Capital markets: listing Jersey holding companies
24 September 2019
With £184 billion market capitalisation held by Jersey listed companies on global exchanges as of 30 June 2019, this briefing explores why Jersey vehicles remain such a popular choice for taking international businesses to market.
Jersey's listing credentials
Jersey has, over many years, established itself as a prime jurisdiction for incorporating holding companies destined for listing on global exchanges. The many advantages offered by the island, some of which are outlined in this briefing, have resulted in shares and depositary interests in Jersey companies being listed on exchanges as far afield as the United States, Canada and Asia as well as in Europe. In particular, Jersey has registered the greatest number of FTSE 100 and AIM companies outside of the United Kingdom, a fact which underlines the confidence both investors and businesses place in the island as a jurisdiction.
Jersey's reputation on the world stage
Jersey's blue-chip reputation, which is based on strong historic fiscal, judicial and political stability, has continued to grow in recent years as a result of the island's demonstrable compliance with evolving international regulatory standards. Recent developments have included Jersey:
- underlining its transparent and co-operative tax practices by implementing measures for the automatic exchange of information, and exchange of information on request, including FATCA and the Common Reporting Standard (CRS) of the Organisation for Economic Co-operation and Development (the "OECD");
- ratifying the OECD's measures to prevent the harmful tax practices of base erosion and profit-sharing (BEPS); and
- introducing new economic substance legislation to meet the requirements of the EU Code of Conduct Group on Business Taxation.
In 2019, these and other developments resulted in the EU Finance Ministers (ECOFIN) confirming Jersey's position as a co-operative jurisdiction and the OECD confirming that Jersey's tax regime is "not harmful".
Those looking for an international finance centre which has succeeded in maintaining and even enhancing its reputation on the world stage in response to these initiatives need look no further than Jersey.
As a tax neutral jurisdiction, Jersey is attractive in that:
- it does not levy corporation or capital gains tax;
- it does not impose stamp duty or similar transfer taxes on the issue or transfer of a Jersey company's shares;
- it is our understanding that UK stamp duty should not arise on the transfer of a Jersey company's shares where the shares are traded electronically and a Jersey-based registrar maintains the register of members in Jersey;
- Jersey companies which are tax resident in the island are generally subject to a 0% rate of income tax locally;
- Jersey companies may choose to be exclusively tax resident outside Jersey, and therefore not resident for tax purposes in the island, if they are managed and controlled, and tax resident, in another jurisdiction where the corporate income tax rate is 10% or more;
- Jersey companies do not need to make withholdings on dividend or interest payments on account of Jersey tax; and
- unless they are resident in Jersey, recipients of dividends or interest payments from a Jersey company will not be liable to Jersey income tax.
The combination of these factors means that Jersey companies can be used at a holding company level to facilitate cross-border investment without triggering associated complex cross-border tax issues. Tax can be levied instead where the business operates and in the investors' home jurisdictions. This makes Jersey an attractive choice for the incorporation of listing vehicles with multiple potential investors in multiple locations around the world.
Familiarity and flexibility
The Companies (Jersey) Law 1991, as amended (the "Companies Law") is the main statute applicable to Jersey companies. Because it is based on the English Companies Act, it uses many of the same corporate concepts with which UK investors are familiar. This means that a lot of the rights and restrictions applicable to a Jersey company and its shareholders are likely to be readily acceptable to potential investors and their advisors.
At the same time, the Companies Law has taken a different – though still robust - approach in certain key areas. As discussed in more detail below, the provisions of the Companies Law relating to capital maintenance, for example, are more flexible than the corresponding provisions in the English Companies Act. As such, this can offer Jersey companies an advantage over many of their UK and some international competitors.
The Companies Law allows companies – including public companies - to return funds to shareholders from a wide variety of sources. In each case, creditor protection comes from the requirement for directors to sign a statement in advance confirming (essentially) that the company is and will continue to be cash-flow solvent for the next 12 months.
This means that, subject to this solvency statement being signed and (where necessary) a shareholders' resolution being passed to approve the relevant corporate action:
- distributions can be made out of any source other than the nominal capital account and any capital redemption reserve. Thus, distributions can be made from share premium;
- shares in Jersey companies can be redeemed or repurchased from any source, including share premium; and
- Jersey companies can reduce their capital accounts in any way without the need for the Royal Court of Jersey to confirm the reduction.
This flexibility not only makes it easier to carry out innovative pre-listing restructuring, to the extent required; it also means that, unlike public companies incorporated in many other jurisdictions such as the UK, Jersey listed companies do not necessarily need distributable profits in order to adhere to any dividend policy they may adopt.
The Companies Law permits a similarly flexible approach when it comes to drafting a Jersey company's constitutional documents, its memorandum and articles of association. Although the "look and feel" of the memorandum and articles will closely follow those of an English company, bespoke provisions, tailored to suit the requirements of the relevant listing authority and to meet any enhanced investor expectations, are regularly inserted into the constitutional documents of a Jersey company contemporaneously with its listing. For example, such provisions may include some or all of the following:
- pre-emption rights on the issue of shares (as the Companies Law contains no statutory pre-emption rights);
- disclosure and transparency requirements relating to the notification of major shareholdings to the company (e.g. based on the UK's DTR5);
- enhanced provisions concerning the circumstances in which directors may be proposed, appointed and removed; and
- investor protection in terms of tighter restrictions on the acquisition and transfer of shares, if the UK Takeover Code does not already apply to the company.
As regards the Takeover Code, it should be noted that this applies to all Jersey companies with securities admitted to trading on a regulated market or a multilateral trading facility, including the London Stock Exchange's Main Market and AIM.
Marketing and trading shares
From a Jersey law point of view, a Jersey company's shares can generally be freely marketed provided that the consent of the Jersey Registrar of Companies is obtained before an admission (or similar offer) document is issued or circulated to the public. This consent is required because the document will constitute a prospectus for Jersey law purposes.
The process for obtaining this consent is straightforward, and generally requires minimal additional information and statements to be included in the prospectus over and above those already needed to satisfy the requirements of the relevant listing authority. So as not to hold up the overall timetable, the Registrar's "in-principle" consent can be obtained in advance based on an advanced draft of the prospectus. Assuming no material changes are subsequently made to the prospectus, the actual consent will be issued when a copy of the final form prospectus, signed by or on behalf of all the directors, is submitted to the Registrar ahead of it being issued to the public.
As regards trading, a Jersey company's listed shares may be held and transferred in uncertificated form on the London and Irish exchanges via CREST, and on certain other approved stock exchanges (including the New York Stock Exchange, NASDAQ, and the Toronto, Luxembourg and Johannesburg stock exchanges).
Company formation and structuring
Jersey companies can be incorporated on a same-day basis, subject to the availability of all relevant information and documents required to support the incorporation application. Typically, a Jersey company to be used for listing purposes will be incorporated as a public company with plain vanilla constitutional documents and a basic share capital. All changes necessary to prepare the company for listing will then be made in consultation with the company's team of advisors.
Once incorporated, the Jersey company can be introduced into any existing current group structure. Subject to tax advice, this is often done by means of a simple share exchange, whereby the existing shareholders exchange their shares in the existing topco for shares in the new Jersey holding company. For complex situations, the Jersey company may also be introduced into an existing structure by means of a court-approved scheme of arrangement.
Directors and meetings: there is generally no need for a listed Jersey company to have Jersey resident directors. Additionally, unless the company is to be managed and controlled in Jersey or local economic substance rules apply, there is no need for board meetings to be held in the island. Shareholder meetings may also be held elsewhere.
Local corporate service providers: although public companies can maintain branch registers wherever they transact overseas business, every Jersey company must have a registered office and maintain its central register of members in Jersey. There are many local corporate service providers who can assist in this regard and who will also take care of making the appropriate local filings (see below). Jersey-based subsidiaries of UK registrars are also available to provide electronic registrar services for Jersey listed companies in the island.
Local filing requirements: as well as complying with its stock exchange and any other overseas filing requirements, the listed Jersey company will also need to comply with certain ongoing Jersey filing obligations. Principally, the company will need to file an annual return (disclosing details of the company's shareholders and directors) and a copy of its audited accounts each year with the Registrar of Companies in Jersey. Copies of all special resolutions must also be filed with the Registrar within 21 days of being passed. The company's Jersey corporate services provider will typically deal with all of these local filing requirements.
How We Can Help
Members of the Bedell Cristin team have extensive experience of listing Jersey companies on exchanges around the world. Please contact Sara Johns, Guy Westmacott or Tim Pearce for further information on any of the topics covered in this briefing.
 Source: Jersey Finance
 Source: Jersey Finance, as at 30 June 2019