Jersey is well known as an international finance centre and Jersey companies are regularly used as listing vehicles for IPOs on the world's stock exchanges. The Island itself is home to a range of finance experts who advise groups seeking to list via a Jersey company on exchanges worldwide, including the main market and the alternative investment market (AIM) of the London Stock Exchange (LSE), the New York Stock Exchange (NYSE) and the Hong Kong Stock Exchange (HKEx).
Jersey is also home to offices of the Channel Islands Securities Exchange (CISE), a globally recognised and growing exchange based in the Channel Islands.
There are a several reasons why Jersey has historically been and continues to be chosen as the jurisdiction of incorporation for holding companies of international groups that are seeking to list securities on the world's markets. Jersey's reputation as an established offshore jurisdiction providing world-class financial services in a well regulated, stable and reliable environment, is one of the principal reasons for its continued popularity in these markets.
The Organisation for Economic Cooperation and Development (OECD) has placed Jersey on its 'white list' along with jurisdictions such as the UK and the US and the International Monetary Fund (IMF) ranks Jersey among the leading international finance centres.
Endorsements from the OECD and IMF are powerful statements and ensure international confidence in Jersey as a jurisdiction.
Companies looking to list benefit from a deep pool of legal, accountancy, banking and other financial expertise available in Jersey and transactions are often easier and more cost-effective as a consequence. Jersey's courts are well developed and capable of handling the most complex and difficult corporate cases.
Jersey provides 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. Jersey does not levy any withholding tax on dividends and there is no Jersey stamp duty on share transfers. Companies can incorporate in Jersey and be tax resident in another jurisdiction if certain criteria are met. This is an increasingly common approach for many listing vehicles.
Modelled on English company law, Jersey company law is familiar to investors around the world, making it easier to understand the implications of using a Jersey company. The law provides greater flexibility than English law, such as a more flexible regime for dividends and distributions, share issues and financial assistance (there is no prohibition on financial assistance in Jersey for either public or private companies). In addition, the share buyback, share redemption and capital reduction regimes are increasingly flexible and straightforward. These aspects of Jersey company law are particularly attractive to companies and investors who are used to company law regimes that are different to England (e.g. Delaware) but who want the assurance of a wellstructured company law regime backed by extensive case law.
If necessary, investors can typically replicate investor protection and other market standards through a Jersey company's memorandum and articles of association in order to reflect any particular market requirements.
Jersey has attracted many companies seeking a listing on the LSE, on both the main market and AIM. 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 in the same way that it applies to an English company. This is attractive to investors as the Takeover Code is highly regarded in investor circles.
Polymetal International plc, a leading precious metals mining company, is an example of a Jersey company that is listed on the main market of the LSE. Other examples of Jersey incorporated group holding companies which are also listed on the main board include Cape plc, as well as Sanne Group, Hastings Insurance Group, Henderson Group plc and Wolseley plc. Recent examples of Jersey companies listing on AIM are XLMedia plc, WANdisco plc and Safestyle UK plc.
NEW YORK MARKET
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 in a company listed on the NYSE. In addition, recent changes to company law in Jersey provide that Jersey shares can now settle in the same way as US shares on the NYSE. An example of a Jersey company that is listed on the NYSE is Delphi Automotive plc, with Quotient Biodiagnostics being listed on Nasdaq.
HONG KONG MARKET
Following the decision of the HKEx to approve Jersey as a jurisdiction of incorporation for admission, there has been increased investor interest in Jersey. The first Chinese business listed through a Jersey holding vehicle, West China Cement, was admitted to the HKEx in August 2010.
While Jersey and Hong Kong company law are both based on English law, where there are differences between the two the HKEx expects any issues to be bridged by amending the Jersey company's articles of association. The company's internal management and the protections afforded to the shareholders will therefore largely reflect the 'norms' under Hong Kong law and will be in line with local market expectations.
RECENT LAW REFORM
Jersey's regulators and legislators regularly update Jersey's company and other laws to ensure that the Island remains an attractive jurisdiction for doing business. Recent innovations include exempting distributions which do not reduce the net assets of a company from the statutory distribution regime, specific provisions dealing with the redemption and buy-back of depositary receipts and removal of both the prohibition on the issue of shares at a discount and restrictions on commissions.
Other developments that may assist publicly traded companies include the replacement of mandatory court approval of capital reduction with a procedure requiring shareholder approval, provided a solvency test is met (although the previous procedure remains available).
CHANNEL ISLANDS SECURITIES EXCHANGE (CISE)
Whilst Jersey companies are regularly listed in exchanges in other jurisdictions, the CISE offers an alternative listing venue for Jersey and overseas companies alike, with a market capitalisation of £357 billion, representing 2,173 securities listed at the end of 2015. Like Jersey more generally, the CISE offers equivalent levels of expertise and regulatory standards to onshore jurisdictions, with faster document turnaround, competitive pricing and a more pragmatic approach to disclosure requirements (not being bound by the European Union Listing Directive).
The CISE has grown significantly in recent years, with 423 new securities listing in 2015, which is an 8% increase when compared with the same figure for 2014, corresponding to a 21% increase in market capitalisation. The CISE is also expanding the nature of securities that it lists and in November 2015 it introduced new rules to allow special purpose acquisition vehicles (SPACs) to list with equivalent capitalisation and free-float requirements to the LSE.
Reproduced from an article in Jersey Finance's 'Jersey - First for Finance', Eighth Edition.
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