"Why should people choose Jersey or Guernsey for their offshore companies, in preference to any other jurisdiction?" is a question often asked of service providers, and one which can cause problems to the unwary.

Whereas in years gone by it was sufficient to proclaim us as sterling based offshore islands with sound government, relevant legislation and economic stability, following the broadside from the OECD in placing us on their "blacklist", these points alone are not enough to reassure the sophisticated clients of the third millenium.

So what are potential clients looking for when choosing an offshore company/regime?

One of the main considerations has to be the wealth and breadth of experience available in the islands through the offices of lawyers, accountants, trust companies and banks. Awareness of the changes in the way in which business is conducted has resulted in a number of these establishing their own in-house e-commerce experts. Coupled to this is the continuing development of legislation in both islands, relating to both the company law and the governance of the professional firms engaged in this work.

But knowledge alone is not enough – perception is also a very powerful deciding factor. It may well be that the client, or his advisor, does not want the business to be associated with, for example, the Caribbean area for a variety of reasons, but is more comfortable with offshore connections in the European area. This of course sometimes works in the other direction, but since most offshore financial service providers act in more than one geographical area this normally doesn’t cause too many problems!

In some cases the choice of a Channel Island base may be as much to do with what people don’t want as what they do require. Take for instance the businessman who does not wish to have any connection with the USA or any dollar based area, he would naturally go for a sterling-based area, giving him essentially the choice between Jersey, Guernsey and the Isle of Man.

So how do you persuade him that the Channel Islands will better meet his requirements than the more northerly isle? This is far more difficult as here we are comparing like with like – sterling based area, highly developed legislation, and capable service providers.

One major consideration can be the fact that Jersey and Guernsey are not part of the EU. Basically many clients are not happy with the idea of a "federal" Europe, and it is the proximity without membership that gives our islands the edge.

Add to this the lack of VAT, the simplicity of our tax structure and the relative ease with which one can travel to the islands, and the Isle of Man often falls out of the equation.

However, in a number of areas confidence has been shaken by the inclusion of Jersey and Guernsey on the OECD listing, and a frequently asked question is "What are the Channel Island authorities doing about it?" This is the most difficult hurdle of all, particularly with the Isle of Man having recently submitted a declaration of conformity to the OECD. Developments in the negotiations are regularly reported in the local press in both islands, and these can be used to reassure the enquirer that the powers that be are not ignoring the situation in the hope that it will go away.

But let’s not forget, there are those clients who prefer the "we will not be bullied into submission" stance taken by the islands, and the fact that rather than rushing in our representatives are taking a more cautious line to see if it is possible to have the islands removed from the blacklist without acceding to the OECD requirements.

The OECD, tax harmonisation and the EU are all topics which regularly appear in the financial press, but these are world-wide causes for concern and should not detract from the essence of the services available in Jersey and Guernsey, which have always been underpinned by sound government, relevant legislation and economic stability.

Which is what we have been telling our clients all along!

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.