Acting as a director – Do I need a personal fiduciary licence?

Overview

Under the Regulation of Fiduciaries, Administration Businesses and Company Directors, etc (Bailiwick of Guernsey) Law, 2000 ("the Fiduciaries Law"), acting as a director in or from within the Bailiwick of any company or unincorporated body whether incorporated, registered or established in or under the laws of the Bailiwick or elsewhere by way of business is a regulated activity. For the avoidance of doubt, "in or from within the Bailiwick" includes in or from within Guernsey, Alderney and Sark.

The Fiduciaries Law provides a number of exemptions from the requirement to hold a fiduciary licence. Section 3 of the Fiduciaries Law sets out these exemptions which include:

  • Acting as a director of a company (provided that no other services consisting of a regulated activity such as nominee shareholder is provided by the director) with an established place of business in the Bailiwick (section 3(1)(b));
  • Acting as a director of a company listed on a recognised stock exchange (section 3(1)(c));
  • Acting as a director of a company in the majority ownership of that director of his/ her close family (section 3(1)(d));
  • Acting as a director of a supervised company (section 3(1)(e)); and
  • Acting as a director of a company which is a subsidiary of a company that meets one of the requirements set out in the preceding bullet points (section 3(1)(f)).

There is one further exemption at section 3(1)(g) which permits an individual to hold directorships of up to 6 companies which do not fall into any of the categories of companies cited in the above bullet points.

AML/CFT obligations

While an individual utilising the exemption under section 3(1)(g) of the Fiduciaries Law does not require a personal fiduciary licence, he/she remains subject to the Criminal Justice (Proceeds of Crime)(Bailiwick of Guernsey) Law, 1999 and is required to comply with the requirements in Schedule 3 to that Law and the rules in the Handbook on Countering Financial Crime and Terrorist Financing ("the Handbook"), which can be found here.

This means that those individuals acting as director under this exemption must, among other things, undertake due diligence on the beneficial owners of the companies on which they serve.

Following the amendment made to paragraph 23 of Schedule 1 Criminal Justice (Proceeds of Crime)(Bailiwick of Guernsey) Law, 1999, an individual is exempt from applying the measures in Schedule 3 and the rules in the Handbook  in respect of a directorship of a company which is a registered collective investment scheme under section 8 of the Protection of Investors (Bailiwick of Guernsey) Law, 1987, or subsidiary of such a company.   For the avoidance of doubt the responsibility to conduct due diligence on investors falls upon the firm nominated by the Board (or equivalent governing body) of the registered scheme and whose nomination has been advised to the Commission in accordance with section 4.8.1 of the Handbook.

Disapplication of the Six Directorship Exemption

The Commission has the power to disapply the exemption under section 3(1)(g) of the Fiduciaries Law if it determines that, in having regard to the minimum criteria for licensing under Schedule 1 to the Fiduciaries Law, an individual is not fit and proper to be a director of a company. This may include, but is not limited to, instances where the individual has failed to comply with any of the anti-money laundering and counter terrorism financing legislation and the rules of the Handbook.

FAQ

For the purposes of this FAQ, companies are "counted in" if they count towards an individual's total of 6 directorships under section 3(1)(g) because no other exemption in section 3(1) covers them. On the other hand, where acting as a director of a company falls under any applicable exemptions under section 3(1), this will be "counted out".

1. I am a director of a number of local trading companies in Guernsey. Do I need a licence?

No. Section 3(1)(b) of the Fiduciaries Law provides an exemption for acting as a director of a company with an established place of business in the Bailiwick provided that no services consisting of, or comprising a regulated activity such as acting as a nominee shareholder, are supplied to the company by the director.

Established place of business ("EPB")

Section 58 of the Fiduciaries Law defines EPB as being in relation to a company, and without limitation, does not include an office in the Bailiwick at which is transacted only such administrative business as is necessary to enable that company to comply with the requirements of the Companies (Guernsey) Law, 1994, the Companies (Alderney) Law, 1994 or any corresponding legislation in force in any place outside the Bailiwick.

For the avoidance of doubt, merely having a registered office or holding statutory documents or administrative records in Guernsey sufficient to meet Alderney or Guernsey company law requirements does not amount to an EPB. The Commission considers a company will be seen to have an EPB in the Bailiwick if they have premises and staff of their own in the Bailiwick.

2. I moved to Guernsey but I'm still a director of a company which is listed on the London Stock Exchange which I know does not count. I'm also still on the board of 7 of the group’s subsidiaries and joint venture companies which themselves are not listed

If the listed company controls the composition of the subsidiaries' and the joint venture companies' board of directors or holds more than half in nominal value of the subsidiaries' and the joint venture companies' equity share capital, then the individual can utilise the exemption available under section 3(1)(f) of the Fiduciaries Law and these directorships would be "counted out".

3. From Q2 above, can all 8 directorships (seven for subsidiaries and joint venture companies and one for the listed company) be deemed as one directorship if I am remunerated by the listed company for all of the directorship services under one contract?

The directorships would not be deemed as one because the companies are structured as separate legal entities with individual legal personalities. In addition, it would not be possible to consider the seven appointments to be "unpaid" as you are remunerated for all of your directorship services. If an individual is a director of a listed company and up to 5 subsidiary companies or joint ventures which the listed company does not control in the manner described above, the appointments would be counted in for the purposes of the up to 6 directorships exemption. Should the individual hold one or more further appointments which do not fall under the other exemptions then the individual should contact the Commission to discuss an application for a personal fiduciary licence.

4. I am a director of a Jersey company which is registered in Jersey under their Collective Investment Funds (Jersey) Law. Is this considered to be counted out in Guernsey?

No – it will be counted in. Currently, under the Fiduciaries Law, acting as a director of a fund is an exempted activity only if the fund holds an authorisation under section 8 of the Protection of Investors (Bailiwick of Guernsey) Law, 1987. So acting as a director of a Jersey fund will not be exempt under the Fiduciaries Law.

5. I am a director of a Cayman company which is registered in Cayman under their Mutual Funds Law (2015 Revision). Is this considered to be counted out in Guernsey?

No - it will be counted in. See answer to Q 4 above.

6. I am a director of a Cayman company with less than 15 investors which is considered an unregulated fund in Cayman. I presume this is counted in?

Yes - See answer to Q 4 above.

7. I have been asked to join the board of a new Guernsey Company which was incorporated last week and which will apply to be an authorised fund under the POI Law. Until the application is successful is this company “counted in”.

Yes.

8. I am a director of a Private Trust Company incorporated and regulated in Jersey. Is this counted in?

Yes. In this case, it does not meet any of the statutory exemptions in the Fiduciaries Law.

9. I have been asked to be a director of a start up company by a friend. I am not receiving a director’s fee which I think makes this company not count in.

If you are not receiving a director’s fee or any other income, fee or benefit from this appointment then the activity will not be regarded as a regulated activity as it is not “by way of business” and therefore “counted out”.

9.1. Does the status change if the founder offers me a small shareholding as compensation for acting as a director even though this shareholding currently has little or no value?

This can fall under the exemption if you hold more than 50% of the total shares of the company. Otherwise, it will be “counted in” as you are actually paid “in kind” by receiving compensation in the form of a shareholding.

10. I am a director of an incorporated cell company (“ICC”) and its incorporated cells. Will this be counted as one directorship?

If the ICC (including its incorporated cells) falls within the definition of a "supervised company", under the Fiduciaries Law, then acting as a director of an ICC and its incorporated cells will allow you to take advantage of the exemption available under section 3(1)(e) of the Fiduciaries Law and will not trigger the requirement for a personal fiduciary licence or be counted as in for purposes of the exemption for up to six directorships.

A supervised company is:

  1. A company:
    1. which holds a licence to carry on controlled investment business under section 4 of the POI Law or is exempt from the licensing under the POI Law;
    2. which is an authorised fund under section 8 of the POI Law; or
    3. which is a closed-ended investment company.
  2. A company which is licensed by the Commission under the Insurance Business (Bailiwick of Guernsey) Law, 2002 or which is exempt from such licensing; or
  3. A company which is a licensed institution within the meaning of the Banking Supervision (Bailiwick of Guernsey) Law, 1994;
  4. A company which is of any class or description prescribed for the purposes of this section by regulations.

In a rare occurrence where the ICC is not a supervised company, the directorship of the ICC and its incorporated cells will be counted separately as each incorporated cells has its own legal identity which is also distinct from the ICC. Accordingly, this ICC and its cells will be “counted in”. If the total numbers of directorship held are not greater than six, then this may fall under the exemption under section 3(1)(g) of the Fiduciaries Law. If the total number of directorship is more than six, then the individual in this scenario should contact the Commission to discuss making an application for a personal fiduciary licence.

For the avoidance of doubt, the definition of ‘supervised company’ as defined at section 58 of the Fiduciaries Law does not include a company regulated under The Insurance Managers and Insurance Intermediaries (Bailiwick of Guernsey) Law, 2002 (“the Insurance Managers Law”). Therefore, an individual acting as a director of a company regulated under the Insurance Managers Law, would need to count that directorship as one of the ‘up to 6’ directorships available to them under section 3(1)(g) of the Fiduciaries Law.

 

11. I am a director of a Guernsey company which is a “registered fund” under the Protection of Investors (Bailiwick of Guernsey) Law, 1987 (“the POI Law”). Is this counted in towards my 6 directorships allowed under section 3(1)(g)?

Yes. Currently, the activity of acting as a director of a registered fund is not exempted under section 3 of the Fiduciaries Law. As a result, acting as a director of a company which is a registered fund will be counted. However, the Commission will consider an application for a discretionary exemption from the requirement to hold a personal fiduciary licence under section 3(1)(y) of the Fiduciary Law from a person acting as a director of registered funds and their subsidiary companies to exempt that person from the requirement to hold a personal fiduciary licence in respect of their acting as a director of registered funds for a specified period (i.e. 3 years).

For the avoidance of doubt, for the purposes of the Fiduciaries Law, a company A is a subsidiary of a company B if:

(a) company B controls the composition of company A’s board of directors; or

(b) company B holds more than half in nominal value of company A’s equity share capital; or

(c) company A is a subsidiary of any company which is company B’s subsidiary.

An individual wishing to apply for a discretionary exemption to enable them to act as a director of a registered fund and its subsidiaries will need to apply only once. However, the Commission will time limit the discretionary exemption for a period of three years after which the individual will need to apply for, and be granted, a discretionary exemption if they wish to continue to act as a director of registered funds and their subsidiaries. If the application is successful and the discretionary exemption is granted, it will cover all registered funds you have acted or will act as a director for, as well as their subsidiary companies for that period.

The aim is for this discretionary exemption to cover the period until such a time the Fiduciaries Law is amended as part of the Revision of Laws project, when it is expected that a statutory exemption will be created for acting as a director of registered funds. More information on how to apply for a discretionary exemption for acting as a director of registered funds can be found here.

12. Following question 11. above, this company has 10 special purpose companies owning properties around the world all of which are 100% owned by the registered fund. Are all of these companies counted out?

No. Currently, the activity of acting as a director of a registered fund is not exempted under section 3 of the Fiduciaries Law. As a result, acting as a director of that company and the subsidiary special purpose companies will be counted in. In this case, the total directorships here will be 11 directorships and therefore you should consider whether to 1) apply for a for a personal fiduciary licence or 2) resign from some of the appointments (in order to bring the total directorships which are “counted in” down to six) or 3) apply for a discretionary exemption for acting as a director of registered funds and their subsidiary companies. The definition of subsidiary is referred to in question 11.

 

If you have applied for a discretionary exemption and it is granted, the company (which is a registered fund) as well as the 10 special purpose companies (which are 100% owned by the registered fund) will be counted out.

 

13. I am a director of a company which is a “registered fund” under POI Law. This company has established a joint venture company ("JV") with a third party shareholder & I have been asked to sit on the board of the JV. Are the fund & its JV counted out?

No. Currently, the activity of acting as a director of a registered fund is not exempted under section 3 of the Fiduciaries Law. As a result, acting as a director of this company and the joint venture company will be counted in.

 

For the registered fund, you can apply for a discretionary exemption for acting as a director of registered funds. If the application is successful and the discretionary exemption is granted, it will cover all registered funds you have acted or will act as a director for, as well as their subsidiary companies.

 

As for the joint venture company of the registered fund, acting as a director of this joint venture company can be “counted out” only if the registered fund 1) controls the composition of the joint venture company’s board of directors or 2) holds more than half in nominal value of the joint venture company’s equity share capital. This is in line with the case of an authorised fund where section 3(1)(f) is applicable. 

 

 

Disclaimer

Whilst the Commission has taken all reasonable steps to ensure that the information set out herein is accurate the Commission does not accept any responsibility for errors or inaccuracies and notes sections 22 and 23 of the Financial Services Commission (Bailiwick of Guernsey) Law, 1987, and the Financial Services Commission (Limitation of Liability) Ordinance, 1990.

The materials in this note do not constitute financial or other professional advice. You should consult your professional adviser if you require advice.