It's probably fair to say that the number of funds listing recently has slowed – and there's many factors which feed into this. Raising capital for an IPO of a fund or SPAC can be a tricky business, as market movements, sentiment – and, indeed, world events – can create roadblocks to listing where none should seemingly be. Yet, for the right proposition and track record, the stars can align for a successful IPO and listing.

Guernsey remains the key jurisdiction (aside from the UK) for listings on the London Stock Exchange. Indeed, at the time of writing this piece, there were over 100 Guernsey companies listed on the main market of the London Stock Exchange ("LSE"), which includes the Specialist Fund Segment, and also the Alternative Investment Market ("AIM"), making Guernsey the jurisdiction of choice for a listed vehicle after the UK.

This short note sets out the key factors which make Guernsey the destination of choice for listed vehicles.

Time zones matter - Guernsey is a leading offshore financial centre located in the same time zone as London. It sounds obvious but having service providers working in the same time zone as the market is important – after the IPO excitement dissipates, there are day-to-day corporate actions and business to be done during the market opening times.

Guernsey provides internationally recognised and top-tier financial services in a well-regulated, robust and stable environment. The Island is home to experienced, high-quality service providers, including company and fund administrators, registrars, auditors and lawyers.

Flexible company law - Guernsey has modern company law giving wide flexibility to create corporate structures tailored to investors' needs.

Key aspects of Guernsey company law include:

  • dividends, buybacks, redemptions and capital reductions are based around solvency rather than available reserves;
  • there is no prohibition on financial assistance if the company is solvent; and
  • local and cross-border mergers are possible, making Guernsey an ideal jurisdiction for a SPAC.

Ease of trading and no stamp duty reserve tax ("SDRT") - Shares in Guernsey companies can be traded in dematerialised form through CREST without the need for CREST depositary receipts. There is no UK SDRT on the sale of Guernsey shares (provided that the share register is maintained outside the UK) and there are no Guernsey stamp or transfer taxes chargeable on the sale of listed shares in a Guernsey company.

Tax neutrality - Guernsey's prevailing rate of corporate income tax is 0%, providing tax neutrality to investors (who will be subject to taxation according to their individual circumstances in their home jurisdiction). Whilst income tax is charged at 10% or 20% rates on certain items of income, Guernsey holding companies or funds are generally subject to the 0% rate and, alternatively, funds can apply for tax exempt status. Guernsey does not levy withholding tax on dividends and other distributions paid to companies or non-Guernsey resident persons and does not levy withholding tax on interest. There are no capital gains, value-added or sales taxes.

Likewise, the tax position of the manager will be important too, especially where the ownership structure may be complex or across multiple jurisdictions.

UK tax residency for Guernsey companies - A Guernsey company is tax resident in Guernsey by default. However, a Guernsey company can migrate its tax residence out of Guernsey to another jurisdiction, such as the UK. This makes Guernsey an ideal jurisdiction for UK Real Estate Investment Trusts ("REITs") which need to be UK tax resident and, crucially, not resident in any other jurisdiction.

This means Guernsey companies can deliver the UK REIT tax benefits to investors – whilst accessing the benefits of the flexibility to return or distribute funds to investors.

Pragmatic regulatory optionality - Guernsey has a robust, flexible and user-friendly regulatory regime for corporate funds, coupled with a pragmatic regulator, the Guernsey Financial Services Commission ("GFSC"), which is continually evolving the fund regimes to meet the needs of the market.

For listed vehicles which are also investment funds, the most typical route is to become a "registered" fund, which has no limitations on the number and type of investors and can obtain regulation on a "fast-track" basis involving a three business-day turnaround by the GFSC. Registered funds do not need to have a Guernsey-based manager (although they can have) and a number of LSE listed funds are managed by UK managers.

Vehicles which are not considered to be collective investment schemes in Guernsey will not be subject to regulation by the GFSC.

UK Takeover Code - UK Takeover Code applies to Guernsey companies that are listed on the LSE or AIM, so that investors receive the same level of protection as they would receive if investing in a UK company listed on the LSE or AIM.

The Walkers team is experienced in the use of Guernsey companies for UK listings – please get in touch with any of the contacts below if you would like to discuss.

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.