The PIF Legislation

The 2016 PIF Rules incorporated a market leading 24-hour registration for both a fund and its associated fund management company. The PIF has proven to be the default option for private equity and venture capital fund managers seeking to launch a fund in Guernsey. This is because the two key characteristics of a PIF are:

- having 50 investors or fewer, and
- having a licensed fund management company in Guernsey.

Very few private equity funds have more than 50 investors, and most opt for a General Partner (“GP”) and Limited Partnership (“LP”) structure which means the GP will act as the fund manager of the LP, which serves as the collective investment scheme (or fund).


Licensing requirements created a disincentive

For fund promoters forming a self-managed corporate fund with its own board and receiving investment advice from an onshore investment advisor, the requirement to form a Guernsey licensed entity to act as manager was a disincentive to use a Guernsey PIF.

Promoters utilising such corporate fund structures used to utilise the ever-popular Registered Collective Investment Scheme Rules 2018 (the “RCIS Rules”). Under the RCIS Rules, there is no requirement to have a Guernsey licensed management entity, no limit on investor numbers, nor minimum investment value and there is a three-day turnaround for GFSC approval. The RCIS Rules do however have more regulation than a PIF which, for example, does not have any formal requirements for the provision of information particulars such as a prospectus.

The new PIF Rules

The new PIF Rules have two new “paths” in addition to the existing PIF application, which is now called Path 1.

Path 2 - qualifying investor criteria
The first of these new paths, Path 2, allows a PIF to be formed when investors in the PIF meet qualifying investor criteria and a licensed fund administrator, such as Trident Trust, provides confirmation that investors are suitably “qualified”. A qualified investor is deemed able to evaluate the risks and strategy of investing in a Qualified Investment Fund (“QIF”) and to bear the economic consequences of investment in the QIF including the possibility of any loss arising from the investment.

Any investor investing more than US$100,000 is considered a qualified investor. Investors making contributions below this figure are subject to analysis of precisely how they meet the definition of being professional investors, experienced investors or knowledgeable employees.

Path 2 is helpful for managers of both closed and open-ended Guernsey funds, which do not have a Guernsey licensed manager.

Path 3 - family relationship between investors
Alternatively, Path 3 enables a PIF application to be made without the requirement for a Guernsey Protection of Investors licensed manager so long as there is a family relationship between investors. This fulfils two key objectives for these family investment structures:

It provides a clearly defined and sensible regulatory route where a family member or third-party professional manages the assets of multiple investors (all family members) in a company which therefore meets the definition of a collective investment scheme.
It provides family offices with an accessible opportunity to formalise the step to becoming a fund manager utilising a lightly regulated fund structure.
Opting into the PIF Rules will require the fund to have an audit and appoint a regulated Guernsey fund administrator, which are not required for a simple investment holding company.

How we can help

Trident Trust Guernsey office has experience of service provision to ultra-high net worth clients, family offices and private investment funds which, together with our 40-year track record, private ownership and independence position us well to support a wide variety of structures including trusts, companies, limited partnerships and protected cell companies.

For further information, please contact:

Joe Truelove
Client Director, Guernsey
E: [email protected]
T: +44 1481 727571