Guernsey Legal Opinions in Cross-border Transactions – What to Know

When a Guernsey company (or other Guernsey entity or trust) is involved in a cross-border transaction, the counterparty and its legal counsel will often require a legal opinion to be prepared and issued by Guernsey qualified lawyers as a condition precedent to completion of the transaction. The legal opinion confirms, among other things, the company’s legal standing, capacity and the enforceability of the transaction documents against it. This briefing outlines what to expect from a Guernsey legal opinion as part of a cross-border transaction, how to plan ahead, and how Spencer West Channel Islands can support the smooth delivery of a Guernsey legal opinion for your transaction.

Due Incorporation

The first part of the legal opinion confirms that the Guernsey company:

• is validly incorporated under the Companies (Guernsey) Law, 2008;
• exists as a legal person and remains on the register of companies; and
• is not subject to winding-up proceedings or any other form of Guernsey legal proceedings.

In order to provide these confirmations, we inspect the company’s certificate of incorporation and carry our searches of the public records in respect of the company at each of the Guernsey Companies Registry and the Royal Court of Guernsey.

Capacity

The legal opinion then considers the entry by Guernsey company into the transaction documents which it is signing and confirms that the company:

• has the power under its constitutional documents to enter into those documents;
• has obtained all necessary internal approvals (e.g. board and/or shareholder resolutions); and
• is not subject to any other legal or regulatory restrictions that would prevent its performance of the transaction.

In order to give these confirmations, we need to review both the Guernsey company’s constitutional documents (including any shareholders’ agreement which may affect its capacity) and the transaction documents which it is entering into. We also need to consider any general regulatory or licensing requirements under Guernsey law which may apply to the company and its business and the transaction in question.

Enforceability

Finally, the legal opinion will confirm that:

• the transaction documents are valid, binding, and enforceable under Guernsey law;
• the Guernsey courts would uphold the terms of the documents, subject to standard qualifications; and
• any foreign law and jurisdiction clauses will be recognised by the Guernsey courts.

In order give these opinions we again need to review the transaction documents and pay particular attention to their governing law and any submission to jurisdiction clauses. Where the chosen governing law is one with which Guernsey has a reciprocal enforcement of judgments arrangement, the legal opinion will refer to that arrangement and explain the process for registering a foreign judgment in Guernsey. If not, the legal opinion will explain the common law process for recognising and enforcing foreign law judgments in the Guernsey courts.

Depending on the nature of the transaction in question, we may be asked to give a range of other opinions such as on the ranking of obligations created under the transaction documents, the valid creation of security interests, the applicability of any Guernsey taxes or other deductions to payments to be made under the transaction documents, and the lack of any requirement for the transaction counterparty to be licensed or registered to carry on business in Guernsey in order to benefit from or enforce the transaction documents. These are all opinions that we are familiar with and can provide on a case-by-case basis, depending on the transaction.

Practical Tips

While a foreign law legal opinion may look innocuous and straight-forward when sitting in a CP schedule or transaction checklist, being in a position to confirm all of the above matters takes some time and preparation. In addition, usually we will have to liaise with the corporate services provider to the company in Guernsey or its directors in order to obtain copies of the company’s constitutional documents and registers. Searches of the public records at the Royal Court of Guernsey can only be undertaken at certain times of the days during the business week with advance warning. In addition, the actual form of the legal opinion can be the subject of some negotiation by the parties to the transaction which may take time. As a result, to avoid any potential delays at closing the party responsible for obtaining the legal opinion should:

• instruct Guernsey counsel as soon as it is known that a Guernsey legal opinion is needed, not just prior to completion; and
• arrange for drafts of the transaction documents and company resolutions along with the company’s constitutional documents and registers to be provided to the Guernsey counsel as soon as possible, so that they can prepare a draft legal opinion for review and approval.

In order to issue the final signed and dated legal opinion for completion, the Guernsey legal counsel will need to see final copies of the transaction documents signed by the Guernsey company (in the manner and by the persons specified in the company resolutions) along with the signed and dated company resolutions. They will also need to carry out updated searches of the public records at the Guernsey Companies Registry and the Royal Court of Guernsey on the date of the final legal opinion.

How SW Offshore Works with You to Support Your Transaction

At SW Offshore, our lawyers have several decades of experience working on cross-border transactions and understand the role of offshore lawyers in pro-actively assisting in these transactions. We offer:

• responsive turnaround times to meet transaction deadlines;
• practical advice focused on what matters to remove potential roadblocks and keep your transaction moving forward;
• a Partner-led service whereby you deal directly with the lawyer making decisions and issuing the opinion; we remove delays often encountered where Partner or Opinion Committee decision making processes are not involved in the transaction day-to-day and delays can occur in obtaining internal law firm approvals for the legal opinion;
• a “can-do” approach to novel and bespoke opinions; we don’t hide behind an internal Opinions Committee and “non-market” responses – if it is reasonable to give a particular legal opinion we will do so;
• robust professional indemnity insurance cover; and
• transparent fixed fees with no surprises.

We aim to make the Guernsey legal opinion process smooth, reliable, and user-friendly. So don’t delay: to request a Guernsey legal opinion or fee quote please get in touch with the SW Offshore team today.