Setting up shop: A new manager's guide to establishing an investment management firm in Guernsey

This guide outlines the key considerations and requirements for setting up your business in one of the world's leading financial jurisdictions, Guernsey.

With a thriving funds industry, Guernsey offers a solid regulatory framework, competitive tax advantages and strategic proximity to London while maintaining political and fiscal autonomy.

Guernsey – a leading international financial centre

Guernsey is one of the world's leading financial centres. Its funds industry is thriving and, as a testament to that, the total net asset value of Guernsey funds at the end of Q2 2024 stood at £295 billion.

Despite being located just under an hour's flight from London, it is politically and fiscally autonomous, meaning Guernsey is financially separate from the UK and has the ability to legislate on its own behalf. This has been key in developing the jurisdiction into the financial centre of excellence it has become. While independent, the legal system borrows heavily from English law, meaning no surprises (save for enhanced flexibility in certain areas).

It goes without saying that another key benefit to establishing your manager vehicle in Guernsey is its competitive tax regime which offers no capital gains tax, zero per cent corporate rate for most financial services firms and exemption from withholding taxes on dividends, interest and royalties.

The Guernsey Financial Services Commission (GFSC) has worked closely with other international regulators, industry bodies and the industry itself to ensure there are set turnaround times for specific licensing applications. It has also helped develop fund products aimed at newer entrants in the market - the Private Investment Fund and the Manager-Led Product being recent examples of this.

Guernsey has 'opt-in' legislation that is equivalent to AIFMD to gain access to EU markets.

The legal framework

Guernsey offers several vehicles and structuring options:

• Companies – Guernsey's company law was updated in 2008. In addition to a standard company limited by shares, Guernsey also has the Protected Cell Company (PCC) and the Incorporated Cell Company (ICC). Both have proven popular, with the PCC becoming increasingly useful in the private fund space.
• Unit trusts – While not strictly a legal entity in its own right, but rather a relationship between a manager and a trustee, the unit trust is a frequently used vehicle and plays into Guernsey's well-recognised trust law expertise.
• Limited partnerships – Made up of one or more limited partners and one or more general partners, limited partnerships are consistently popular and are the common route for carry vehicles.

The regulatory framework

The Protection of Investors (Bailiwick of Guernsey) Law, 2020 (the POI Law) governs how managers set up and operate in Guernsey. There are also several applicable rules and regulations which, together with the POI Law, strikes the right balance between the wants and needs of managers and investors.

The POI Law sets out the minimum criteria for licensing, including fitness and propriety, solvency, mind and management, track record, risk management and resourcing.

While you don’t need a a specific track record, the GFSC will assess key personnel’s integrity, competence and financial standing.   A clear business plan helps, covering:

• investment approach
• asset classes and target markets
• detailed procedures for managing investment, liquidity and operational risk 
• strong governance practices 

Having experienced independent directors and/or investment committee members and third-party service providers is also useful. Incubation platforms and start-ups support structures are also available. These typically provide an umbrella structure where new managers can operate their fund strategy, offering compliance support and a framework to build a verifiable track record over time.

The GFSC will not accept speculative applications - you must have definite plans to operate a regulated business in the Bailiwick.

Provided the application pack is complete, the GFSC will look to turn around an application within 28 business days. There are certain regimes with quicker turnaround times, such as 10 days for managers of qualifying investor funds or registered collective investment schemes.

Costs and ongoing obligations

The non-refundable application fee is currently £2,925.

The annual fee is £4,190 to be paid to the GFSC by 31 January each year.

Wrapping up

With a compelling regulatory framework, competitive tax benefits and close proximity to London, Guernsey offers an ideal environment for investment. The jurisdiction combines a familiar legal system based on English law with the flexibility of political and fiscal independence.

Thanks to the GFSC's efficient approach to licensing, we can help you establish your operations quickly and smoothly. For more information about establishing your investment management firm in Guernsey, contact our team.