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Transcript of Jersey Links with India
Jersey LinksA focus on Jersey’s international profile
Jersey’s growing links with India
www.jerseyfinance.je
www.jerseyfinance.je Jersey Links | India 1
Contents
A milestone in India in an anniversary year ...................................................................2
Building our business with India ...................................................................................... 3
Private Banking to engender entrepreneurship and safeguard wealth ....................... 4
The use of Jersey companies by Indian businesses ........................................................ 5
UK residential property structures using the Liberalised Remittance Scheme ...............6
Jersey: First for funds..........................................................................................................7
Platform Funds for India ....................................................................................................8
www.jerseyfinance.je Jersey Links | India 2
2011 marks the 50th anniversary of Jersey’s financial services
industry. It also sees Jersey strengthening its ties with India with
the engagement of dedicated Jersey Finance representatives
in Mumbai and New Delhi and the introduction of innovations
to Jersey’s company law regime in support of the strategic
development objectives of corporate clients in the region.
Jersey has powerful endorsement as one of the best regulated
jurisdictions in the international community from the
OECD, FATF and UK Government amongst others and its
regulatory regime has recently been rated as one of the best
international finance centres globally following the latest IMF
review. Jersey’s Government will be signing a Tax Information
Exchange Agreement (TIEA) with India shortly, having been
actively engaged in the process of signing TIEAs since 2002,
with agreements in place with many countries in the G20
including France, Germany, the UK, the US and China.
New representative team
Jersey Finance launched a permanent representative team in
Mumbai and New Delhi in March. Reporting to Sean Costello,
Head of Business Development for India and the Gulf
Cooperation Council, the team plans to continue highlighting
Jersey’s expertise and capabilities in managing international
capital and its role as a jurisdiction for Indian corporate
clients wishing to expand into European and US markets. The
Jersey holding company vehicle, when domiciled within the
jurisdiction’s tax neutral platform, has been a popular option
for international investors wishing to list on global stock
exchanges. New laws are to be implemented this year that
will make Jersey an even more attractive destination and
Sean outlines more details in the next article.
Experience and expertise in wealth management
Jersey continues to be a centre of excellence for managing
the wealth of high net worth individuals and a world leader
in trusts. Jersey has practitioners with years of experience in
handling the estate and succession planning requirements of
internationally mobile individuals and more STEP qualified
professionals than anywhere else outside of London.
It is fitting that in this anniversary year for Jersey’s finance
industry, we can celebrate a new milestone with the launch of
a representative team in India. We have also opened an office
in Abu Dhabi to cement our presence in the Gulf region. We
look forward to building further on our commercial ties with
both existing and new clients across India and the Gulf.
“It is fitting that in this anniversary year for Jersey’s finance industry, we can celebrate a new milestone with the launch of a representative team in India”
By Geoff Cook Chief Executive, Jersey Finance
A milestone in India in an anniversary year
“The team plans to continue highlighting Jersey’s expertise and capabilities in managing international capital and its role as a
jurisdiction for Indian corporate clients wishing to expand into European and US markets”
Jersey Finance Chairman Jonathan White, Senator Philip Ozouf, Senator Freddie Cohen, renowned International Tax Expert Professor Rohatgi and Jersey Finance’s Sean Costello light candles to celebrate the launch of Jersey Finance’s new permanent representative team in Mumbai and New Delhi
www.jerseyfinance.je Jersey Links | India 3
the new partnerships will bring, with their variations of
legal personality and asset ownership, combined with
commercial flexibility, will further enhance Jersey’s appeal
as a domicile for fund and finance vehicles.
• Foundations
Jersey’s Foundation vehicle has added to the options
available for those considering wealth management strategies
for families and high net worth clients. Through the concept
of ‘a guardian’, which is one of its features, it has introduced
a greater element of corporate governance oversight than
exists in similar structures in some other jurisdictions. Jersey
Foundations have a wide appeal, particularly for those who
remain unfamiliar with the trust concept.
Alongside these developments, Jersey continues to grow its
fund administration services, wealth management services and
its capabilities as a listing provider on worldwide exchanges
using the Jersey holding company. The thriving funds sector is
supported by a flexible regime for professional investor funds,
including a Feeder Fund that is recognised and marketable in
the European Union and the Gulf, unlike similar fund vehicles
provided by some competitor jurisdictions.
Throughout the global financial crisis, Jersey has remained a
strong, stable partner for international business, acting as a
conduit for the distribution of capital to the world’s leading
finance centres and as a gateway to European markets. As the
global recovery continues to gather pace led by the emerging
economies, Jersey’s legal and finance practitioners, working
from a jurisdiction of substance with high standards of
corporate governance, are well placed to build on their long
established commercial ties with clients throughout India.
Jersey Finance’s new representative team in Mumbai and New
Delhi will act as a hub to enable us to communicate that depth
and range of our financial services and the wider uses of some
of Jersey’s investment structures.
Building our business with India
To continue building business with clients and professional
contacts in India, we recognise that it is vitally important
to establish a permanent presence there as well as provide
a commercial framework that meets the needs of Indian
based investors and their advisers.
The launch of our representative team in Mumbai and
New Delhi, the interaction at senior government level
and the continuing dialogue between regulators are all
part of that ongoing process. It is also crucial that Jersey
keeps its legislation and regulations under review and,
whilst maintaining robust standards, we are eager to
innovate in these areas to enable international investment
to be facilitated.
The new Cross Border Merger Regulations, which will permit
companies incorporated in Jersey to merge with foreign
companies and other bodies incorporated outside Jersey,
are an example of this and offer an enhancement which
will assist Indian investors in their strategic decisions in
identifying suitable vehicles when investing in Europe. We
know there is huge interest in Indian businesses expanding
internationally but there is also a need to recover and
repatriate the profits made from that capital investment
back to India. These amendments using a Jersey company
make that process far easier to achieve.
The finance industry in Jersey invests heavily in such
improvements to its legislation and works closely with the
authorities and with the Jersey Regulator. Amongst other
developments which will be outlined to our intermediary
contacts in meetings this year are:
• Changes to Partnership Law
Jersey has introduced Separate Limited Partnerships
and Incorporated Limited Partnerships. These new
vehicles widen the choice in the funds sector and in
structured finance. The range of possibilities that
“Jersey’s legal and finance practitioners, working from a jurisdiction of substance with high standards of corporate governance, are well placed to build on their long established commercial ties with clients throughout India”
“Jersey has remained a strong, stable partner for international business, acting as a conduit for the distribution of capital to the world’s leading
finance centres and as a gateway to European markets”
By Sean Costello Head of Business Development for India and the Gulf Cooperation Council, Jersey Finance
www.jerseyfinance.je Jersey Links | India 4
Jersey provides the opportunity and expertise to help
develop a truly successful international portfolio.
Banking and investment management in action
To illustrate the extent of local expertise, we worked with a
wealthy resident Indian entrepreneur to help him increase his
ownership (shareholding) in a successful and growing Indian
based Privately Owned Company, despite not having liquid
assets to finance the deal. The client needed help to achieve
this via pledging some of the shares, which, as majority
shareholder, he already owned in the Company. He held these
shares via a Mauritian Company of which he was the sole
shareholder.
Due to an innate understanding of India and the presence
of the Bank in Mumbai, it was easy for us to independently
agree the value of the Privately Owned Indian Company
shares, such that they could be used as collateral for the
loan. An understanding of the India-Mauritius double tax
treaty meant that it was possible to design and develop the
appropriate facility to support the deal.
The Indian Company continues to expand rapidly and hopes
to float on the Indian Stock Exchange. The client and his
family have since agreed to centralise and house the wider
family financial assets in Jersey.
Jersey: a preferential jurisdiction
Indian entrepreneurs have every reason to move businesses
to Jersey and/or to consider Jersey as a preferential
jurisdiction to reside and accumulate their assets. Many
banks in Jersey have developed a strong understanding of
the culture and the banking and investment needs of resident
and non-resident Indians, and they are putting this at the
disposal of an ever-growing client base.
Private Banking to engender entrepreneurship and safeguard the wealth of the Indian community
Recognised for its conviction to provide the best in offshore
wealth management services, Jersey is fast becoming the
jurisdiction of choice for global investors – particularly the
resident and non-resident Indian community.
Why? Investors continue to recognise Jersey’s robust,
weighty and highly experienced private banking sector,
which is highly accredited by international and European
regulatory bodies. Jersey’s wealth structuring models
are renowned for being innovative and nimble to
anticipate and embrace changing personal situations
and international regulations. Jersey offers the perfect
infrastructure for resident and non-resident Indians to
diversify their assets and to safeguard their wealth.
The Jersey banking industry has already committed
to forming strong bonds with India, learning to better
understand the cultural value systems that govern
the financial decision-making process. The industry
acknowledges that it is vital to take the time to nurture
real relationships with investors and their families before
undertaking any wealth management activity.
ABN AMRO Private Bank Jersey first began to support
resident Indian clients in 2001 and has continued
since with a wide variety of banking and investment
management services. Jersey institutions have provided
tailored structuring to provide cross border business
financing, they have structured personal wealth
management solutions and have also provided financing
for the acquisition of property in response to the growing
number of wealthy Indian nationals buying UK property.
Many resident Indians, with the help of Jersey’s banks,
are making good use of the Indian Liberalised Remittance
Scheme, where residents can legitimately transfer/invest
up to US$200,000 abroad per family member each year.
By Patrick Crowley Country Executive, ABN AMRO Private Bank Jersey
“Investors continue to recognise Jersey’s robust, weighty and highly experienced private banking sector, which is highly accredited by international and European regulatory bodies”
www.jerseyfinance.je Jersey Links | India 5
• In Jersey there is no Stamp Duty on share transfers, a
standard 0% Corporate Tax rate, no Withholding Tax on
dividends and no Capital Gains Tax. Jersey is outside the
UK Value Added Tax network;
• Jersey law has been amended to permit the merger of a
Jersey company with an Indian company;
• Jersey has excellent air links with London and other cities
and has a wide choice of legal, accounting and other
service providers.
The use of Jersey companies has served Indian business
well and this trend is likely to continue as Indian businesses
expand their activities and capital-raising into markets
outside India.
The use of Jersey companies by Indian businesses
Establishing a Jersey company is an excellent choice for
Indian businesses wishing to set up a company outside India
as a listed vehicle or a holding company for non-Indian
assets, or to raise debt capital. Typically, an established
group of companies will introduce a new listed Jersey
parent company or finance company. Jersey companies are
suitable for listing on the main board (FTSE) and AIM of the
London Stock Exchange.
Why choose Jersey?
Jersey companies are popular for many reasons including
the following:
• Unlike many offshore jurisdictions, Jersey shares settle
through CREST, the UK’s paperless securities settlement
system. This removes the need for a depository receipt
programme;
• Jersey corporate law is modelled on English corporate
law but incorporates further flexibility, for example by
providing a wider choice of entities and more flexible
dividend, share issue and capital reduction regimes.
There is no prohibition on financial assistance in Jersey;
• The City Code on Takeovers and Mergers applies to a
Jersey company if it is centrally managed and controlled
in the UK, the Channel Islands (including Jersey) or the
Isle of Man;
• In relation to funds, the flexibility and speed of
the Jersey regulatory regime and the availability of
innovative structures make Jersey attractive;
• Jersey is located in the UK time zone, covering India’s
close of business and the USA’s opening of business;
“Jersey companies are suitable for listing on the main board (FTSE) and AIM of the London Stock Exchange”
By Alan Stevens Group Partner, Carey Olsen
“In Jersey there is no Stamp Duty on share transfers, a standard 0% Corporate Tax rate, no Withholding Tax on dividends and
no Capital Gains Tax”
Indian businesses using Jersey
• Yatra Capital Limited, an Indian property fund based in Jersey and listed on Euronext Amsterdam (that raised €100m at its launch in 2006), aims to create value for investors through the ownership, development and operation of high quality property on Indian commercial and retail markets;
• Vedanta, an Indian mining business, has used Jersey companies on a number of transactions, including the issue of US$725m convertible bonds in 2006, US$1.25bn convertible bonds in 2009 and US$805m convertible bonds in 2010;
• Essar Energy, an Indian energy business, recently used a Jersey company to issue US$550m bonds convertible into ordinary shares in its UK parent company.
www.jerseyfinance.je Jersey Links | India 6
UK residential property structures using the Liberalised Remittance Scheme
“The Liberalised Remittance Scheme allows Indian Resident individuals to remit overseas US$200,000 per financial year”
any mortgage, less the available nil rate band, currently
£325,000). Therefore should the property be worth
£2,000,000, if held directly, the Inheritance Tax payable
could be up to £670,000.
The simple solution to this problem is for the individual
to own the UK property through a Jersey company. The
individual therefore owns shares in a Jersey company (i.e. a
non-UK situs asset), rather than the direct property holding,
so the above UK Inheritance Tax problems do not arise.
There would be no UK Capital Gains Tax payable upon sale of
the property, however there would be some UK Income Tax
payable on the net rental income. With regards to UK Income
Tax, one important difference is that a company would only
ever pay Income Tax at the basic rate (20%), whereas an
individual could be exposed to higher rates (up to 50%).
An Indian Resident making use of the Liberalised Remittance
Scheme would use the allowance to purchase the shares of
a newly formed Jersey company. The Jersey company would
then use these funds to pay the deposit on the property and
the associated purchase expenses.
The aforementioned example uses a Jersey company,
however there are also benefits in using Jersey trusts and
Jersey Foundations for such structures, which may provide
additional estate planning advantages. We expect to see
more use of these structures going forward.
The residential property market in the United Kingdom
has long held attractions for overseas buyers, in particular
Indian High Net Worth Individuals, many of whom have
until recently found it difficult to access the market due
to exchange controls in place in India.
The Liberalised Remittance Scheme was introduced in
2004 and further extended in 2007. It allows Indian
Resident individuals to remit overseas US$200,000 per
financial year (April-March).
It states that this is available “for any permitted current
or capital account transactions or a combination of
both. Resident individuals are free to acquire and hold
immovable property or shares (of listed companies or
otherwise) or debt instruments or any other asset outside
India without prior approval of the Reserve Bank”.
We have seen Indian Residents setting up structures using
the Liberalised Remittance Scheme for various different
activities, however the most popular has been to purchase
UK property via Jersey companies.
Jersey is tax neutral having a zero per cent Corporate
Tax rate, no Capital Gains Tax, Inheritance Tax or
Withholding Taxes.
The value of UK property falls within the scope of
UK Inheritance Tax, even where the owner is neither
UK resident or domiciled. This means that should an
individual die while owning UK property, a charge to UK
Inheritance Tax would arise (at 40% of the value net of
By Neel Sahai Director, Minerva Financial Services Limited
“We have seen Indian Residents setting up structures using the Liberalised Remittance Scheme for various different activities, however the most popular has been to purchase UK property
via Jersey companies”
www.jerseyfinance.je Jersey Links | India 7
Jersey: First for funds
India’s economic growth in recent years has prompted
increasing interest from international investors wishing to
diversify into this vibrant market. Indian fund promoters
have also recognised the potential of tapping global inward
investment by using Jersey fund vehicles familiar to
sophisticated global investors.
Jersey fund vehicles, whether companies, limited
partnerships or unit trusts, enjoy the certainty of tax
neutrality (with no Capital Gains Tax, Stamp Duties or
VAT) and provide a range of flexible structures for the
efficient extraction of investor returns and management
fees. But what distinguishes Jersey from other offshore
fund jurisdictions?
• Jersey offers a full spectrum of fund regulation, from
rigorous regulation of publicly offered Retail Funds
through to unregulated regimes, with regulated but ‘fast-
track’ expert investor and listed fund regimes in between.
• In the same time zone as London, Jersey has a
sophisticated, innovative and mature finance industry,
with 25% of the workforce in law, accountancy
(including the ‘Big Four’), banking, investment and
fund administration.
• Jersey fields experienced directors for local funds and
management entities to ensure that management and
control (and hence real ‘substance’) is demonstrable.
“Many Indian Real Estate, Infrastructure and Private Equity Funds have been established using Jersey feeder structures”
By Ben Robins Head of Funds, Mourant Ozannes
Jersey funds investing in India include:
• India Optima Fund The India Optima Fund is promoted by ICICI Bank and uses a Jersey Feeder Fund (India Opportunities Fund Limited) to introduce a wider pool of international investors. It offers exposure to a range of Indian equity opportunities, including small-medium cap companies.
• Tara India Fund III, LLCPromoted by IL&FS Investment Managers Limited and using a Jersey Feeder Fund (Tara Feeder Fund), the Tara India Fund III, LLC is targeting US$400,000,000 of Indian private equity investment.
• Urban Infrastructure Real Estate FundThe Urban Infrastructure Real Estate Fund uses two Jersey Feeder Funds, which feed into a Mauritian master fund, investing up to US$500,000,000 in Indian infrastructure projects.
• 3i India Infrastructure Fund3i Investments plc has established the 3i India Infrastructure Fund in Jersey, which has been established to invest in the rapidly growing India Infrastructure market and has commitments of US$1,194,830,000.
• Jersey is economically and politically stable, with financial
reserves and no government debt.
• Jersey recognises the importance of strong political,
regulatory and trade links with India. A Tax Information
Exchange Agreement between Jersey and India will be
signed shortly.
• Jersey is in the top division of global compliance as assessed
by the IMF, OECD, IOSCO and the Financial
Action Task Force.
Indian fund structuring
Many Indian Real Estate, Infrastructure and Private Equity
Funds have been established using Jersey feeder structures.
The Jersey Feeder Fund, which is a preferred vehicle for
international investors, invests in India via a master fund
structure established in a jurisdiction with a double tax
treaty with India, such as Singapore or Mauritius, to assist the
efficient extraction of income and capital for investors and
avoiding punitive double taxation. Each Jersey Feeder Fund is
managed and administered in Jersey, with investment advice
and recommendations received from local Indian experts. The
funds are audited in Jersey (generally by one of the ‘Big Four’
accountancy firms) and have proved particularly popular in
the region.
www.jerseyfinance.je Jersey Links | India 8
Efficiencies and flexibility
Cost and time efficiencies are achieved on a fund platform
by each fund using the same standard form prospectus,
with fund specific terms reflected in a short appendix. These
include the investment objective, strategy and restrictions
of each fund, the identity of the investment manager, as
well as risks associated with the particular investment. Time
periods and amounts for the various dealing dates, lock-ups,
maximum and minimum initial investment and liquidity terms
and so forth are also dealt with in the appendix.
The standard form documents are drafted in such a way as
to provide structural flexibility for funds of varying levels of
complexity. They may accommodate nearly any Alternative
Investment Fund, including Private Equity, Venture Capital,
Hedge Funds, Property Funds, Film Funds and Art Collection
Funds.
Jersey Platform Funds pave the way to a more comprehensive
and thorough set of fund documents for both alternative
investment and other funds. They offer an unbeatable
alternative for funds where structural integrity is paramount,
consistency of documentation and low cost is highly desirable,
and a credible jurisdiction is strongly advisable.
Platform Funds for India
Innovative Platform Funds can provide a valuable gateway
for funds business between Jersey and India, facilitating
both inward-bound and outward-bound investments
connected to India.
The idea of commoditising funds is attractive but not new.
For a long time Umbrella Funds have been established with
a single investment manager providing services to a number
of separate funds formed under one holding vehicle.
Umbrella Funds may use largely standard form documents
and the same service providers to achieve cost efficiencies
for all funds on the same platform.
Going one step further, facilitating different investment
managers on the same platform presents a new set of
challenges. Ideally, it requires the regulation of each fund,
as opposed to the Umbrella Fund structure as a whole. This
demands a special legal structure that can further protect
the portfolio of each fund from the potentially diverse or
even opposing investment strategies of different investment
fund managers on the same platform. Jersey has such
a structure and is using it to establish Platform Funds
which are either regulated by the Jersey Financial Services
Commission or unregulated, open-ended or closed-ended
and, furthermore, capable of having different investment
managers. The funds may be established in a corporate
form or in a limited partnership form, in either case
providing appropriate ring-fencing to protect investors.
By Adrian Odell, Head of Funds, Jersey, Collas Crill
“Cost and time efficiencies are achieved on a fund platform by each fund using the same standard form prospectus, with fund specific terms reflected in a short appendix”
“Platform funds offer an unbeatable alternative for funds where structural integrity is paramount, consistency of documentation and low cost is
highly desirable, and a credible jurisdiction is strongly advisable”
Jersey
Jersey Finance Limited4th Floor, Sir Walter Raleigh House48-50 EsplanadeSt HelierJersey JE2 3QBChannel IslandsT: +44 (0)1534 836000F: +44 (0)1534 836001E: [email protected]
Mumbai
Jersey Finance Limitedc/o B 205 Dynasty Business ParkAndheri Kurla RoadAndheri EastMumbai - 400093 IndiaT: +91 (0)22 6742 3211 F: +91 (0)22 6742 3215E: [email protected]
New Delhi
Jersey Finance Limitedc/o 4th Floor, Statesman HouseBarakhamba Road, Connaught Place New Delhi - 110001 IndiaT: +91 (0)3044 6777 F: +91 (0)3044 6506E: [email protected]
Abu Dhabi
Jersey Finance LimitedOffice 107, Bainunah St 34, Al Bateen C6TowerPO Box 113100 Abu Dhabi UAET: +971 2 406 9722F: +971 2 406 9810E: [email protected]
London
Jersey Finance LimitedSuite 604, Tower 4225 Old Broad StreetLondon EC2N 1HNUnited KingdomT: +44 (0)20 7877 2317F: +44 (0)20 7877 2316E: [email protected]
Hong Kong
Jersey Finance LtdRoom 5, 20th FloorCentral Tower28 Queen’s Road CentralCentralHong Kong T: +852 2159 9652F: +852 2159 9688E: [email protected]