Company Formation by Fiduciary Licensees (November 2021)

Summary

This is guidance from the Guernsey Financial Services Commission explaining regulatory expectations for fiduciary licensees that offer company formation services, whether forming Guernsey companies or incorporating companies in other jurisdictions. It sets out how AML/CFT, beneficial ownership, record keeping and competence requirements apply specifically to the company formation activity.

• Gatekeeper role: Only holders of fiduciary licences under the Fiduciaries Law may form Guernsey companies; personal fiduciary licence holders cannot conduct company formation activity.
• Risk assessment: Company formation services must be included within business risk and relationship risk assessments under Regulation 3 of the Proceeds of Crime Regulations and Chapter 3 of the Handbook.
• Pre-formation considerations: Before forming or instructing formation of a company, licensees should assess beneficial ownership due diligence, proposed company name restrictions, legality and licensing needs of proposed activities, high risk relationship indicators, and reputational risk to the Bailiwick.
• Enhanced due diligence: Cases assessed as high risk (eg politically exposed beneficial owners, complex structures, unregistered financial services activity) require enhanced due diligence and ongoing monitoring.
• Record keeping: All licensees, including those with no ongoing relationship with companies they form, must comply with record keeping requirements under Regulation 14 and Rule 2.6 of the Fiduciary Rules and Guidance, 2021.
• Competence: Licensees and their directors and managers must understand the company law of any jurisdiction in which they form or administer companies, as this is assessed as part of the fit and proper and minimum licensing criteria under Schedule 1 to the Fiduciaries Law.

The Commission indicates it will consider regulatory or legal action where licensees breach the Regulations or Handbook, or fail to meet the minimum licensing criteria, including in relation to compliance with the Companies (Guernsey) Law, 2008.

Key obligations

• Licensees must include company formation services within their business risk and relationship risk assessments under Regulation 3 of the Regulations and Chapter 3 of the Handbook.
• Licensees must identify and verify the ultimate beneficial ownership of proposed companies in accordance with the Regulations and Handbook before forming or instructing formation of a company.
• Licensees must consider proposed company name restrictions and relevant registry guidance before applying to form a company.
• Licensees must assess whether proposed company activities are legal and whether they require licensing or authorisation in the relevant jurisdiction.
• Licensees must apply enhanced due diligence and ongoing monitoring to relationships or activities assessed as high risk.
• Licensees must consider reputational risk to the Bailiwick of Guernsey arising from company formation, including cases involving arms trading, defence-related technology, or unregulated financial services business.
• All licensees, including those without an ongoing relationship with companies formed, must comply with record keeping requirements under Regulation 14 of the Regulations and Rule 2.6 of the Fiduciary Rules and Guidance, 2021.
• Licensees and their directors and managers must understand and comply with the company law of any jurisdiction in which they form or administer companies.

Applies to

fiduciary licensees, corporate services providers, resident agents