Structuring an AIM or LSE IPO using a Jersey or Guernsey vehicle
23 November 2010
This briefing covers the practical issues that are likely to be considered by UK advisers when structuring an AIM or LSE IPO using a Jersey or Guernsey based vehicle ("FloatCo").
To form FloatCo, the Jersey Financial Services Commission ("JFSC") in respect of a Jersey company and the local company incorporation agent (the Corporate Services Provider) in respect of a Guernsey company will require, inter alia, the following basic details:
- the names, addresses, nationality and date of birth of the proposed directors of FloatCo;
- the nature of the activities of FloatCo and the group of which it will become the holding company; and
- details of the ultimate beneficial owners of FloatCo (i.e. the shareholders of the existing holding company of the group to be floated).
As a separate requirement, the incorporation agent will also need full anti-money laundering due diligence documentation in the usual form in respect of each director and beneficial owner of FloatCo (i.e. the current shareholders of the existing holding company of the group) prior to forming FloatCo.
Incorporation may be undertaken on a same day basis.
There is no requirement to have Jersey or Guernsey resident directors (unless FloatCo will be carrying out restricted regulated business) but it would be normal to appoint a local corporate services provider to provide registered office, company secretarial and administrative services to FloatCo. Every Guernsey company which is not a regulated entity must either appoint a resident agent in Guernsey or must appoint a Guernsey resident director to act as such resident agent on its behalf. The Corporate Services Provider will be able to provide resident agent services as part of its service provision.
FloatCo will usually be formed with "plain vanilla" constitutional documentation, which is then amended pre-listing to incorporate AIM or LSE specific and other commercial requirements.
Regulatory considerations - Jersey
The only regulatory approval (aside from the consent to issue its share capital) which is required in Jersey (assuming that FloatCo would not be carrying out any restricted regulated activities) relates to the issuance of the admission document or prospectus (as relevant) by FloatCo.
For a Jersey company, the admission document/ prospectus will constitute a "prospectus" for the purposes of the Companies (Jersey) Law 1991, as amended, and as such will require the prior approval of the Registrar of Companies in Jersey (the "Registrar"). For approval to be given, certain mandatory information must be included. This information is mainly factual in nature (including details of share capital, registered office, directors, secretary, advisers, loans, material contracts and certain disclosure statements) and, to a large extent, overlaps with the relevant AIM/LSE requirements.
Once the admission document/prospectus is in sufficiently final form, it will be submitted to the Registrar for approval. The response time is five business days from the date of submission to the Registrar. Any subsequent material revisions to the admission document/prospectus must be approved by the Registrar in the same way. The response time for subsequent filings is usually three business days from the date of filing with the Registrar.
Regulatory considerations - Guernsey
Provided the shares in FloatCo are to be listed on a stock exchange in an IOSCO jurisdiction, then there are no regulatory requirements applicable in Guernsey. Following a recent review of Guernsey regulation, there is no longer any need to obtain the consent of the Guernsey regulator either to form FloatCo or to raise money through the issue of shares in it.
Legal and corporate considerations
Directors: As stated above, there are no local residency requirements for directors in Jersey or Guernsey (unless FloatCo is carrying out restricted regulated activities).
Pre-emption rights: Jersey and Guernsey companies are not subject to any statutory pre-emption rights.
Meetings: There is no requirement for directors' or shareholders' meetings to be held in Jersey or Guernsey (as applicable), although there is no reason why they cannot be held there.
Share capital: A Jersey/Guernsey company may issue share capital denominated in any currency and in any nominal amount (for example £0.001) or with no par value.
Name of FloatCo: The name of a Jersey/Guernsey company must end with "Limited" (or certain equivalents). A Guernsey company cannot use the term "Plc", although a Jersey company can do so.
The shares of a Jersey/Guernsey company may be held through CREST in uncertificated form.
City Code on takeovers and mergers
The City Code will apply to a Jersey/Guernsey company, if its place of central management (as determined by the Takeover Panel) is in the UK, the Channel Islands or the Isle of Man. Since 1 July 2009, Guernsey and Jersey both have the ability to appoint their own panel on takeovers and mergers although, to date, the opportunity to create the Islands' own panel has not been taken up.
Both Jersey and Guernsey have modern company legislation allowing, for example, amalgamation, migration to other jurisdictions and conversion to other forms of company (such as incorporated or protected cell companies). In addition, purchase/ redemption of own shares and the making of distributions from any source are permitted subject to compliance with relatively simple conditions designed
FloatCo should be subject to income tax in Jersey at a rate of 0%. Under Jersey's zero/ten tax regime, all Jersey incorporated companies will be subject to income tax at a rate of 0% save for certain local exceptions (namely, companies which undertake certain classes of financial services business or utilities business in Jersey or which undertake certain real estate activities in Jersey).
FloatCo will be subject to income tax in Guernsey at a rate of 0%. FloatCo will not suffer any tax in Guernsey on capital gains. Shareholders of FloatCo who are not resident (for tax purposes) in Guernsey will not suffer any capital gains tax in Guernsey on the sale, transfer, redemption or disposal of their shares. Shareholders who are not tax resident in Guernsey will receive dividends without deduction of Guernsey income tax.
There are currently no corporate, capital gains, or inheritance taxes in Guernsey or Jersey, save only for Jersey's new Goods and Services Tax which is currently charged at 3% on the supply of goods and/or services in Jersey.