13 October 2021
Jersey: A clear route to market
It is not without good reason that Jersey has become the favoured destination for registering FTSE 100 and AIM companies outside of the UK. Factors of key importance to large corporations such as financial flexibility, familiarity with English company law and a well-regulated environment provide the basis for which Jersey has developed its reputation as an attractive jurisdiction for companies to come to.
There has been an increase in market capitalisation of Jersey listed companies on global exchanges from £269 billion in 2014 to £278.9 billion in 2021. Furthermore, The International Stock Exchange (TISE) has seen the number of listings increase from 2,272 in 2016 to 3,431 securities on its official list at end of June 2021. These are just some examples which explain why Jersey is now regarded as a premier international finance centre.
There are a number of reasons for why Jersey is chosen as the place of incorporation for a holding company of international groups that are seeking to list shares on the world’s markets. The Island has a very strong reputation globally. The OECD has confirmed that Jersey is a cooperative jurisdiction in relation to tax and has placed Jersey on its white list. This ensures international confidence in Jersey as a jurisdiction which allows the Island to continue to build its reputation as an established offshore jurisdiction providing world-class financial services in a well-regulated and reliable environment.
Jersey is a stable, tax-neutral environment in which to establish and maintain corporate structures. Jersey companies (apart from locally regulated financial services companies and utility companies) are, typically, zero rated for income tax and are not subject to capital gains tax within the jurisdiction. In addition, there is no Jersey stamp duty on share transfers. Companies can be - and often are - incorporated in Jersey but resident for tax purposes in another jurisdiction. The introduction of economic substance laws in Jersey has particularly helped to protect the reputation of the Island.
Company law in Jersey derives largely from English company law and so Jersey companies very much look, feel and operate like English companies. Investors around the world will be familiar with Jersey company law making it easier to understand the implications of using a Jersey company.
In addition, the increased flexibility that Jersey law perm its, from the choice of corporate entity available, to more flexible options on dividends, share issues and financial assistance regimes (there is no prohibition on financial assistance in Jersey for either public or private companies), makes Jersey companies flexible and attractive on both an acquisition and throughout the investment holding period. Jersey companies can have par or no par value shares and the share buyback, share redemption and capital reduction regimes are straightforward.
Share buybacks, share redemptions, capital reductions and distributions are based around the ability of the directors to pass a prescribed solvency statement, rather than a balance sheet test. This provides greater flexibility to companies than that which is afforded to them under English company law.
The COVID-19 pandemic saw it become impractical for shareholders or directors to travel to attend an AGM. Jersey law is also flexible enough to permit the holding of virtual shareholder meetings and the use of electronic signatures (provided that the relevant company’s articles do not contain provisions to the contrary) and this has greatly assisted companies in keeping their shareholders and employees safe in relation to the ongoing pandemic.
The flexibility of Jersey law is highly attractive to companies and investors when seeking the place of incorporation for a holding company. If needs be companies can also replicate investor protection and other market standards through a Jersey company’s memorandum and articles of association. Furthermore, Jersey law provides a suite of potential options should investors in a Jersey company be looking to exit their investment whether such exit takes the form of a Jersey scheme of arrangement, a takeover, a merger, demerger or an initial public offering.
Jersey company law is largely similar to English law in respect of acquisition structures in that contractual offers are subject to similar squeeze-out mechanics and schemes of arrangement are, broadly, essentially the same as in England. Jersey law does differ from English law in that it provides for a relatively flexible merger/demerger regime, however this is similar, in principle, to other jurisdictions such as Delaware. The Borg Warner / Delphi acquisition is a good example of recent high value acquisition which was affected by way of a Jersey scheme of arrangement.
There has been a notable resurgence in the use of special purpose acquisition companies (SPACs) as a means of gaining access to European equity capital markets. The flexibility of Jersey law means that whatever investment structure is envisaged it will be achievable if the SPAC is incorporated in Jersey. Jersey law permits both Jersey and cross border mergers, therefore the acquisition can be completed in the target’s jurisdiction of incorporation.
Jersey has the greatest number of FTSE 100 and AIM companies registered outside the UK. This is partly because Jersey company shares settle in the same way as UK shares on the London market (either through the paperless CREST system or through stock transfer forms). This removes the need for a depository receipt programme or branch register and associated costs. In addition, the UK Takeover Code applies to a Jersey company listed on AIM and the main market of the LSE (other than an open-ended investment company), irrespective of where it is managed and controlled. This is attractive to investors as the Takeover Code is highly regarded among many investor circles.
Wizz Air Holdings PLC, a leading airline company, is an example of a Jersey company that is listed on the main market of the LSE. Other examples of Jersey incorporated companies that are also listed on the main board include Predator Oil & Gas Holdings PLC, as well as JTC PLC and IWG PLC. Recent examples of Jersey companies listing on AIM are MJ Hudson Group PLC, Wentworth Resources PLC and Yellow Cake PLC.
US AND HONG KONG MARKETS
There are several Jersey companies currently listed on the NYSE and NASDAQ. Jersey company law is flexible enough to largely reflect the market standards that US investors would expect to see and recent changes to the law allow Jersey company shares to trade using the systems operated by those exchanges including the use of the DRS system. In addition, there are certain share registrars that have operations in both the US and Jersey which enhances Jersey’s offering regarding listings in New York.
An example of a Jersey company that is listed on NASDAQ is Quotient Limited.
In 2009, Jersey companies were approved for listing on the Hong Kong Stock Exchange (HKSE). There are currently two Jersey companies listed on the HKSE. While Jersey and Hong Kong company law are both largely based on English company law, where there are differences between the two, the HKSE will expect any issues to be bridged by way of amendments to a Jersey company’s articles of association. The company’s internal management and the protections and control afforded to the shareholders will therefore largely reflect the ‘norms’ under Hong Kong law and will be in line with local market expectations.
In addition to the legal, accountancy, banking and other financial expertise available in Jersey, TISE is a regulated marketplace which offers a convenient and cost-effective service for listing a wide range of securities. Listing on TISE can open companies up to a larger potential investor base and can provide comfort to investors as listed companies become subject to the additional oversight that is given by TISE’s Market Authority.
Trading companies, such as SandpiperCI Group Limited (which is the Jersey holding company of an international retail and food service operator), have listed their shares on TISE and TISE continues to be an exchange of choice for debt listings and REITs. TISE has also been working on expanding its range of services and one recent innovation is TISE Sustainable which is a market segment for green, social and sustainable investments, including bonds, funds and trading companies.
TISE implemented new Listing Rules which have been in effect since 2nd August 2021. The new Listing Rules made the rules far clearer and concise in order to facilitate ease of use for issuers and included the introduction of TISE’s Qualified Investor Bond Market (QIBM).
TISE also updated its Listing Rules in relation to SPACs. The revised rules will make TISE a more attractive exchange for SPACs, especially those targeting an institutional investor base.
It is anticipated that companies will continue to use Jersey vehicles to list on global exchanges.
An original version of this article was first published by Jersey: First for Finance, September 2021