You would hope September will bring a fresh start after the traditional summer lull, but market volatility, a lack of investor confidence and ongoing macroeconomic uncertainties make conditions challenging for the re-start. After a record opening for global initial public offerings in the first half of 2011 the Financial Times pointed, earlier this month, to an estimated £10 billion of IPO activity having been postponed in the European market alone.
Other estimates put that figure nearer to £30 billion to account for those companies who managed to engineer a quiet exit after gauging preliminary investor appetite. It's a confusing picture but unsurprising given the sentiment driven swings that have plagued global equity markets this year. A simple Google search highlights the point with analysts predicting anything from robust activity in the second half to an almost total shut down driven by investor disillusion and valuation issues. Clearly geography plays a significant part. The UK and wider European IPO markets have been hit hard, but the Global IPO pipeline seem to be a little more robust. This article is not going to attempt to second guess economic commentator's predictions for the second half but the global equity capital markets teams continue to see strong demand from clients in developing markets particularly Russia, China and more recently India - looking to access the international equity capital markets.
The Jersey equity capital markets group is servicing a broad range of clients looking to raise funds on the London market with strong demand from Chinese originators across all sectors. The group recently completed the listing of China New Energy with two further Chinese originated offerings due to execute shortly (market volatility permitting).
Similarly, the Russian pipeline for the first half has been strong, particularly in the natural resources and energy sectors. We expect this demand to continue. What has been particularly exiting for the group has been the opportunity to advise on both the Mauritian and Jersey elements of a number of potential Indian originated deals in the leisure and renewable energy sectors. The group offices in Mauritius and Seychelles are often the first port of call for clients in these and other developing markets. Using a Jersey company as group listing vehicle offers a number of potential benefits:
- Jersey is a highly regulated tax neutral jurisdiction. There is no corporation tax, capital gains tax or capital transfer tax. There is no requirement for a Jersey company to make any withholding or deduction on account of Jersey tax in respect of dividend or interest payments.
- Using a Jersey company as the vehicle for an IPO may enable a foreign trading group to access London's capital markets without becoming liable to UK tax (UK tax advice should be taken and followed in every case). Mind and management of the company can be based on Jersey.
- Jersey companies with a market capitalisation of more than GBP £10 billion are listed on a number of markets on the world's leading stock exchanges including: London Stock Exchange (Main Market, AIM, PLUS), Euronext (Amsterdam, Paris), Luxembourg Stock Exchange, Stockholmborsen (NASDAQ OMX), Hong Kong Stock Exchange, New York Stock Exchange (NASDAQ, Euronext) and Toronto Stock Exchange.
- Jersey companies have unlimited capacity. Share capital can be denominated in any currency and issued in any number of classes at no par value shares are also available.
- A Jersey public holding company is comparable to a UK PLC. Jersey Companies Law is based on similar UK legislation which is familiar to investors around the world - although Jersey law is frequently a simplified version of that which applies in the UK. Jersey's Companies Law provides a greater degree of flexibility particularly in relation to pre-emption rights, distributions and repurchases of shares. In addition the financial assistance rules have been abolished.
- Treasury shares allow effective management of share capital.
- Shares in Jersey companies can be traded in uncertificated form and are eligible for admission into the CREST trading system. Three well known CREST enabled share registrars are present in Jersey.
- Incorporated and Protected Cell Companies are available.
- Jersey now has the provisions of the UK takeover code enshrined in its legislation.
- The introduction of cross border merger regulations allows foreign companies to merge with a Jersey company providing potentially significant tax advantages.
- Located in the Euro time zone bridging US and Asian markets Jersey is OECD white listed and was voted no. 1 for all (onshore and offshore) jurisdictions in a recent International Monetary Fund report dealing with multilateral initiatives against money laundering, terrorist financing and tax evasion.
- There are no foreign exchange controls which limit a Jersey company's ability to hold foreign funds or securities.
In addition to advising on Jersey vehicles Appleby also advises on a number of Guernsey and Isle of Man holding vehicles looking to list on the London market. The three crown dependencies together account for more than 28% of the non UK companies listed on the London market, so whether it's a September start or something a little later were hopeful for a strong year ahead.
As originally appeared in Finance, Offshore – Summer 2011
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