Using a Jersey company for a stock market listing
25 June 2015
This briefing looks at Jersey's attractiveness as a location for companies seeking a stock market listing, and considers the practical issues that are likely to be of relevance when structuring a public offering using a Jersey-based vehicle.
Jersey is renowned as an international finance centre and Jersey companies are regularly listed on the world’s stock exchanges, with approximately 100 Jersey companies listed on various exchanges, including those in London, Amsterdam, Toronto, New York and Hong Kong. Listed Jersey companies have a combined market capitalisation in excess of £100 billion in sectors diverse as mining, oil and gas, metals, media, real estate, pharmaceuticals, support services, finance and general investment.
In recent years there has been considerable growth in the number of businesses whose activities and assets are located around the world choosing a Jersey company as the listed holding company - including in particular on the London Stock Exchange main market or AIM market. Through this track record and growth Jersey companies have established a strong reputation with investors - with approximately 80% of the non-UK holding companies in the current FTSE 100 Index being Jersey companies.
There are a number of reasons why Jersey is regularly chosen as the place to incorporate a holding company before then listing its shares. The attributes which make Jersey particularly attractive as a domicile for a listed vehicle are as follows:
- Jersey is an established offshore jurisdiction and a leading financial services centre;
- Jersey has a critical mass of world-quality professional service providers;
- Jersey is a well regulated and a politically and economically stable jurisdiction, which is well regarded by international governments and regulators as a jurisdiction which has co-operated with international initiatives against money laundering, terrorist financing and tax evasion;
- Jersey has a well-developed court and legal system which is capable of handling complex and difficult cases;
- The Companies (Jersey) Law 1991 as amended (the "Companies Law"), is a modern statute that is based on English company law but avoids some aspects of English company law that some investors may find restrictive. Examples of the flexible provisions within the Companies Law are as follows:
- provisions enabling amalgamation, migration to other jurisdictions and conversion to other forms of company (such as incorporated or protected cell companies);
- the purchase or redemption of own shares and the making of distributions from any source are permitted, subject to compliance with relatively simple conditions designed to protect shareholders and creditors;
- there is no prohibition against a Jersey company giving financial assistance in connection with the acquisition of its shares;
- there are fewer restrictions on the transactions a company can enter into with its directors;
- directors' duties are more straightforward;
- there are no statutory pre-emption rights;
- there is no prohibition on the issue of shares at a discount and no restrictions on the payment of commissions;
- the Companies Law is sufficiently flexible to permit a Jersey company's memorandum and articles of association (the constitution of a Jersey company) to be drafted to accommodate the requirements of the relevant listing rules as well as any commercial requirements;
- Jersey offers tax transparency and tax efficiency:
- a listed Jersey company will ordinarily 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);
- there are no capital gains, capital transfer or corporation taxes payable in Jersey;
- the ability for a Jersey company to be non-tax resident in Jersey is unusual among offshore jurisdictions. This may offer a significant advantage to a company if it wishes to demonstrate that it is tax resident in another jurisdiction and not Jersey;
- a listed Jersey company would not have to make any withholdings or deductions from payments of dividends or interest on account of Jersey income tax, and a person who is not resident in Jersey is not liable to Jersey income tax on dividends or interest paid by the company;
- no stamp duty or other similar taxes would be payable in Jersey on the issue or transfer of shares in a listed Jersey company and, provided the company's register of members is maintained in Jersey, shareholders in a Jersey company listed on the LSE or AIM should not be subject to the UK's 0.5% stamp duty on share transfers;
- the shares in a listed Jersey company settle in the same way as UK shares on the London market and so may be held and traded in uncertificated form through the CREST system, avoiding, if desired, the inconvenience and cost involved in issuing global depositary receipts;
- the City Code will apply to a listed Jersey 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. The UK Takeover Code offers a degree of investor protection, which is a desirable objective as far as many investors are concerned and can be an advantage in marketing a company's securities;
- a Jersey company is potentially eligible for inclusion in the FTSE 100, 250 and other FTSE Indices, giving access to a potentially larger range of institutional investors;
- Jersey has a demonstrable track record of an ability to adapt and innovate, including enhancements to both law and regulation in order to meet required standards, and to provide choice; and
- Jersey is conveniently located in the same time zone as the UK.
The process and practical considerations
Forming the company
To form a Jersey company in readiness for listing the Jersey Financial Services Commission ("JFSC") will require, inter alia, the following basic details:
- the names, addresses, nationality and date of birth of the proposed directors of the company;
- the nature of the activities of company and the group of which it will become the holding company; and
- details of any material ultimate beneficial owners of the company (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 material beneficial owner of the listed Jersey company (i.e. the current shareholders of the existing holding company of the group) prior to incorporating the company.
With all relevant information being supplied, incorporation may be undertaken on a same day basis.
There is no requirement to have Jersey resident directors (unless the company 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 the company. The company will usually be formed with 'plain vanilla' constitutional documentation, which is then amended pre-listing to incorporate stock exchange-specific provisions and any other commercially required content.
The only regulatory approval (aside from the consent to issue its share capital) which is required in Jersey (assuming that the company would not be carrying out any restricted regulated activities) relates to the issuance of the admission document or prospectus (as relevant) by the Jersey company.
For a Jersey company, the admission document/ prospectus will constitute a 'prospectus' for the purposes of the Companies Law, and as such will require the prior approval of the JFSC. 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 stock exchange requirements.
Once the admission document/prospectus is in sufficiently final form, it will be submitted to the JFSC for approval. The response time is five business days from the date of submission to the JSFC. Any subsequent material revisions to the admission document/prospectus must be approved by the JFSC in the same way. The response time for subsequent filings is usually three business days from the date of filing with the JFSC.
Legal and corporate considerations
There are a number of legal and corporate matters to note when approaching a listing, which we will ordinarily assist with. Some of these matters are listed below:
Often a group reorganisation will be undertaken before the listing: for instance, to document a share-for-share exchange to introduce the to-be-listed Jersey company as the new parent company of the group.
The listing document must be prepared including providing appropriate disclosure on Jersey company and tax law. Where the offering document requires preparation as a prospectus under Jersey law, we ensure that the additional prescribed disclosures are made. We also assist with verification of the offering document, in particular those parts relating to Jersey.
Articles of association
The articles of association of the Jersey company will be tailored for the listing. We can assist in replicating the investor protections and other market standards required by investors through the listed company's memorandum and articles of association.
There are no local residency requirements for directors in Jersey (unless the company is carrying out restricted regulated activities) but this may be desired. There are a number of professional directors in Jersey with a variety of experience who may be willing to act as non-executive directors of a listed Jersey company.
The directors of the company must be briefed and made aware of their statutory and customary law duties as a result of being a director of a listed Jersey company - often this includes the production of a detailed memorandum on directors' duties.
Meetings, share capital, name and filings
There is no requirement for directors' or shareholders' meetings to be held in Jersey, although there is no reason why they cannot be held in Jersey.
A Jersey company may issue share capital denominated in any currency and in any nominal amount (for example shares of nominal value of £0.001) or with no par value.
The name of a Jersey company must end with 'Limited' (or certain equivalents) or with 'Plc'.
A Jersey company which is listed on a public market will be a 'public' company for Jersey law purposes and, as such, will be required to file a copy of its accounts and auditor's report with the JFSC.