Jersey Links with India

Jersey LinksA focus on Jersey’s international profile

Jersey’s growing links with India

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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



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



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



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”



• 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.



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”



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.



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]

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Jersey Links with India

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