Jersey: Jersey Incorporated Holding Structures For UK Acquisitions

Last Updated: 8 September 2008
Article by Michael Lombardi and Simon Mackenzie

Most Read Contributor in Jersey, September 2018


There has been an increasing level of interest in using Jersey corporate holding structures for UK public takeover offers and private acquisitions. The principal advantage of using a Jersey holding company is the flexibility of Jersey company law in relation to returns to investors - whether by means of dividend, redemption of share capital or share buy-back. Although generally more flexible, Jersey company law is modelled on UK company law principles.


The States of Jersey has passed legislation to introduce a general zero rate of income tax with effect from January 2009. This zero rate of income tax will apply to virtually all companies and, unless it is managed and controlled in a jurisdiction outside Jersey (see below), any company incorporated after 3 June 2008 shall be subject to a zero rate.

Alternatively, Jersey companies may be exclusively tax resident in jurisdictions outside Jersey provided that:

  • It is centrally managed and controlled in another jurisdiction outside Jersey;
  • It is tax resident in that other jurisdiction; and
  • The highest rate of corporation tax in that other jurisdiction is 20% or above.

Accordingly, UK managed and controlled Jersey companies should not be treated as "dual resident investing companies" for the purposes of s.404 of ICTA 1988.

No stamp duty is payable on the transfer of shares in a Jersey company, and there is no corporation or capital gains tax in Jersey. The Island also levies no annual taxes or charges by reference to a company's authorised or issued share capital. Although the States of Jersey has recently introduced a goods and services tax at a rate of 3 per cent, companies beneficially owned outside Jersey which do not supply goods or services in Jersey will generally qualify for "international service entity" status - effectively bringing them outside the scope of the goods and services tax regime provided that a fee of £100 is paid each year.


It is possible to structure returns to investors by way of capital returns or cash distributions (or a combination of the two). Jersey company law is very flexible on the sources of funding for redemption of share capital and in relation to requirements for distributions.

Redemption And Buy Back Of Shares

Monies payable on the redemption of redeemable shares or on the buy back of shares by a Jersey company may be funded from any source, including capital. Previously, in the case of a par value company, the sources available to fund such payments were limited, in general terms, to distributable profits or the proceeds of a fresh issue of shares (although, where such payment included a premium element in excess of the nominal value, the share premium account could also be used). Similar restrictions applied in the case of a no par value company, although stated capital account could also be used.

The directors responsible for authorising the redemption or buy back payment will be required to make a statement that they have formed the opinion that:

  • immediately following the date on which the payment is to be made, the company will be able to discharge its liabilities as they fall due; and
  • " having regard to the prospects of the company and their intentions with respect to the management of the company's business and the amount and character of the financial resources that will, in their view, be available to the company, the company will be able to continue to carry on business and discharge its liabilities as they fall due for a period of 12 months after the date of such payment (or, if sooner, a solvent winding up of the company).


A Jersey company is now permitted to make a distribution from any source, not merely from distributable profits. Therefore, distributions may be made from capital without a need to obtain Court approval for a reduction of capital, as was previously the case.

A distribution may be debited from any account of the company (including the share premium account and the stated capital account) other than the capital redemption reserve or the nominal capital account. The fact that distributions may be made from the stated capital account of a no par value company but not the nominal share capital of a par value company may lead to an increased use of no par value companies in the future.

A distribution may only be made if the directors authorising the distribution make a solvency statement in the form referred to above.


Jersey company law historically prohibited a company giving financial assistance in respect of the acquisition of its own shares. The prohibition has now been removed and the amendments make clear that any previous common law prohibition on financial assistance is not renewed by virtue of the removal of the statutory prohibition.


A public offer often involves the issue of loan notes in connection with the acquisition financing. The Channel Islands Stock Exchange ("CISX") was designated by the UK Inland Revenue as a recognised stock exchange under Section 841 of the UK Income and Corporation Taxes Act 1988 in 2002. This designation means that qualified debt securities listed on the CISX are eligible for the "Quoted Eurobond Exemption" which allows an issuer within the UK tax net to make payments of interest on the listed securities gross without deduction for tax.

Ogier Corporate Finance Limited is a full listing member of the CISX and is able to act as sponsor for listing purposes, having extensive expertise in this area. Further details of the services provided by Ogier Corporate Finance Limited are available on request.


Jersey incorporated companies are increasingly being used for listing on the Alternative Investment Market of the London Stock Exchange and also on the main board of the London Stock Exchange. A separate briefing on the advantages of using a Jersey company for a listing is available on request.


Reasons for using Jersey include:

  • Jersey is a leader among the offshore jurisdictions and has a top-tier reputation;
  • as one of the largest offshore jurisdictions Jersey has the legal and administrative depth and expertise to facilitate complex transactions;
  • Jersey companies law is based on English companies law but tends to be more flexible;
  • fast track incorporation of companies (same day if required);
  • Jersey's close proximity to, and same time zone as, London makes closing transactions a simpler process;
  • an extremely favorable corporate tax regime and no stamp duty on transfer of shares in Jersey companies.


Ogier also advises on BVI, Cayman and Guernsey law and is, therefore, able to advise on corporate structures in those jurisdictions.


  • United Utilities Electricity (December 2007): provision of legal and administrative services to a Jersey-domiciled bid vehicle capitalized by a consortium led by JP Morgan Asset Management and Australia's Colonial First State Asset Management on its successful bid for the UK's United Utilities Electricity Limited.
  • Domestic & General Group plc (November 2007): provision of legal and administrative services to AIDG Jersey Acquisition Limited, a Jersey company established at the direction of Advent International plc to bid for Domestic & General Group plc.
  • Southern Water (October 2007): provision of legal and administrative services in respect of a Jersey structure established to facilitate the £4.2 billion acquisition of Southern Water.
  • John Laing plc (December 2006): provision of legal and administrative services to a Jersey company established by Henderson Infrastructure Funds, in respect of the £1 billion takeover offer for John Laing plc. Ogier also advised on the CISX listing of loan notes issued as part of the acquisition financing.
  • Anglian Water (October 2006): provision of legal and administrative services in respect of a Jersey structure established to facilitate the £2.2 billion public offer for AWG plc (owner of Anglian Water). Ogier also acted as sponsor for the CISX listing of Eurobonds.
  • London City Airport (October 2006): provision of legal and administrative services to a Jersey company in respect of the takeover of London City Airport.
  • Associated British Ports Holdings plc (August 2006): provision of legal and administrative services to a Jersey company established by a Goldman Sachs led consortium, in respect of the £2.8 billion takeover offer for AB Ports. Ogier also advised on the CISX listing of loan notes issued as part of the acquisition financing.

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.

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