Issue No.5
Finance Update For international investors and their advisors
Plus ■ Jersey
expands its international presence
■ Jersey's
crucial role in London Stock Exchange Markets
The future is bright for Jersey’s finance industry Jersey continues to focus on developing its offering to meet the changing requirements of the international investment community
Jersey Finance
Finance Update: For international investors and their advisors
Contents
Contents The future is bright for Jersey's finance industry...............................................1 Jersey expands its international presence.............................................................2 Jersey's crucial role in London Stock Exchange markets................................. 3 Listing to add value................................................................................................ 4 Cross border mergers of Jersey companies..........................................................5 Jersey for specialist corporate business............................................................. 6 Jersey's alternative funds industry staying flexible...........................................7 Family offices in Jersey.......................................................................................... 8 European taxation and Jersey trusts................................................................... 9 Jersey – A winning business plan...................................................................... 10 Insurance opportunities - Reinsurance and Insurance Linked Securities...... 11 Jersey for ship registration and maritime services........................................ 12
www.jerseyfinance.je
Jersey Finance
Finance Update: For international investors and their advisors
Introduction
The future is bright for Jersey’s finance industry We continue to focus on “developing our offering to meet the changing requirements of the international investment community
”
By Geoff Cook Chief Executive, Jersey Finance
This year marks a 50 year milestone for Jersey’s finance industry. While it is a time to reflect on how Jersey has made its mark on global financial services in the last five decades, we do so with our sights firmly set on the future. We continue to focus on developing our offering to meet the changing requirements of the international investment community, so that we remain a jurisdiction of choice for both corporate and individual clients. An industry milestone Jersey’s finance industry first took shape when merchant banks began to open offices to service the banking and investment needs of expatriates and high net worth individuals. This began in 1961 when an old law was repealed that removed the limit on the interest rate that could be charged on loans, thus making the jurisdiction more attractive for deposit gathering. Trust and wealth management services soon followed as a natural ally to banking and as the asset management expertise expanded, the funds industry later became a third key sector. While the focus in the early years was on the provision of services to UK residents overseas and to UK-based institutions and their clients, today’s financial services industry is truly global in outlook. Recent developments The momentum that has been gathering in Jersey’s finance industry is clear. Jersey Finance is expanding its office presence into key markets around the world. Following the opening of our Hong Kong office in 2009, we now have an office in the Gulf and a full time representative team in India. Jersey delegations are regularly visiting Dubai, Abu Dhabi, Hong Kong, Shanghai, Beijing, Moscow, Mumbai and New Delhi to promote the jurisdiction in an ongoing marketing drive.
Jersey Finance recently joined a government led visit to Israel, which included meetings with senior representatives from the Israeli Government, the Tel Aviv Stock Exchange, banks, law firms and other leading intermediaries. Jersey’s government, working alongside its ministerial colleagues in Guernsey, has appointed a representative in Brussels, to represent the Channel Islands and to explain our role and the services within the European Union. Meanwhile Jersey continues to build links with City of London practitioners through our events and meetings and there is growing business with City institutions, the London Stock Exchange and AIM. The fund sector has enjoyed consistent growth since the recovery began and is confident that on any reasonable test Jersey can provide a regulatory regime that is fully compliant with the EU’s Alternative Investment Fund Managers Directive. Finally, our lawmakers and regulator continue to revise and enhance Jersey’s legal structures and investment vehicles to support further innovation, while maintaining the high standards necessary to meet international obligations. Performance and recognition Statistics for the industry confirm that business is showing a marked increase and Jersey is retaining its prominent status within the global community for the quality of its offering. Jersey is the highest rated offshore jurisdiction in a rankings survey known as the Global Financial Centres Index, a position it has held in four consecutive indices. With a track record to be proud of, and a position that has been hard earned, Jersey will now strive to ensure it remains a premier finance jurisdiction on the world stage for the next 50 years and beyond. ■
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Jersey Finance
Finance Update: For international investors and their advisors
News
Jersey expands its international presence When building business in key overseas “markets, it is important to establish a physical presence, as well as provide a favourable commercial framework in which business can flourish
”
By Sean Costello Head of Business Development for India and the Gulf Cooperation Council, Jersey Finance
Jersey’s ongoing commitment to the Gulf region and to India has been reinforced by our move to develop a permanent presence in these locations. We recognise that when building business in key overseas markets, it is important to establish a physical presence, as well as provide a favourable commercial framework in which business can flourish.
also close contacts between the regulatory authorities in Jersey and those in the Gulf, and high level governmental contacts have been maintained through visits that Jersey undertakes to the region.
The Jersey Finance office in Abu Dhabi, which opened in March 2011, complements the office we opened in Hong Kong in 2009, and the recent appointment of a representative team in India is further evidence of Jersey’s intent in building its commercial ties with these thriving overseas markets.
A similar pattern is emerging in India where we have appointed a representative team to help foster our contacts with senior government officials and regulators, as well as to support the development of our ties with leading intermediaries and other business introducers in India.
Abu Dhabi and the Gulf
We know that there is huge interest in Indian businesses expanding internationally but there is also a need to recover and repatriate the profits made from that capital investment back to India. Jersey recently amended its cross border merger regulations, thereby making that process far easier to achieve for Indian investors.
The official opening of the Abu Dhabi office was celebrated at a reception at the British Embassy hosted by the British Ambassador HE Dominic Jermey CVO OBE and officiated by HE Sheikha Lubna bint Khalid bin Sultan Al Qasimi, Minister for Foreign Trade. Since then, Jersey Finance has been very active in the region. Events have included the Arab Banking Conference in Qatar, where I took the opportunity to meet officials of the Qatar Financial Centre and its regulatory authority, and a reception to mark the Queen’s Birthday, held in the Embassy grounds in Abu Dhabi, of which Jersey Finance was a sponsor. Jersey is not only represented by the new office. Up to 10 Jersey firms have a presence in the GCC, with more actively planning one, and there are many more leading international banking and finance institutions with offices in the Gulf that also have a substantial office presence in Jersey. There are
Mumbai and New Delhi
Jersey Finance is acting as a hub to communicate the range of our financial services and the wider uses of some of our investment structures to both corporate and individual investors. A conduit and gateway to Europe Jersey has remained a strong, stable partner for international business, acting as a conduit for the distribution of capital to the world’s leading finance centres and as a gateway to European markets. We are now extremely well placed to build on our long established commercial contacts. ■
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Jersey Finance
Finance Update: For international investors and their advisors
Listings
Jersey’s crucial role in London Stock Exchange markets Jersey has continued to “play a crucial role as a source of equity finance on the London Stock Exchange during the financial crisis
”
By Mark Russon Business Development Manager, London Stock Exchange
Historically there has always been a strong link between Jersey and the London Stock Exchange, both in listing companies on our markets and in attracting investment from Jersey. Jersey has continued to play a crucial role as a source of equity finance on the London Stock Exchange during the financial crisis. More recently, during a period of increased IPO activity, it has provided key support to companies issuing new capital on the London markets. Additionally, there are now 67 Jersey-incorporated companies on our markets, with a combined value of over £111bn. Of those, the firms that have floated in the last year raised £8bn, which is over half1 of all new capital raised across our markets during that time. Jersey is home to a range of companies of all sizes, from many sectors and geographic origins. Two recent flotations of firms incorporated in Jersey illustrate this scope well: Jersey-incorporated commodities business Glencore International, which became London’s largest ever international IPO in May, operates in 40 countries and has a market capitalisation of over £35bn. Jersey-incorporated Top Creation Investments has a market capitalisation of £5m, and floated on the Exchange’s growth market, Alternative Investment Market (AIM), in March in order to expand its property operations in Malaysia. Recently AIM successfully lobbied on behalf of small and medium sized enterprises, increasing the qualifying limits
for Venture Capital Trust (VCT) investment, leading to greater support for growth companies seeking investment. At the Exchange's annual AIM conference the day after the UK Budget, Marcus Stuttard, Head of AIM, said: “We have been working closely with the Government and European policy makers to find ways of encouraging equity investment in growing businesses and we are delighted at yesterday’s increase in qualifying limits for VCT investment to include companies with up to 250 employees and £15m gross assets.” As well as the Main Market and AIM, the London Stock Exchange operates the Specialist Fund Market (SFM), a market for highly specialised investment entities aimed at institutional and professional investors. As with AIM and the Main Market, last year saw an increase in the number of funds opting to IPO on the Specialist Fund Market. As we look ahead, with a very encouraging pipeline of firms looking to float, we see Jersey playing a prominent part in future fundraisings. Its advisory community is flourishing and its international profile is stronger than ever. We are looking forward to working closely with Jersey’s financial sector as it continues to make such a valued contribution to the success of the London markets. ■ July 2010 – June 2011
1
firms that have floated in the last year raised £8bn, “The Jersey which is over half of all new capital raised across
”
our markets during that time
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Jersey Finance
Finance Update: For international investors and their advisors
Listings
Listing to add value During the past two or three “years, there has been a raised awareness of the transparency benefits of a listing on a recognised investment exchange
”
By Tamara Menteshvili Chief Executive, Channel Islands Stock Exchange
Expectations have undoubtedly changed since the financial crisis and there is now a renewed emphasis on accountability and transparency from investors, regulatory bodies and market participants. Alongside moves for greater transparency, there has also been a flight to quality in which Issuers seek to secure a listing on a recognised market in order to gain a competitive edge and attract the appropriate investors. For more than a decade, the Channel Islands Stock Exchange (CISX) has played a vital role in providing essential supporting infrastructure for the financial sectors in the Channel Islands. The Exchange has by far the most Channel Islands listings of any global exchange, with more than 360 listings domiciled in Jersey alone, although it maintains a truly international following, with over 22 countries and well over 200 international issuers represented on its Official List. Why List? Each Issuer is likely to have different priorities for deciding to list, but broadly, financial institutions list for the following reasons: to create a market value; to provide investors with an exit route; to extend their product’s visibility; to secure a kite mark that demonstrates they have met rigorous disclosure requirements and to attract certain types of investors. Obligations
diligence required to inform investment has led investors and promoters to assess information in ever greater detail. Market information must therefore be discernable, clear and, of course, available. Any exchange, and the CISX is no different in this regard, upholds a public disclosure regime designed to provide information flows not only to investors but to credit institutions that may also rely upon the listing status of securities. A public disclosure regime requires Listing Rules established and enforced by the exchange to an internationally recognised standard. The CISX requires directors of listed companies, including funds, to adhere to ongoing disclosure requirements in relation to corporate actions, trading activity and adherence to the Model Code. At the heart of the disclosure regime is the need to ensure that Directors of Listed Issuers keep the market informed and to ensure that there is equality of treatment of shareholders. A listing on any exchange should add value and enhance information flow to investors (and the public generally) and it is the exchange’s role to facilitate this. Due diligence works both ways of course. An exchange must also stand up to scrutiny in terms of it operating standards, market practices, Listing Rules and its track record with regards to enforcement and transparency. Added to that, it must ensure public confidence in the securities admitted to listing by maintaining high standards for the conditions of listing and public disclosure of information. ■
During the past two or three years, there has been a raised awareness of the transparency benefits of a listing on a recognised investment exchange. Increasingly, the due
The CISX maintains a truly international following, “ with over 22 countries and well over 200 international
”
issuers represented on its Official List
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Jersey Finance
Finance Update: For international investors and their advisors
Legal
Cross border mergers of Jersey companies Jersey company law has “been amended recently to permit Jersey companies and foreign companies to merge directly
”
By John Rainer Partner, Mourant Ozannes
Jersey companies have been able to merge since 2002. Until now, if a foreign company and a Jersey company wanted to merge, one of them had to migrate to the place of incorporation of the other as a preliminary step. Jersey company law has been amended recently to permit Jersey companies and foreign companies to merge directly and to allow the merged company to be either a Jersey company or a foreign company. Benefits and opportunities Cross border mergers and opportunities: ■
offer
a
range
of
benefits
N ot having to migrate a foreign company to Jersey or migrate a Jersey company to a foreign jurisdiction prior to undertaking a merger simplifies the process and can reduce transaction times and costs.
■
I t is now possible to structure an acquisition or a takeover of a Jersey company as a merger, instead of doing it by way of a takeover offer or a scheme of arrangement. Acquisition or takeover by way of merger is common in jurisdictions like the US and it may be easier to achieve an acquisition or takeover using the merger process.
■
I n order to squeeze out minority shareholders in a takeover, where it is structured as a merger it must be approved by 66.6% of each class of members' of each merging Jersey company. In contrast, where it is structured as a takeover offer or as a members' scheme of arrangement, a higher approval threshold is required and, in the case of the latter, it must receive court sanction. The lower approval threshold and the absence of a general requirement for court sanction for a merger may make it more attractive to a bidder.
■
cross border merger may not result in shareholders A of the merging companies incurring a charge to Capital Gains Tax. This benefit may have an application beyond acquisitions and takeovers. In the private wealth sphere, cross border mergers may provide a tax efficient means of repatriating the fruits of foreign investment held by a Jersey company.
■
he assets and liabilities of merging companies are carried T forward into a merged Jersey company by operation of law. There is no need to transfer assets or assign contracts to effect the merger. This offers a simple way of achieving what may otherwise be a complicated and time consuming exercise.
Principal features of the merger regime A merger results in either one of the merging companies being the merged company or a new company being created. Each merging company must enter into a merger agreement approved by its shareholders specifying the terms of the merger. Notice of the merger must be given to creditors. Shareholders and creditors can apply to court to object to the merger. Court sanction of the merger is not otherwise required unless any of the merging Jersey companies are insolvent. Cross border mergers require the approval of the Jersey Financial Services Commission. The introduction of cross border mergers further enhances the flexibility of Jersey company law and makes Jersey an even more attractive place to incorporate or to redomicile companies. ■
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Jersey Finance
Finance Update: For international investors and their advisors
Real Estate
Jersey for specialist corporate business Jersey has been a popular “jurisdiction for structuring real estate investment vehicles for some years and it is a growing trend
”
By Ed Fletcher Head of the Corporate and Alternative Fund Services Division, Deutsche Bank, Jersey
In recent years, Jersey has succeeded in solidifying its position as a preeminent location for corporate administration business. Thanks to the flexibility of its legislation, regulation, OECD status and proximity to Europe, Jersey structures are being used increasingly for a wide range of purposes that enable efficient access to investment opportunities and acquisitions in the UK, Europe and Middle East. Backed up by a robust regulatory and legislative framework, and a government that is committed to complying with international standards of transparency, corporate work is an area in which Jersey is seeing significant growth. In addition, Jersey benefits from a specialist workforce and a network of firms that have global reach, which gives confidence to those wishing to establish sophisticated structures. Jersey has been a popular jurisdiction for structuring real estate investment vehicles for some years and it is a growing trend. Jersey firms have been involved in establishing, managing and administering a range of regulated funds and holding structures investing into UK real estate. Services in Jersey have also been drawn upon by European and Asian clients wishing to purchase individual pieces of real estate in the UK through Jersey holding companies. The consistent feedback is that Jersey provides a robust, efficient and tax neutral solution for their real estate investment needs.
UK real estate investment: a case study Recently Deutsche Bank was mandated to provide corporate services to a large Malaysian retirement fund, in relation to its acquisition of £1bn of real estate in the UK. The fund has a strategic target to hold 5% of its assets in real estate and will continue to actively seek property investments outside Malaysia. Following numerous discussions involving a range of advisers, a report was produced that identified Jersey as the most suitable jurisdiction that would enable the fund to maximise its return on its UK real estate investments, avail of certain foreign landlord tax allowances and take advantage of Jersey’s tax neutrality. A holding company and joint venture company were established for the Malaysian client, with Jersey asset holding companies subsequently being set up to purchase the real estate - a fairly typical example of how Jersey structures can be used by foreign entities for acquiring assets, such as real estate, within the UK. It is noteworthy that the client, being a significant sovereign wealth fund, opted to use two investment managers (ING Real Estate Investment Management and RREEF Asset Management), acting independently of each other. This demonstrates the ability of firms in Jersey to cope with the handling of complex instructions from more than one manager and provide related services, such as banking facilities. ■
“Corporate work is an area in which Jersey is seeing significant growth” www.jerseyfinance.je
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Jersey Finance
Finance Update: For international investors and their advisors
Funds
Jersey’s alternative funds industry staying flexible AIFMD strategy is focused “onJersey’s ensuring that Jersey has a legal, tax and regulatory framework in place so that it can be ‘business as usual’ under AIFMD
”
By Brendan McMahon Partner, PricewaterhouseCoopers
Alternative Investment Fund Managers Directive (AIFMD) was adopted in November 2010 by the European Union (EU), with rules to take effect by 2013. The AIFMD will affect any alternative asset manager, regardless of domicile, seeking to raise institutional capital in Europe. Jersey sought and obtained input from relevant stakeholders to formulate and validate an action plan. An AIFMD Working Group has been formed involving Jersey’s government, the Jersey Financial Services Commission, Jersey Finance, professional advisers, and service providers and asset managers based in Jersey. Jersey’s AIFMD strategy is focused on ensuring that Jersey has a legal, tax and regulatory framework in place so that it can be ‘business as usual’ under AIFMD for the Jersey fund management and services industry. The Working Group is also looking at opportunities to improve market access. There are several aspects to achieving this, falling into two strands: ■
■
A focus on the private placement regime, where Jersey will engage with the European Securities and Markets Authority on Level 2 third country provisions and coordinate efforts with other significant third countries (Switzerland, Singapore, Hong Kong, Guernsey etc). Early engagement will ensure that ongoing access to European institutional investors is assured. Jersey is also considering proposals to further streamline the private placement regime. The objectives here being to ensure an operating regime that is AIFMD compliant and a local regulatory approval process that is streamlined for the efficient launch of alternative asset management products.
in place by 2013, making this available as an ‘opt-in’ regime in advance of the access under 2015 passport. Choosing to base asset managers and funds in Jersey offers unique advantages. Jersey managers can market non-EU alternative investment funds on a country by country basis (i.e. without a passport), without a requirement to comply with the more onerous AIFMD obligations. Jersey-based managers not actively marketing their funds within the EU have no obligations under the AIFMD, i.e. passive marketing/ reverse solicitation is out of scope. EU-based managers are required to comply fully with the Directive, even for non-EU funds not marketed within the EU. Jersey-based managers are not disadvantaged against their EU counterparts - they have the same access to the EU market, based on the same rules. Jersey-based managers can manage EU-based funds and access the EU market via the passport, if they are in full compliance with the Directive, under the oversight of an EU member state. Where Jersey managers are not targeting the EU market, they are out of scope of the AIFMD. The AIFMD Working Group is confident that Jersey will satisfy the access conditions required under the private placement regime, and will explore an opt in AIFMD compliant regime in advance of 2013. Being close to Europe, Jersey may provide a better option than many other jurisdictions for promoters looking to access EU institutional capital, either on a passive (where investors approach the asset manager directly – not subject to regulation by the AIFMD) or on a direct marketing basis. ■
E nsuring that Jersey provides a full AIFMD ‘passport’ compliant regime by having operational rules and legislation
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Jersey Finance
Finance Update: For international investors and their advisors
Wealth Management
Family offices in Jersey Jersey has a growing “number of both single and multiple family offices, servicing local and international families
”
By Chris Bevan Director, BKS Family Office Group
Family office: these two words are possibly the most incongruous combination of words in use today. Family life is meant to be about having fun, engaging in loving and lasting relationships and enjoying all that life brings with others. Why on earth would a family require an office? There are literally hundreds of reasons and here are just a few: the administration of family companies and trusts; wealth management; asset allocation; succession planning; taxation; accounting; confidentiality; security; property management; staff payroll; gate-keeping; counselling; arbitration and mediation. There are therefore many different types of family office. Some offices work for single families and others work for multiple families. Some offer administration, accounting, succession planning, confidentiality, counselling and arbitration. Others focus solely on investments, perhaps even leveraging the family name to operate on a commercial business. Whatever the motivation, there will be a very close connection with a family at the heart of the operation. The ability to deal with many different types of personalities in a variety of different situations, ranging from a business context to a purely social one, will be fundamental. Does this mean that the family office needs to be located in close proximity to the family it serves? It’s tempting to say yes, it has to be right on the door step of course. This is undoubtedly the traditional view, but the world is changing. Just as working from home has become more acceptable in the business world, having a family office located elsewhere is also acceptable providing that it remains accessible.
Why Jersey? Jersey has a growing number of both single and multiple family offices, servicing local and international families. It is believed that one of the largest single family offices in Jersey employs about 20 people, with a range of skills including accountancy, legal and investment expertise, and operates for a European family. In many ways Jersey is an ideal place to locate a family office as it has a large pool of locally-based professionals, many of whom have international experience and contacts. If you cannot find exactly the right person locally, Jersey is a very attractive and easy place into which one can import talent. Jersey is a low tax jurisdiction - we only pay 20% Income Tax and have no Capital Gains Tax. Jersey also offers an excellent lifestyle. Typically it take no more than 20 minutes door to door to commute and a lot less time if you miss the half hour rush! Golden sandy beaches coupled with a rural landscape, Michelin star restaurants, family restaurants, water sports galore, including surfing, a very low crime rate and no need to drive any faster than 40 miles an hour! This type of lifestyle, coupled with a robust legal system well versed in financial law and a highly respected regulator, make Jersey perfect not just for family holidays but also for a family office. ■
Jersey is an ideal place to locate a family office as it “ has a large pool of locally-based professionals, many of
”
whom have international experience and contacts
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Jersey Finance
Finance Update: For international investors and their advisors
Wealth Management
European taxation and Jersey trusts Jersey is well placed as “a platform for trusteeship, striking an appropriate balance between privacy and transparency
”
By Peter Harris Barrister, Overseas Chambers
Whilst underlying trends in European taxation can appear contradictory and the extension of the trust into the now more mobile European middle classes means that it is attracting increasing fiscal attention in that area, Jersey is well placed as a platform for trusteeship, striking an appropriate balance between privacy and transparency.
exemption providing that there are information exchange mechanisms in force. As part of this continuing process, France is introducing a system of capital taxation of trusts on 1st January 2012, based upon experience gleaned from its disclosure facility of 2009. Jersey trust mechanisms
Trusts and privacy: the coming European ‘stress’ tests One State, source of capital and income, determines the nature of the rights created and the level of taxation to which these are subject. The State of the next residence of the settlor or of the beneficiaries may then determine that it has the right to tax on the basis of residence, in another manner entirely. There is therefore a continuing mediation of these two forces. In terms of capital taxation, European Union law can provide useful defences at the level of movement of capital and persons. Third states or territories can also benefit. The attack on alleged ‘secrecy’ is part of this process. The state of residence will require disclosure of assets for inheritance, gift and wealth taxation, and will attempt to disqualify foreign structures it considers inappropriate, following a more permanent immigration. The preliminary ruling in the Prunus case C 384/09 shows that the movement of capital from third countries into Europe can now take place freely, providing that there is information exchange, i.e. no tax evasion. Whilst only the BVI companies concerned were mentioned, the European Court was not siesed of any trust structure overlying the corporate structure owning the French immovables: the BVI companies were opaque to the tax. In future, this will no longer be the case, and trusts will be able to obtain
Jersey provides trust mechanisms which offer privacy, but also now provide sufficient transparency to foreign tax authorities to render their use acceptable within the current changing international compliance environment. The balance between privacy, legitimate tax effectiveness and compliance requirements has shifted, but not so as to render a Jersey trust disposition a public matter. The Lugano Convention provides a method of allocating jurisdictional competence within European jurisdictions. Although Jersey is not within its scope, its general principles of reference can be introduced to influence foreign tribunals in civil cases, to ensure that a trustees’ jurisdictional presence is recognised as such, and require respect of governing law provisions, even where a non-EEA jurisdiction such as Jersey is concerned. Jersey, as a third ‘territory’ within the sterling zone, is therefore well placed as a platform for trusteeship. It benefits from the freedom of movement of capital, both flowing in and out of Europe and has sufficient compliance mechanisms in place to achieve an acceptable degree of privacy, alongside strictly confidential information exchange with tax authorities, on their application. The TIEAs negotiated do not provide for any form of collection or recovery of foreign tax, merely information. ■
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Jersey Finance
Finance Update: For international investors and their advisors
Finance Industry
Jersey – A winning business plan Jersey has developed its financial “services industry with professionalism and clarity, and a shared purpose and common mission not seen in many other jurisdictions
”
By Helen Hatton Managing Director, Sator Regulatory Consulting Limited
Jersey has developed its financial services industry with professionalism and clarity, and a shared purpose and common mission not seen in many other jurisdictions. Jersey approaches the exercise like an efficient business. It has worked out the jurisdictional equivalent to key business processes and has established frameworks, be they regulatory, consultative, legislative or promotional, to create a holistic and joined up process. Jersey’s key business processes In a manufacturing organisation, key business processes relate to: employing skilled staff; operating good machinery; sourcing suitable materials; producing desirable, ‘fit for purpose’ goods; marketing them effectively; distributing them reliably; and delivering them on time, to price and within acceptable quality/safety standards. Taking this model, how can we apply the equivalent key business processes to Jersey as an International Financial Centre? The ‘skilled staff’ needed in a manufacturing company translates readily to the skills pool needed by a jurisdiction and Jersey undoubtedly boasts a highly qualified and internationally experienced workforce.
The equivalent of ‘desirable goods’ might be the client offering itself, namely the wealth management structures made to delight clients and display on our proverbial shelf. This loops straight back to the skills pool in that innovative and clever, but safe, structuring reflects a very high order of professional ability. Continuing the analogy, the issues of ‘marketing’ arise with the long standing marketing priority to create a brand with a clear message and good reputation. Jersey’s largest creator or detractor of brand stems from the outstanding results of third party reviews, specifically those conducted by the FATF, IMF and other industry award bodies. Moving to ‘distribution’, Jersey distributes its goods through a highly complex and multi channel international communication plan, involving a wide range of media including via Jersey Finance Limited, Jersey’s Government, Jersey Financial Services Commission and, of course, the individual financial services organisations themselves. A consistent message is conveyed - one of competence, integrity and of an excellent track record.
Having ‘good machinery’ could relate to the regulatory and legal framework, including companies law, and Jersey is very highly regarded in this area.
Finally, the ‘time/price/quality control’ issues probably arise at an intersection of a number of forces: regulatory controls by way of authorisation and enforcement policies; the low costs, compared to say Singapore or Switzerland, and the significant benefits of doing business in Jersey; and investor protection issues, such as compensation schemes, ombudsman and complaint handling.
The ‘materials’, in a jurisdictional sense, might be considered to be represented by the array of corporate vehicles, trusts, foundations etc, which every centre needs to conjure up the client offering. Again Jersey is extremely well equipped in this sense.
To keep the manufacturing analogy going, Jersey has an extremely high quality ‘product’, with a great reputation. Going forward, the jurisdiction must ensure that it remains up to date, does not get too expensive, nor become over engineered. ■
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Jersey Finance
Finance Update: For international investors and their advisors
Insurance
Insurance opportunities Reinsurance and Insurance Linked Securities
is viewed as an ideal location “forJersey reinsurers who may be considering re-domiciling their existing operation or perhaps establishing a subsidiary
”
By Richard Packman Managing Director, Heritage Insurance Limited; Chairman, Jersey International Insurance Association
The ability and ease to transact international insurance business in Jersey have been advanced of late by a number of developments. Jersey has long since considered itself an ideal jurisdiction for the establishment and management of insurance structures, but could perhaps be seen as guilty of not capitalising on the numerous benefits of transacting this form of offshore financial services business. Jersey International Insurance Association Recently Jersey’s practitioners have been working to develop the insurance sector to take advantage of the opportunities that are seen to exist in the insurance arena, be they with captive insurance structures, reinsurance business or alternative risk transfer mechanisms (involving the capital markets). To recognise and develop Jersey’s insurance sector, a number of leading firms have now formed the Jersey International Insurance Association (JIIA). Working with Jersey Finance, this body will represent and promote the interests of Jersey’s offshore insurance industry. The JIIA is also intended to be a voice for the industry with government, the Regulator and other external bodies. Reinsurance Jersey is viewed as an ideal location for reinsurers who may be considering re-domiciling their existing operation or perhaps establishing a subsidiary. With its close proximity to London and Europe, its central time zone, and excellent travel and communication links, Jersey can consider itself a competitor to jurisdictions such as Bermuda. Indeed, with Jersey’s business links into the GCC, India and China,
it can provide a more accessible place for business from these regions. Jersey welcomes entrepreneurs: the housing laws can make possible the relocation of principals (and their families) and a very appealing lifestyle and excellent educational facilities are on offer. At the time of writing, it would appear that Jersey’s decision will be not to seek Solvency II equivalence, as it is considered that this position will not present a barrier to transacting insurance-related business in Jersey. On the contrary, it may open up new opportunities. Insurance Linked Securities As an extension of ‘conventional’ reinsurance business, other opportunities exist for the development of the securitisation of insurance risks. Jersey is well known for its abilities and expertise in structured finance products and securitisations and, as its insurance sector develops, opportunities exist for insurance linked securities. As the world changes and catastrophic weather related events occur (for example earthquakes, tsunamis and hurricanes), additional (re)insurance capacity and/or alternative forms of reinsurance protection are sought. The convergence of the capital and insurance markets in recent years has developed vehicles such as Catastrophe Bonds, ‘Transformers’ and ‘Sidecars’, and Jersey is a perfect location for establishing and managing these vehicles. As well as the reasons for doing business in Jersey that have already been mentioned, the intellectual property and legislative framework also exists and Jersey can move quickly to provide these insurance solutions. ■
Jersey has long since considered itself an ideal “ jurisdiction for the establishment and management
”
of insurance structures
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Jersey Finance
Finance Update: For international investors and their advisors
Maritime Services
Jersey for ship registration and maritime services Jersey Red Ensign
Jersey’s government “recently adopted the Jersey Red Ensign, which may now be flown by Jersey registered vessels
”
By David Capps Chairman, Jersey Maritime International
Jersey’s government recently adopted the Jersey Red Ensign (pictured above), which may now be flown by Jersey registered vessels. In light of Jersey’s unique relationship with the English Crown, it was permitted to add the Royal Arms of the House of Plantagenet to the Red Ensign thus creating one of the most distinctive flags within the already much coveted Red Ensign Group. Jersey is the largest Category 2 jurisdiction on the International Register. It is currently home port to 65 commercial craft under 150 tons, 36 private pleasure craft between 150 tons and 400 tons, and 2007 private pleasure craft under 150 tons. The commercial vessels include work boats and charter yachts and represent a potentially interesting niche market for Jersey, particularly since the Red Ensign Group, at its annual conference held in Jersey recently, agreed to increase the limit from 150 tons to 400 tons.
The regulatory section of Jersey’s Economic Development Department ensures high quality administrative and safety standards for the Ship Registry by overseeing compliance and maintaining a modern maritime law. It has also encouraged the growth of the maritime industry by actively supporting Jersey Maritime International (JMI), formed to promote the development of Jersey’s maritime business. JMI is open to all Jersey based individuals or firms with a maritime connection or interest. It is based in Jersey but is internationally orientated, with members providing services in the fields of insurance, yacht management, legal services, trust and company administration, accounting, crew management, survey and maritime consultancy, crew management and payroll, yacht supplies and finance. ■
The benefits of Jersey registration are: ■
J ersey is part of the sterling area and in the same time zone as Britain.
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I t is the closest Red Ensign Group member to mainland Europe.
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R egistration is valid for up to 10 years.
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I t is outside the VAT regime enabling yachts flagged in Jersey to obtain temporary importation relief from VAT, subject to meeting certain criteria, when sailing in EU waters. Such VAT mitigation is ideal for any owner operating outside Europe or a non-EU owner or user operating within Europe.
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ersonal ownership is allowed for Commonwealth and P EU citizens, and corporate ownership is allowed for any EU or Commonwealth body corporate.
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J ersey maintains close links with the City of London, which remains one of the world’s leading maritime business centres.
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s part of the Red Ensign Group, Jersey’s registration A system is monitored by the UK Maritime and Coastguard Agency and its vessels enjoy the protection of the Royal Navy.
Jersey is currently home port to 65 commercial craft “ under 150 tons, 36 private pleasure craft between 150 tons and 400 tons, and 2007 private pleasure craft under 150 tons
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www.jerseyfinance.je If you would like to contribute to the next issue of Finance Update please email: lucy.braithwaite@jerseyfinance.je
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