Using a Jersey-registered company can give companies easy access to the London markets without the burden of the UK tax regime. There is nothing new in a Jersey company being used as a vehicle to list shares on the London Stock Exchange…
Using a Jersey-registered company can give companies easy access to the London markets without the burden of the UK tax regime.
There is nothing new in a Jersey company being used as a vehicle to list shares on the London Stock Exchange, whether it be a full listing or one on AIM – there were a handful of such companies 10 years ago.
What has changed since then is that the number has increased significantly, with large numbers of new listings in the past couple of years. There are now some 70 Channel Islands companies listed on AIM, the majority of which are Jersey ones, as well as a few which have full listings in London.
Ultimately the rationale for using an offshore company to list is the same as one would use an offshore company generally – tax mitigation. Put simply, depending upon the nature, location and circumstances of the underlying business, there is a considerable benefit by avoiding falling into the UK tax net while at the same time gaining access to the world’s leading financial market.
The most likely type of business to benefit from being restructured and held beneath a Jersey holding company prior to listing is one with non-UK core assets and undertakings. Recent listings using offshore holding companies have often been in the oil and gas, mining and natural resources sectors, but the IT, media, pharmaceutical and other sectors are included. Geographically the spread is also diverse and from all continents.
But what other benefits does a Jersey holding company bring?
• Jersey is a stable and well-regulated jurisdiction which is familiar to the market and can assist with marketing the offering
• Jersey company law is based on well known and accepted English law principles, with an element of additional flexibility – virtually everything you would want a UK company to do or be bound by for the purpose of shareholder protections is equally possible with a Jersey company
• Jersey companies are subject to the Takeover Code provided that management and control of the company are exercised for the purposes of the Code in the UK (which for these purposes includes the Channel Islands)
• More tax and duties avoidance – a Jersey listed company will usually pay no Jersey income or capital taxes and there is no withholding on dividends. It should also be able to avoid paying VAT on services provided to it by onshore advisers and service providers, and there is no stamp duty payable on share transfers if the share register is maintained offshore (at least two UK registrars have Jersey offices to undertake that function)
• A straightforward regulatory procedure in Jersey governing the listing/offer of shares. That regulatory consent is normally given on the back of the listing particulars and can be obtained within a week or so and will be granted effective on admission. There is no impact on the usual pre-admission marketing process
• Availability of an English style, court approved, capital reduction process, which has been used to create a balance sheet conducive to being able to pay dividends once the shares of a company have been admitted
• There is no requirement to have Jersey directors or a secretary, although in practice a Jersey secretary or administrator is employed to maintain the statutory records
While the emphasis of this article relates to Jersey companies, it is pretty much equally applicable to those based in Guernsey. Guernsey-based companies, together with some in Jersey, have been used more for closed ended listed fund companies, reflecting the mature nature of the offshore funds industry there.
Likewise, the details of the additional regulatory approvals for funds are beyond the scope of this article, but it is fair to say that like listings generally in an offshore context, the regime is designed to be straightforward, fair and provide value to the client.
Marc Yates is a Jersey advocate and partner based in the Jersey office of law firm and fiduciary services provider Ogier.