In particular, we are seeing strong interest from China in the wealth management services we can offer high-net worth individuals and the corporate services we can provide to Chinese businesses in terms of accessing European capital markets through listings on local and international stock exchanges.
Guernsey is an island located in close proximity to Europe, but it's not part of the European Union. What geopolitical advantages does Guernsey have? What does those mean for Chinese investors?
Guernsey has the advantages of being in the same time zone as the UK (which means business can be conducted with the Far East and Americas in the same day), is English speaking, uses the British pound (Sterling) and is located near the UK as well as continental European markets. Many key advisers and managers for Asian business are based in London and so the close proximity and travel links to London are an especially strong benefit.
In addition, Guernsey offers an independent Government which provides political and economic stability and can respond positively and quickly to the needs of business. Not being a member of the EU allows flexibility so that directives are only adopted when they are in the best interests of the Island. Guernsey's position outside of both the UK and EU all means that it is able to negotiate international agreements directly with foreign authorities, such as the local and national government, regulators and stock exchanges in China.
Guernsey Financial Services Commission has a reputation for robust regulation and Guernsey has been declared to be a cooperative jurisdiction by OECD. Are compliance costs high in Guernsey?
In January this year, the IMF released a series of reports which commended Guernsey's high standards of financial regulation, supervision and stability along with our robust criminal justice framework. Later that same month, the OECD built on its white listing of Guernsey at the earliest opportunity by endorsing the Island's ongoing commitment to tax transparency and exchange of information.
These reports from the IMF and the OECD illustrate Guernsey's position as a top tier international finance centre. As such, compliance costs in Guernsey are not the highest of the international finance centres but on the other hand, they are also not the cheapest, which reflects the level of quality on offer in the Island.
What are the biggest benefits of forming a Guernsey company for Chinese investors? Compared with other jurisdictions, what are the competitive edges of Guernsey in providing the company registry services?
The Guernsey Registry combines cutting edge on-line technology with historic integrity and delivers a service that is competitive in meeting the needs of the international marketplace. A high quality service is delivered in a personalised manner and can cater for the incorporation of companies within as little as 15 minutes.
Whilst the precise benefits of incorporating a Guernsey company will be determined by the purpose of the particular company, Guernsey structures cater for a wide range of requirements, delivered to high international standards through a network of world-class intermediaries in the fields of banking, fund management, insurance and trust business.
In 2012 it is envisaged that a facility will exist for Certificates of Incorporation to be available as a translation into Chinese characters, demonstrating the commitment that Guernsey has to developing relationships with Chinese clients.
Guernsey is Europe's leading jurisdiction for captive insurance with companies all over the world having already established captives in the island. Is the business appealing to Chinese?
In a period when the Chinese economy is growing so rapidly, there will be increasing numbers of firms looking to insure greater and more unusual types of risks which are the specialty of the captive concept. Chinese companies will then be seeking the level of expertise that a leading captive domicile such as Guernsey can offer.
In addition, increasing numbers of Chinese companies are beginning to expand geographically, particularly by establishing operations in Europe. It is advantageous to have these risks covered by a captive in the region and Guernsey offers significant experience and expertise in writing insurance and reinsurance business from a position of close proximity to the UK and Europe. However, being outside the EU means that the Island has been able to elect not to currently seek equivalence with the EU's proposed regulatory regime for insurance business, Solvency II.
Guernsey is also a pioneer in promoting the cell company concept. How can Chinese investors take advantage of the structure in such sectors as insurance, funds and fiduciary?
Guernsey pioneered the cell company concept in 1997 when it introduced the Protected Cell Company (PCC). A PCC is a single company with a core and individual cells where the assets and liabilities of each cell are segregate and distinct from each other. Cells are cheaper and quicker to establish and exit than standard companies, partly due to the fact that they only require one board of directors as a PCC is a single corporate entity.
Since pioneering the PCC, Guernsey has since also introduced the innovative Incorporated Cell Company (ICC), which is similar to a PCC except that each cell is a distinct legal entity. This can be perceived as offering greater protection in terms of the segregation of assets and liabilities and also further potential structuring options, including amalgamations.
The success of the cell concept is illustrated by the fact that it is now used across the financial services world but by using Guernsey, Chinese clients would be benefiting from our considerable experience and expertise that has been built up from having first mover advantage.
As for fiduciary services in Guernsey, what kinds of structures can Chinese, especially those wealthy families, form to manage their assets?
Guernsey has some five decades' experience in providing fiduciary services through trust and company structures for private wealth management.
Trusts allow individuals and families to protect and manage their wealth and assets efficiently, for example for investment purposes, tax planning and estate planning. The concept originates from and has been used successfully for many years in the UK and the US. The trust concept is less familiar in jurisdictions such as China where for many people the idea of handing over control of wealth and assets to complete strangers (albeit professionals) who may be half way across the world is an uncomfortable prospect.
Guernsey can address these concerns. Firstly, within the arrangements of a standard Guernsey trust there are special provisions which allow for the Settlor (the person settling wealth and assets into the trust) to take control of the wealth or assets. Secondly, the use of a structure involving a Private Trust Company (PTC) and a purpose trust gives the Settlor greater control - they may sit on the board of the PTC and also be in command of the purpose trust which is the ultimate authority over the PTC board.
In addition, Guernsey is also set to introduce foundations in early 2012. We expect the foundation structure will be attractive to clients based in civil law jurisdictions such as China where the trust concept is less familiar than in common law countries such as the US and the UK and in particular, due to the fact that the foundation reserves more power in the hands of the client. The introduction of foundations will provide another tool for practitioners to best meet the needs of clients according to the circumstances.
Today, Guernsey plays host to 150 licensed fiduciaries. Together they hold more than £350 billion (US$ 542 billion) of assets in trust and company structures and are supported by a complimentary suite of asset management and private banking services.
What kind of expertise can Guernsey offer in terms of fund administration, especially in the alternative funds world? What kinds of efforts is the island making to further expand the Asian market?
Guernsey has an investment fund industry with a heritage that stretches back for over half a century. During the past two decades, the sector has seen a gradual yet sustained shift where the balance of business has moved from being largely retail, equity-traded/cash-based schemes to predominantly institutional, niche funds.
The www.FundDomiciles.com Stability Index 2011 shows that Guernsey was the highest placed jurisdiction to show the most improvement, with a move up from sixth place in 2010 to third this year. The FundDomiciles.Com rankings are based on a combination of macroeconomic and fiscal data, as well as fund flow statistics.
Guernsey's attractions lie in its depth of experience which locally has led to strong expertise and well established infrastructure. Our administrators and custodians do service non-Guernsey funds but a large proportion of their business relates to Guernsey open and closed-ended funds, which are now promoted and sponsored by leading institutions in more than 55 financial centres globally. The Island offers modern corporate and partnership structures and a flexible regulatory process, including authorised and registered routes and a parallel 'fast track' QIF regime.
In addition, Guernsey vehicles can list on the local Channel Islands Stock Exchange (which is approaching 4,500 listings), Euronext Amsterdam or the London Stock Exchange (LSE), amongst others. Data direct from the LSE to the end of December 2010, shows that there are more Guernsey-incorporated companies and securities listed on its markets than there are entities from any other competitor jurisdiction.
In addition, Guernsey companies have been approval to list on the Hong Kong Stock Exchange (HKEx). This comes at a time when a number of Guernsey firms are establishing a presence in the region, including International Administration Group (IAG) which has formed a joint servicing platform with Exceedor in Shanghai that allows it to offer onshore RMB denominated private equity fund administration services in China.
Has Guernsey's economy been greatly affected by the ongoing US and European debt crisis? What's the island's economic prospect in the future?
Guernsey has not been immune from the global financial crisis and its subsequent effects but the Island has been somewhat insulated from the most severe elements. Our finance industry proved more resolute and is recovering more quickly than many of our competitors. For example, our funds industry has recorded eight consecutive quarters of growth so that total business reached a new record high of £274 billion (US$ 424 billion) at the end of June 2011 - up 4% in the quarter and 22.5% year on year.
A distinguishing feature of our finance industry is its diversity. The breadth of our industry means that while some sectors may be more adversely impacted, others see an upswing or identify new prospects and this helps balance the overall economy. In addition, Guernsey is renowned for innovation - such as the PCC - and adaptability. Indeed, in recent years, the Island has exploited opportunities to become the leading jurisdiction globally for overseas pensions and is looking to capitalise on other niche areas such as film finance and clean energy.
Guernsey has always proved adaptable in the past and there is strong confidence that the Island will be able to take all the steps necessary to maintain its position as a leading international finance centre into the future.
Apart from the financial industry, does Guernsey's economy have any other sectors that can effectively attract Chinese companies?
Guernsey's economy comprises not just financial services but a range of other industries, including tourism, retail, exporting low value goods, horticulture and agriculture. The latter is particularly noteworthy because the Guernsey Cow is world renowned for producing rich and creamy milk. There is the potential for the Island to export embryos so that the Guernsey Cow can be reared in China.
Have any Chinese investors been involved in doing business in Guernsey? How is the current situation?
Guernsey is growing its share of business from the Far East, with a number of the Island's law firms, fund and trust administrators establishing operations in Hong Kong, Singapore and Shanghai. International Administration Group (IAG) has formed a joint servicing platform with Exceedor in Shanghai that allows it to offer onshore RMB denominated private equity fund administration services in China. Through our JV in Shanghai we are offer full administration services in Chinese and English including local investor, tax and regulatory reporting. In respect of RMB funds we are building our client base consisting of international managers based in Hong Kong, the USA and UK, often with offices in China and domestic managers based in Shanghai, Beijing, Suzhou and Guangzhou. Some funds are pure RMB Limited Partnerships with entirely China-based investors and others admit foreign investors via for instance the Shanghai Qualified Foreign Limited Partner Pilot Programme. In addition, Guernsey firms are managing the wealth of several high net worth clients from the region.
Guernsey officials have frequently visited Asia, including China's mainland, signing several MoUs and letters of understanding. How will these agreements influence businesses among these regions?
Guernsey has taken a number of steps to show our commitment to the Chinese market, raise our profile and put the right building blocks in place to facilitate business flows:
- At the end of 2007, Guernsey opened an office in Shanghai led by our representative WENG Wei.
- The Guernsey Government has signed a Tax Information Exchange Agreement (TIEA) with XIAO Jie, Commissioner of the State Administration of Taxation for the Chinese Government.
- The Guernsey Government has signed a Memorandum of Understanding (MoU) for exchange and cooperation with FAN Yongjin, Deputy Director General of the Shanghai Municipal Financial Services Office.
- Guernsey's Chief Minister, Lyndon Trott, has both visited and hosted TU Guangshao, Vice-Mayor of Shanghai; Dr FANG Xinghai, Director General of the Shanghai Municipal Financial Services Office; and Madam FU Ying, formerly Chinese Ambassador to the UK and now Vice Foreign Minister in the Chinese Government.
- Guernsey has received the green light for its companies to be listed on the Hong Kong Stock Exchange (HKEx) and is in discussions to reach a similar agreement regarding the Shanghai Stock Exchange (SSE).
- Guernsey is making progress towards signing MoUs with each of the China Banking Regulatory Commission (CBRC), the China Securities Regulatory Commission (CSRC) and the China Insurance Regulatory Commission (CIRC).
We believe that investing time and resources in building these strong relationships will provide us with the solid foundations from which our industry will be able to further diversify into supplying Chinese organisations and individuals with our products and services.
What kind of legal system does Guernsey have? Is it easy for Chinese to have legal consultations if they are involved in any commercial dispute?
Guernsey has a unique legal system which reflects its Norman-French and UK heritage. The Island's 50 years' experience of providing financial services and products means that the relevant legislation is well developed and understood. A significant number of the local law firms have established offices in Singapore, Hong Kong and now also Shanghai, thereby making it much easier for Chinese intermediaries and clients to access advice from Guernsey qualified lawyers.
