising cutting edge online technology to provide users with incorporations in 15 minutes for prices starting from GBP100 whilst maintaining the Island’s hallmarks of personalised service. The Registry also incorporates the office of the Intellectual Property (IP) Registrar. Online searches and online filing submissions are the norm. Directors, who are issued with electronic signatures, are notified automatically of all events at the Registry which affect their company. Annual returns have been replaced by an annual validation whereby companies simply validate the information held on them at the Registry once a year.
The 2008 Companies Law consolidated much of the companies legislation enacted in the wake of the Companies (Guernsey) Law, 1994, and many of the former Act's provisions remain in the updated legislation. Protected Cell company legislation was also consolidated into the new Act. Two other additions to the new law are the reduction of regulatory requirements, and the introduction of a comprehensive system of corporate controls and governance.
Advocates are no longer required to act in the incorporation process, corporate service providers (CSPs) are the only people who may make an application for the incorporation of a company. CSPs must obtain a fiduciary licence from the Guernsey Financial Services Commission.
The administrative procedures for amalgamating a company and migrating a company in or out of Guernsey have been streamlined by abolishing the requirement for Royal Court approval. Both procedures will now require the consent of the Guernsey Financial Services Commission, followed by an application to the Registrar.
A single test will be used in relation to all solvency related issues including companies converting into protected cell companies, transfer of incorporated cells between incorporated cell companies, conversion of companies into limited liability companies, migrations, dividends, distribution and financial assistance.
The powers of an auditor have been enhanced to investigate companies, which include giving auditors rights to obtain information about resolutions and meetings of the company.
The new law contains a ‘Takeovers’ section, which allows a purchaser of a company to use ‘squeeze out’ provisions in relation to dissenting shareholders if 90% of that company’s shareholders have otherwise agreed to transfer their shares to the purchaser.
The 2008 Companies Act also allows for the formation of mixed liability companies.
Provisions were made in the 2008 Companies Act for both Protected Cell Companies and Incorporated Cell Companies. The benefit of the cellular structure is the ability to segregate and manage risk – a feature which has made the use of these structures popular with the investment and insurance industries. The ICC provides additional inter-cell security in the event of insolvency and unlike the PCC, permits each cell of the ICC to contract with each other.
It was announced in April 2010 that two years after its introduction, the Companies (Guernsey) Law 2008 is to come under review. The law provides the legal framework for the establishment and operation of companies in the island.
“When it was introduced, the Law represented a fundamental overhaul of Guernsey’s existing legislation, involving the consolidation, amendment and updating of existing provisions," Guernsey’s Commerce and Employment Department said in a statement on April 7. The statement continued:
"The 2008 Law has been well-received and has proved a successful piece of legislation for Guernsey - providing a competitive and leading framework from which to carry out business locally, nationally and on an international platform."
“Given the significant nature of many of the changes introduced by the Law, Commerce and Employment has conducted a post implementation review in order to identify any amendments that may be necessary. These will address practical issues, take account of developments in company law elsewhere, and ensure that Guernsey maintains its reputation as a highly regarded and competitive business centre."
“In reviewing the Companies (Guernsey) Law (2008), the Department has taken note of feedback received from a number of individuals and organisations including local Advocates, local industry and the Guernsey Registry, as well as taking into account broader policy considerations.“
Explaining the purpose of the consultation, Deputy McNulty Bauer, Minister of Commerce and Employment, stated: “The Companies (Guernsey) Law 2008 represented the most significant change to Guernsey company law since protected cell companies were introduced 13 years ago. Guernsey cannot be complacent and must ensure that its law remains cutting edge, flexible and practical. I would encourage all those in industry to provide their feedback on the law and the proposed amendments by responding to the consultation.”
The department set a closure date of May 31, 2010 for the consultation. A summary report on the consultation process was released in May 2012, and in November 2012, a government approved report on the proposed changes called for the preparation of the necessary changes within the Company Law.