Doing Business Internationally: Jersey

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Christy: Hello, everyone, and welcome to today's webinar, "Doing Business Internationally: Jersey." My name is Christy DeMaio Ziegler, and I will be your moderator. Please join me in welcoming our host, Helena Ledic, an associate general counsel for CSC in the Chicago office. Helena.

Helena: Thank you so much, Christy. Everyone, I'm delighted that you can join us today and hear from our experts in Jersey. I'd like to introduce you to Philip Hendy, the Head of Real Estate in Jersey. Philip.

Philip: Hi, Helena. Thanks so much, and I'm looking forward to just taking everyone through a bit of a whistle-stop tour about how to do business in Jersey and just to get that message out to people.

Helena: Very good. And then Shane Hugill, our Head of Executive Compensation Services in Jersey. So Shane.

Shane: Yeah, thanks, Helena. Yes. Hi, everyone. Shane Hugill, Head of Exec Comp in Jersey. Delighted to be talking to you today, and look forward to giving you some insight into Jersey location.

Helena: So let's talk about our agenda today for doing business internationally with Jersey. First, we'll learn a little bit about CSC, and then we're going to go into the country profile and why Jersey. We're going to learn about what we need to know about doing business in Jersey, types of structures to consider, and the executive compensation services, and then how CSC can help you.

So a little bit about CSC. For more than 120 years CSC has been the partner of choice for companies around the globe. We're trusted to handle everything from incorporating a company through maintaining compliance to corporate transaction work, and we protect digital assets from the threats of the online world, and then we do everything in between. We offer the solutions and technology that keep businesses running in the background, allowing clients to focus on the important work of growing their business.

So let's learn a little bit about where CSC is located. We've got offices and capabilities in more than 140 jurisdictions across Europe, the Americas, Asia-Pacific, and the Middle East. We're a global company capable of doing business wherever our clients are, and we accomplish that by employing local experts, such as Philip and Shane, in every business we serve.

So first a little bit about Jersey. The population is about 103,000 people. And then the only city, as Shane and Philip have told me, is St. Helier. The island is about 45 square miles. It's located in the English Channel, off the coast of northern France. There are 12 parishes, and each parish geographically touches a coast. Certainly for our audience what matters is it's about a one-hour flight from London Heathrow.

So Jersey has been a leading international financial center for more than six decades. It boasts a dynamic regulatory system as well as a stable economic and political climate. Financial and legal services drive the island's economy. So there is great political and economic stability, and it makes it a world leader in finance. It offers a clear, tax-neutral environment, which we will learn more about in the webinar today, allowing investors to work together more efficiently. And Jersey also has a very strong regulatory framework, and this framework is one of the strongest in the world and it brings great clarity and transparency to the world of finance in Jersey.

So now that we've learned a little bit of facts about Jersey, let's talk a little bit about how Jersey became such a successful international finance center. Philip, why don't you get us started?

Philip: Okay, Helena. I think the starting point is the fact that Jersey is a Crown Dependency. So it's the Bailiwick of Jersey. And what that means is it's not part of the UK nor part of the EU. It is a Crown Dependency. Although it's not a sovereign state, it does have the power to pass its own legislation. So it has the ability to set its own tax and its own regulatory envelope.

So over the last six decades, it's become one of the leading and most successful offshore international centers because it's got a stable political environment where it is democratically electing a parliament, but also it reflects the UK and the UK economic climate in that wrapper of tax transparency. So that's made it a very important and significant destination for international investors to avoid additional layers of tax on top of what investors and companies would pay in their home jurisdiction.

In terms of over the last couple of years, the drive economically and socially of every jurisdiction has been to recognize the responsibility to the world. And Jersey is no different, and it's using and looking to use its expertise and capital to support and move to this environmentally and more socially responsible economy. It's Commission has acted upon a series of reports. The most recent one was Pathway to Success, which will be delivering a social responsibility investment by the year 2030.

Helena: So Shane, why don't you tell us a little bit about the political and economic stability in Jersey and then also the workforce?

Shane: Sure, Helena. And just starting with the workforce, a significant proportion of the island, actually its employed population anyway work in the finance sector. And that finance sector is pretty broadly spread. So there's a range of business types working in what we call the finance sector. We've got banks, investment managers, hedge funds, law firms, and then of course corporate administrators, such as ourselves, with specialisms in trusts, fund administration, corporate administration. So it's a very broad sector, and it contributes a significant amount to Jersey's economy.

Importantly, I think that workforce is largely viewed as highly skilled. So we take employees from all over the globe really, and they're generally educated to a higher standard. For example, Philip and my backgrounds are from the UK, chartered surveyor, tax advisor. We have a lot of people who move to the island to support the finance sector, and I think that really benefits the island and its services we can provide from here.

As we've already touched on, it's a very stable economy and a stable environment. Politically there's very few upheavals. Economically it's robust. So if there are downturns globally, Jersey remains largely sheltered from that. And it's a heavily regulated jurisdiction. So we are compliant with all of the international standards, FATF being an example. We have a MONEYVAL visit here across the backend of this year. So the regulatory position is very strong. And it's really recognized I think as a jurisdiction that's compliant, has done a lot of work around tax information sharing agreements, did a huge amount of work to become compliant with FATCA, CRS, and other tax information sharing of services.

So Jersey as a whole, I think it's a very stable place for business, and it has an excellent professional infrastructure to support clients with their needs on the island.

Helena: So now that we've learned a little bit about Jersey in terms of the facts and then how it became so prominent of an international financial center, Philip, why don't you talk to us about the different types of SPVs that are most common in Jersey?

Philip: Thanks, Helena. So starting off, the first used are companies, and I'm sure that lots of the people dialing into this webinar will know all about companies. So they have their own legal personality. They have directors and shareholders. And the important thing is that shareholders are only liable to the money that they've put into that company. And in Jersey, we tend to use them for holding assets. And we also have two other types of companies. They've got protected cell companies and the incorporated cell companies. But the main bedrock is traditional companies.

For collective investment and aggregation of investors' money, we tend to use general partners and limited partnerships. And again, that's I'm sure a structure that's well known to many of the people on this call. But one thing that's slightly different is that they're tax transparent, both for the UK and for overseas, but also from a Jersey tax perspective.

One thing that probably a lot of people don't know about is Jersey property unit trusts. So they are unitized trusts that set up to hold real estate anywhere in the world. And a lot of the time they are completely tax transparent in the UK and also in Jersey. They also can be used to aggregate capital in a unitized basis, very similar to a fund with units, like shares or limited partnership interests.

Something that's just been passed law and started to be able to set up in Jersey is the LLC, and that I'm sure is something that lots of people know all about on the call. But from a Jersey perspective, it's a new type of vehicle. But most importantly it can not only hold assets directly, but from a Jersey and UK perspective, it can be tax transparent. But from a U.S. tax perspective, it can be treated either as a partnership or as a company. And I think from a North American perspective, we'll start to see a lot of interest and traction in that particular area.

And then, the last type of structure that we see a lot of in Jersey are trusts. So unlike the Jersey property unit trusts, these are just discretionary trusts to hold assets on behalf of beneficiaries. And that has the ability to split the legal and beneficial ownership. So the legal ownership is held by the trustee, but the beneficial ownership could be individuals or in some instances employees of companies. I know that Shane will talk to that later on in this webinar.

Helena: So Philip, we've heard both you and Shane have mentioned tax neutrality. Can you talk a little bit about that with Jersey?

Philip: Absolutely, Helena. So tax neutrality is the Jersey way of not imposing additional layers of tax on top of what investors and companies already do in their home country. So investors avoid double tax and only pay one tax in their home jurisdiction. So that removes the administrative burden of investors who want to pool funds with other investors and have to make tax returns and payments.

So in Jersey, you have the ability for people with different tax consequences investing side by side and only bearing the tax consequence that they ordinarily would do. So, for example, pension funds can invest next to an individual next to a company, all with different tax rates in the home jurisdiction, but because of tax neutrality, they're all able to return their money back to their home jurisdiction and settle their tax as it would be due.

Does that answer the question, Helena?

Helena: Yes, it does. Thank you. So tell us now a little bit more about how SPVs actually work in Jersey.

Philip: So Jersey has been set up to have a wide variety of SPVs, and we've gone through the most common ones. But they're also used to deploy capital into private equity, fund of funds, and credit funds. In terms of companies, we look after companies for large corporate entities holding assets or holding companies that hold further shares in other companies in Jersey, that then hold assets. It's also able to incorporate capital market platforms that issue bonds and listed securities. Real estate can be held directly or indirectly through companies, GPs, LPs, and Jersey property unit trusts as we spoke about earlier. Private wealth structuring can be done through trusts and through companies. Executive compensation, Shane will talk to you more about the type of structures that we tend to see in Jersey around that. And that all is able to be able to be run in a very well regulated but appropriately regulated environment with this tax neutrality that we spoke about earlier.

Helena: So Philip, can you tell us a little bit about the strong regulatory framework that is in Jersey?

Philip: Absolutely, Helena. But I probably should also start with an apology. This is going to be probably one of the drier slides that we go through in this whole presentation today.

Fund regulation is something that in Jersey is appropriate. So unlike other jurisdictions where they've put a very high bar on regulatory oversight of funds, Jersey has looked to have appropriate regulation because most investors recognize there needs to be some proper regulatory environment, but don't want the cost consequences of an overly-regulated fund or jurisdiction.

So in order to do that, Jersey split its fund regime into types of investors and number of investors. So Jersey is not a particularly well-known jurisdiction for the very retail type of mom-and-pop investors, but it is very well known for professional and expert investors, which can also be individuals as well as pension funds, insurance companies, and sovereign wealth funds.

So at one end you've got the Jersey private fund that can be used for up to 50 investors. That can generally be open or closed ended. And that type of investor is people that are investing a minimum of £250,000. And again, that can be used to access the EU, the UK, or the rest of the world.

The Jersey expert fund has no limit on the number of investors or the fund size. Again, it can be opened or closed ended. And the type of investor, the definition of an "expert" is set out in a number of categories. But the main one is a minimum investment of $100,000, and that is in U.S. dollars. And again, that can be used to market to the EU, the UK, or anywhere else around the world using the private placement regime, particularly into the investment into Europe which the private fund can also do.

The eligible investor fund again has no limit on investors and no limit on the size of the fund. Again, open or closed ended. There are a number of categories for eligibility for the investors, the main one being the minimum investment of a million U.S. dollars. Now this has to be invested into or marketed more correctly into an EU or EEA country, so the EU or the EEA being mainly large European countries. But if it's not marketed into the EU, it can be a notification fund only back to the Jersey Financial Services Commission to regulate the funds.

So I think that really demonstrates a level of appropriate fund regime and regulation depending on the type of investors and the size of the fund.

Helena: So we've heard from Philip about different fund structures, but Jersey is also known for executive compensation plans and programs. So Shane is going to walk us a little bit through that now. Who actually uses these executive compensation plans? Why do they use them, and then how do they work?

Shane: Thanks, Helena. Yeah, so I just want to run you through an interesting sector that we have at CSC Jersey that pulls on that skill set that we talked about earlier within the workforce here. So our team supports businesses running their employee incentive plans, and it's a really diverse and important piece of the jigsaw in Jersey because we support corporates all over the world in running their incentive plans. And I'll go through what some of those look like later. But we service listed multinationals, private companies. In the team here, we have NASDAQ and New York Stock Exchange listed clients. We do a tremendous amount for global financial institutions, whether that be investment banks or asset managers. And private equity drives a huge amount of administration work in this space for us.

I'm not going to go into huge detail as to why a company would use an incentive plan. I mean it's quite obvious. But I think talking about some of the features of the plans and why therefore you might want to outsource some of the administration of those plans, it is an interesting point to consider. So incentive plans are I think increasingly complex. There's a real need globally to attract and motivate staff, and coupled to that there's a regulatory regime in the world that's tightening up, particularly around financial services firms. That means that administering an incentive plan is actually quite complex. So companies do often outsource that work to a third party, such as ourselves. And also in many of the countries where our clients are located, there are tax approved plans or qualifying plans where you need to meet certain requirements, and so a third-party administrator might provide some of the core functionality that you need to ensure that your plans remain compliant with the local tax authorities.

In terms of what we do here and how we support clients, it's a range of services really. So some of the things I'll talk about are SPVs. Some of the work we provide is what we call plan administration, so managing data, dealing with inquiries, providing online portals, providing reporting to corporates as well. And then we have other bespoke services we provide, such as acting as nominee for shareholders, holding pools of assets for companies.

And one thing that's core to our business here, which I know is not terribly common in the U.S., but I'm just going to touch on it is a trust. I know Philip has mentioned it already. Jersey has a really advanced trust legislation and background, and a lot of companies globally do use a trust to support their incentive plans. They use that trust to hedge the value of awards in the programs. They can use them for flexible buy-back mechanisms, settling trades. There's a whole host of reasons why a trust is the typical SPV that we use to support our clients.

So it's a range of services that we provide, but importantly we've got a dedicated team here with a range of skills that can support our clients running their incentive plans and allowing them to focus on their core business rather than worrying about the administration of those plans.

Helena: So Shane, tell us a little bit about how being located in Jersey impacts the executive compensation plans?

Shane: Sure, Helena. Yeah, so being in Jersey has a direct impact by virtue of the types of clients that we've serviced over the years and how our services have evolved. So it impacts the core components of our services, whether it be SPVs or plan administration, and it also impacts the types of incentive plans that we support for clients. And I think that's quite important.

So if you look at our current client base, it's a lot of work is historically generated out of London, but that's not a bad thing. London is a global hub for incentive plans. Certainly for the rest of the world, Asia, Middle East, Europe, and the UK, London really is the go-to. Obviously, the U.S. is its own market, although we do have U.S. clients in the team. But if you look at where our work has come from, what we've seen is that we need to segment our services based on the types of plans that we support.

So very briefly, we've split our team into four areas. Share plans or equity comp would be the most obvious one. But then we have three I think slightly more sophisticated offerings that really pull on our abilities in the team here. So we run carried interest and co-investment arrangements for private equity managers. Maybe that's profit sharing arrangement in the U.S. We have a dedicated pensions and savings team that runs employer savings schemes. And we have a bonus deferral team, and that team focuses heavily on financial services firms where there's a lot of regulatory requirements to defer variable pay for high earners.

So we've plugged into those four areas, and we provide a range of services to run those plans. As I touched on previously, one of those services is acting as a trustee. Not common in the U.S. But as I said, the rest of the world, many companies will use a trust to support their incentive plans. And what we see is particularly with the U.S. client base in mind, where there's a an outbound deal in Europe or a multinational corporation that might be looking to run stock plans in other countries, they will typically come across the use of a trust or a nominee or some of the other SPV services we provide.

But in addition to that, we've got sophisticated plan administration services. So we can run all of these plans, the data, the portal, the Q&A with participants. So that is a key requirement for a service provider I think in Jersey providing exec comp services.

As we've touched on before, depth of expertise to support these programs. We use lawyers, accountants, tax advisors all within the team to ensure that based in Jersey we can provide as much support as we can to clients in running their incentive plans.

And I just note that, as we touched on earlier, Jersey sits in this quite unique place where it's quite independent, sets its own laws, and I think that kind of flows through into how we operate. So we can interact independently with banks, custodians, transfer agents, and other major stock plan administrators. And we can seamlessly plug into them without necessarily being caught up in their environment and those dynamics that you might see in the U.S.

So all in all, I think the team in Jersey has got a long, long track record in servicing incentive plans, and we've shaped the services to meet our clients' needs and really focus on giving those clients the support they need. And particularly on outbound deals out of the U.S. into Europe or the UK, I think that's an area that really is of interest here.

Helena: So now that we've learned about fund structures and regulations in Jersey and how executive compensation plans work, let's talk a little bit about how CSC can help you. So Shane, why don't you tell us a little bit about CSC in Jersey, how we can help you out with things such as your company formation, company management, and executive comp?

Shane: Yeah, thanks, Helena. So starting, as we as we've touched on the most common entity type, company formation in CSC Jersey, we've got down to a very smooth process. We have a team, a dedicated Corporate Services team that can form companies in a very quick time frame, but then provide a whole range of services for the ongoing management of that entity going forwards. All the obvious ones, accounting, management, reporting. Importantly, of course, provision of directors. So we do provide CSC directors onto client companies, sometimes onto mixed boards. So there's a range of director services that come out of our Corporate Services team. They are making use of a cash management and deposit facility that we've got in Jersey at the moment as well.

And then moving briefly back to my area, executive compensation, so as I said, we can support companies with a range of plan types. I won't go through them again, but I think it's a very broad range of incentive plans that we can support businesses with in terms of taking that pressure off the administration for them.

So I think I'll just ask Philip now to just run through what we can do in the real estate, private wealth, and fund administration space.

Philip: Thanks, Shane. So from a real estate perspective, we can look after all the regulatory and tax filings for wherever that particular property is based. We can also do the accounting to a variety of standards, and that doesn't necessarily need to be where the property is based because international investors own property around the world and consolidate those into their accounts and their own need for accounting standards. So we can do U.S. GAAP, International Financial Reporting Standards, UK GAAP, LUX GAAP. And we do that on a regular basis as well as doing consolidations into larger accounts.

We also can do the accounting through our own proprietary systems. Or we can also do it on Yardi, or we can also do it on clients' instances of Yardi as well. So we're very flexible about how we can do that accounting and those reporting obligations.

In terms of sharia finance, we're very conversant with how to do commodity murabaha structures and other ways of holding property with sharia compliant finance in place.

From a private wealth perspective, we obviously provide trustees, both corporate and private trust companies, as well as running family offices. Clearly we're running for the trusts, whether they are discretionary or life interest trusts. Foundations, they can either be charitable or non-charitable. We can provide the regulated council member to be there as well. And through all these types of structures that we've all spoken about, whether they be real estate, executive compensation, private wealth, or companies, we can do the cash management and help move that money around.

From the fund perspective, we've obviously talked about the different types of funds, and it won't surprise you that we can set up all of those types of funds. We can also deal with the regulatory consents that are needed, and we can do the AIFM or local reporting under the private placement regime if required. Fund accounting, again we can reflect the accounting that's required by investors, not necessarily the jurisdiction where the fund is. And we can do investor reporting, whether that's bespoke investor reporting or through various portals that we have. Clearly, we've got lots of directors that have got the skills and experience to sit on any of these types of vehicles that we've spoken about. We've got a large team of compliance people that can keep the structure and the entities regulatory compliant all the way through the regulatory journey that that entity goes on.

Helena: So now let's talk a little bit about CSC's global coverage. As I mentioned earlier, we're in 140 different jurisdictions, and we have that distinctive advantage that we are able to serve our clients where they are. We have regional hubs around the globe with in-country experts, such as Shane and Philip, who understand the ins and outs of various jurisdictions. You'll work with a dedicated service team in your time zone, fulfilling all your service needs. In all, our team is wherever you need us to be.

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