This move toward jurisdictions with stronger regulations is hugely positive for Jersey, particularly in the corporate services sector.
Offering political and economic stability and a strong legal regime, Jersey is a jurisdiction of choice for a wide range of corporate clients. Entities seeking to list on the capital markets are just one example. Interestingly, the largest number of FTSE 100 companies registered outside of the UK are registered in Jersey¹. Jersey is also a world-renowned centre for investment structures in both real estate and private equity using a combination of regulated and unregulated vehicles, such as funds, unit trusts, companies or partnerships among others.
Operating to a high standard
Jersey’s regulatory regime is incredibly robust and the administration houses, accountancy practices and law firms on the Island all have to comply to the highest regulatory standards. Moreover, Jersey’s regulator, the Jersey Financial Services Commission (JFSC), is highly proactive, adding to these strong foundations.
Jersey combines this robust operating standard with an innovative approach to meeting the needs of an ever changing corporate landscape. The Jersey Private Fund (JPF) exemplifies this innovative approach. Launched last year, this vehicle offers fund managers and corporate investors the opportunity to establish certain funds that might otherwise be cost-prohibitive. The JPF regime provides a new, streamlined fast-track regulatory authorisation process for the establishment of private investment funds suitable for up to 50 professional investors or eligible investors who are looking for a cost-effective solution in a regulatory environment which is simplified yet still meets international standards. The JPF allows Jersey to attract those clients while, critically, upholding standards that maintain the security of assets and data.
The strength of Jersey’s political, legal, financial and regulatory sectors, ensure that the Island is consistently seen as a top quality jurisdiction for companies looking for efficient corporate structures. Indeed, the experience and expertise gained across these sectors since Jersey was first recognised as an international finance centre have created a deep well of structuring knowledge that clients can access.
The Brexit effect
Increasing globalisation means that like all other jurisdictions, Jersey needs to be much more aware of – and plan for – the potential impact of decisions made in other parts of the world. Brexit is a perfect case in point in this regard.
Given Jersey’s proximity and historic relationship to the UK, it is inevitable that the Island should be affected by the uncertainty surrounding the future of the UK’s relationship with the EU. Yet while uncertainty is never great for business, Jersey may well be in a position to benefit from the seismic changes.
Why? Let us start with real estate, which makes up a significant portion of Jersey’s corporate work. Rather than turning investors off UK property assets, the impact of the UK’s impending exit from the EU on the value of the pound has actually made it more attractive for some. In the wake of the referendum vote, foreign investors operating in US dollars, including sovereign wealth investors coming in from the Middle East and Far East, have been able to effectively acquire UK property at an advantageous price. This is equally applicable in other sectors. Private equity houses looking to acquire operational businesses in the UK may well decide that reduced purchase prices outweigh any uncertainty concerns.
All of which equals opportunities for Jersey where the necessary expertise and experience are readily found. If a fund manager from the Middle East or Far East is looking to deploy capital in the UK market, it is impossible to overstate the importance of having suitably experienced people sitting as directors on the board and good quality administrators that can run the structures and ensure the financial reporting is accurate – and that strong governance is maintained.
Impact of CGT changes
The change in the UK capital gains tax (CGT) legislation proposed last year will also affect Jersey’s corporate sector if introduced, which is likely. The move, which would come into effect in 2019, would expand CGT paid by non-residents to all types of UK real estate, not just residential. Whilst the changes no doubt present challenges for the offshore world, Jersey continues to have strengths that make it an attractive proposition, especially for foreign investors who would likely look to outsource the administration of their investments.
There are specific opportunities presented by pension funds and sovereign wealth funds, which appear unlikely to be negatively impacted by changes in CGT legislation. There are also opportunities to use Jersey companies for onshore real estate holding vehicles, such as the increasingly popular Real Estate Investment Trust (REIT). REITs need to be listed on a recognised stock exchange so are often structured using a UK resident Jersey company listed on the Channel Islands based TISE (The International Stock Exchange).
Clearly there are challenges and opportunities ahead for the corporate sector in Jersey. However, the Island has a number of strengths that will work to its advantage in overcoming those challenges and seizing relevant opportunities. Jersey is home to a whole community of major banks, law firms and accountants, with companies relying on the quality of the Island’s finance sector. Jersey’s reputation is second-to-none and that is true even beyond established specialisms such as real estate. So even in these changing times, investors seeking corporate services are very much heading towards the Island, rather than away.
FOOTNOTE: ¹www.jerseyfinance.je/capital-markets
Stuart Pinnington, Group Managing Director, Corporate Services, First Names Group.
Stuart is a key member of the Group’s leadership team, with responsibility for growing the corporate side of its business across its network of offices. He has a proven track record of driving significant business growth in the corporate sector and has a particular expertise in real estate structuring. His international experience includes roles as a funds lawyer, corporate director and managing director in the UK, the Caribbean and the Channel Islands. He is based in Jersey.
