It is well known that new investment company listings have been relatively sporadic of late – this is not entirely due to Brexit, but it is clear that Brexit has stalled a number of fundraisings which have gone out to market. Fortunately, once there is some clarity on the way forward, there may be a race to market.
Data from the London Stock Exchange (LSE) to the end of January 2019 shows that Guernsey is home to more non-UK incorporated companies listed on the LSE than any other jurisdiction globally. Guernsey will not be directly affected by Brexit because it is not part of the European Union and never has been; therefore, if the structure works now, it will almost certainly work after Brexit.
However, Guernsey will not be entirely unaffected by the European Union – the news that EU finance ministers signed off on Guernsey's substance laws confirms Guernsey's status as a fully compliant jurisdiction for the purposes of tax transparency and tax cooperation. This is great, if not unexpected news and has had the knock-on effect that the European Investment Fund (EIF) is once again permitted to invest in Guernsey funds. The EIF, which previously invested in Guernsey funds as part of a €147 billion investment across Europe, provides risk finance for small and medium-sized enterprises across Europe, backed by the European Investment Bank, the European Union and a range of public and private banks and finance institutions.
The offering to the European Union extends further – the latest report on the Alternative Investment Fund Managers Directive by the European Commission (the Report on the Operation of the Alternative Investment Fund Managers Directive, 10 December 2018) says that:
statistical evidence indicates that the EU management passport is working well, but the EU marketing passport is lagging behind and is suffering from the different approaches taken by NCAs [National Competent Authorities].
This "results in additional costs for the industry and investors, and undermines the benefits of the AIF [alternative investment fund] passport and therefore the Single Market". The report also states that:
it has therefore been of EU added value that national private placement regimes (NPPRs) are permitted to operate. Some interviewees called for the non-EU passports to be introduced and a significant number, from a range of Member States and third countries, called for the NPPRs to be retained, even if the non-EU passports are introduced.
It is clear that for some the passport will likely be a good choice; however, for the significant majority of new managers, private placement will still likely be cheaper and simpler.
This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.