Guernsey LLC / Limited Liability Company
A Guernsey Limited Liability Company (LLC) is a separate legal entity which can own properties, lend money or borrow, enter contracts, and file lawsuits and be sued in a court of law. Foreigners can own all of the shares.
The Guernsey Companies Law of 2008 governs LLC’s in their formation, activities, and liquidation.
A Guernsey Limited Liability Company (LLC) can have these benefits:
• Complete Foreign Ownership: Foreigners can own 100% of the shares.
• No Taxation: Guernsey does not impose any taxes on its companies. However, U.S. taxpayers and others subject to global income taxation must disclose all income to their governments.
• Limited Liability: Shareholders’ liability is limited to their paid shares capital contribution.
• Fast Incorporation: It only takes one business for incorporation.
• Nominee Shareholders: The LLC can use nominee shareholders to protect the beneficial owners’ privacy.
• One Shareholder: Only one shareholder is required.
• One Director: Only one director is required who can be the sole shareholder.
• English: Guernsey’s official language is English.
Guernsey Limited Liability Company (LLC) Name
The LLC must select a unique company name not used by any other legal entity in Guernsey or so similar to cause confusion. Company names can be reserved through a CSP.
Limited liability companies must end with “Limited” or “Limited Liability” or their abbreviation “Ltd”.
Only a licensed Corporate Service Provider (CSP) can file the necessary documents to incorporate a company in Guernsey. Along with a formal application, a Memorandum of Incorporation must be filed stating that identifiable founding members want to incorporate the company. In addition, the company’s Articles of Association setting forth the regulations regarding how the company conducts itself.
The Registrar of Companies must be informed of the type of business the company intends to engage in. Some types of business activities may require licensing such as banking, custodian, insurance, financial or investing services.
Incorporation takes a maximum of one business day, but for an additional fee, can only take 2 hours. A Certificate of Incorporation is issued by the Registrar upon approval.
The shareholders have limited liability when the company winds up (liquidated). In addition, shareholders’ liabilities towards the company’s debts are only up to the value of the company’s assets without extending towards the members’ personal assets. However, if any of the member’s shares issued to him or her are unpaid, then that amount will be subject to the creditor’s claims. For instance, if a shareholder owes $1,000 to the company for issued shares not fully paid, the $1,000 will be subject to claims by creditors.
The Memorandum of Incorporation describes the company’s constitution. A Memorandum typically state the following:
• Company’s name;
• That it is a limited liability company;
• Founders’ full names and number of subscribed shares and current value;
• Total amount of paid up shares and if any partially paid shares were issued to the founders and the amounts owed;
• Any limitations on the purposes of the company.
Guernsey companies are assumed to have unlimited purposes unless limitations are described in the Memorandum.
A minimum of one subscriber must sign the Memorandum.
Articles of Incorporation
The Articles of Incorporation set forth the company’s regulations regarding procedures and internal management including rights associated with shares. The Memorandum and the Articles of Association create a binding contract of the shareholders and the company.
The law sets forth prescribed articles for incorporated companies unless specifically excluded in the Articles of Association. A company can amend its articles at any time by a majority vote of its membership on a special resolution unless the Articles of Association prescribes a different method.
At least one subscriber must sign the Articles of Association.
Many CSP’s recommend using a corporate nominee to sign all documents and filing them with the Registrar for incorporation. Upon approval by the Registrar, the nominee transfers the shares to the real beneficial owners. This provides privacy in the documents filed with the Registrar.
The resident agent must know who the real beneficial owners are and must maintain a register of the details of beneficial owners.
The resident agent keeps a register of the identities of the beneficial owners which is a private document. However, shares held by a nominee are not required to detail the beneficial owners in the register.
Shares held in trust requires the name of the trust and truest along with name and address of the settlor must be disclosed.
A minimum of one shareholder is required to form a LLC.
The law allows for the issuance of shares with or without par value.
Shares must be issued as registered shares and the issuance of share certificates is optional. Bearer shares are prohibited. Fractional shares are permitted.
If more than one class of shares can be issued, the shareholders must consent to the issuance and can set limits. Such consent can only be granted for a maximum of 5 years.
A company may issue non-voting shares. In addition, companies can issue different share classes with difference in the rights to dividends, voting, and winding up distributions.
At least one director must be appointed to manage a LLC.
The director can be either a natural person or a corporation. While it is not a requirement that directors be local residents, if none are appointed then a local licensed registered agent will be required.
Directors manage the company pursuant to the Articles of Association which may limit the powers of a director.
Directors owe a fiduciary duty to the company. Any potential of conflicts with the company such as having a direct or indirect interest in any transaction to be engaged must be fully disclosed to the company.
Personal liability of a director for a company’s debts may be imposed due to reckless conduct when carrying on trading or failing to reasonable avoid insolvency but disregarded the risk resulting in an insolvent winding up.
While indemnification of directors may be allowed, they cannot allow a director to engage in breach of duty, default, negligence, or breach of trust in relation to the company. However, a company can purchase an insurance policy to cover a director’s liabilities.
A company has the option to appoint a company secretary. The articles will describe a secretary’s duties. If the articles fail to do so, then the directors can define the duties. A sole director may be appointee as the secretary.
Registered Agent and Office
Every LLC must appoint a local registered agent and maintain a local office address which can be the registered agent’s office address.
The resident agent must either be a local resident company director or a licensed CSP. The only exceptions to the requirement to appoint a registered agent are companies licensed by the Guernsey Financial Services Commission or companies listed on recognized stock exchanges.
Prior to conducting business or trade, the subscriber appointed initial directors will conduct an initial board meeting to:
• Designate the location of the local registered office;
• Allocate subscribers’ shares and first shareholders and issue share certificates (if required);
• Approve share transfers;
• Appoint the registered agent;
• Appoint bankers;
• Execute an administrative contract with a CSP (if one has been appointed);
• Establish the financial year; and
• Appoint a secretary (if required).
Annual Shareholders Meetings
Within the first 18 months from incorporation, the first annual general meeting must occur. Within 15 months thereafter, an annual general meeting must occur. A minimum of 90% of those attending a general meeting must approve any waiver of the annual general meeting requirement.
The company secretary can convene a shareholders meeting or by request from shareholders holding at least 10% of the voting rights.
Meetings can be held anywhere in the world. Shareholders may participate via telephone unless the articles prohibit it. The articles may provide different methods for shareholder participation.
Companies are required to maintain accounting records explaining all transactions and showing the current financial position of the company with reasonable accuracy. Records must be kept for at least 6 years and can be stored anywhere.
There are no public filings of accounts or financial statements. Annual accounting must be prepared reflecting the true financial condition and profits and loss of the company.
Annual audits are required except for a small company defined as:
• An asset holding company;
• A dormant company; or
• A company with 10 or fewer members.
Companies are required to keep a register at its registered office detailing its shareholders, directors, secretary, and registered agent. Shares held by a nominee are not required to detail the beneficial owners in the register. The register is not for the public, but must be accessible to the shareholders and directors.
Members of the public may request access to the register by providing a purpose for the access and if refused may apply to the Guernsey Courts for an order requiring access which will be up to the courts to decide.