FIRST HALF, 2012 /EXPERT INSIGHT INTO THE WORLD OF OFFSHORE COMPANY INCORPORATIONS/ CONTENTS/ INTRODUCTION [1] EXECUTIVE SUMMARY [2] THE COMPANY INCORPORATION ENVIRONMENT [3] GEOGRAPHIC TRENDS [4]
1 INTRODUCTION Welcome to this inaugural edition of Appleby s On the Register, a new report that provides data and insight about the company incorporation activity going on in the major offshore jurisdictions around the globe, where we do the majority of our business. This report looks primarily at data for the first six months of 2012. The data shows that markets have continued to recover since the lows of early 2009. Despite many potentially adverse circumstances still developing that could derail a recovery, some offshore jurisdictions should remain pretty optimistic that they have a strong value proposition and remain attractive destinations for registering offshore businesses. And with the likely resumption of strong growth in emerging markets, we expect that jurisdictions like the British Virgin Islands, Cayman Islands and Mauritius will continue to see increased interest. Offshore jurisdictions remain pretty optimistic that they have a strong value proposition and remain attractive destinations for registering businesses. Globally, offshore new company registrations are slowly returning to the levels that were seen before the global economic downturn. However, our report for the first half of 2012 indicates that there is still some volatility. For example, the number of new offshore company incorporations in the first half of 2012 was 41,556, representing a decrease of 4% on same period a year earlier, but an increase of 9% on the previous six months. We will watch the registries closely to see if the volumes continue to stay at or above the 2011 levels as we reach the end of the year. The offshore jurisdictions of the British Virgin Islands (BVI) and Cayman stand out in this recent upward trend with 10% and 13% increases in new company incorporations since the second half of 2011. Cayman in particular is showing a rapid return to the levels seen in 2009 and certainly seems to be a destination of choice for companies looking to incorporate offshore. Meanwhile, the BVI continued to record the largest number of new incorporations with 33,065 companies joining the register there in the first half of 2012. We hope you find the analysis on the following pages useful. Please don t hesitate to get in touch with your usual Appleby contact should you have any questions. Farah Ballands Global Head of Fiduciary & Administration
Loc Aggregate (mil ON THE REGISTER 2 EXECUTIVE SUMMARY There are a number of key themes that emerge from the statistics outlined on these pages. In particular: Volumes of offshore companies being registered were higher in H1 2012 than the preceding six months, and show that there is still a reasonable amount of activity going on across the offshore world. A number of jurisdictions are showing a clear positive direction with year on year increases in registration activity since 2009. The Seychelles is the offshore economy witnessing the greatest growth in activity, albeit that this jurisdiction s data lags behind the other jurisdictions we are tracking for this report. Between 2010 and 2011 this offshore location grew its company registrations by 20%. The jurisdiction that is dominating offshore new company registration activity by volume is the British Virgin Islands, which has consistently maintained a six-fold lead ahead of its nearest comparator, the Cayman Islands. The Cayman Islands is the fastest growth jurisdiction for new registrations, with a 13% increase since the previous six months. The UK and Hong Kong as comparators are showing signs of continued recovery with both annual registrations and total active companies showing year on year improvement. The projected figures for the UK are looking to be 200,000 more active companies at the end of the year compared to 12 months previously. H1, 2012 SIX-MONTHLY NEW INCORPORATIONS British Virgin Islands 33,065 Isle of Man 1,214 Cayman Islands 4,794 Guernsey 814 UK/London 246,705 Hong Kong 72,746 App loca Bermuda 465 Jersey 1,204 Seychelles N/A No. of deals Cay Isla 1 19, Mauritius N/A
3 THE COMPANY INCORPORATION ENVIRONMENT In the first half of 2012 there were 41,556 new offshore company incorporations, representing a decrease of 4% on the same period a year earlier, but an increase of 9% on the preceding six months. ALL NEW INCORPORATIONS OFFSHORE 2009-2012 1 H1 2009 28,542 H2 2009 32,364 H1 2010 36,965 H2 2010 37,159 H1 2011 43,269 H2 2011 38,115 H1 2012 41,556 Whilst the number of new company registrations appears to be growing in the first half of 2012, the total number of active companies on the offshore registries at the end of June 2012 (801,168 2 ) was 4% (or 31,918) fewer than the end of December 2011. It is possible that continued uncertainty in some markets, and the shift in focus from China/Asia to Africa for jurisdictions like Mauritius and the Seychelles is affecting a universal return to the numbers of company formations recorded prior to the global economic crisis in 2009. That said, we can clearly see that the volume of offshore companies being registered was higher in the first half of 2012 than the preceding six months. This shows that there is still a reasonable amount of activity going on across the offshore world. Even without the figures being available from some jurisdictions, a number of the offshore jurisdictions covered in our report are showing a clear positive direction with year on year increases in registration activity since 2009. The British Virgin Islands and the Cayman Islands being good examples of jurisdictions that have shown a dramatic return to the levels of company formations seen prior to 2009. If we look to the total number of active companies in the major markets of Hong Kong and the United Kingdom as indicators of the strength of confidence, their growth figures for the first half of 2012 are both up a solid 4% compared to end-2011. HONG KONG & UK: TOTAL ACTIVE COMPANIES ON REGISTER 2009-2012 Hong Kong UK 2009 782,174 2,339,618 2010 873,937 2,417,185 2011 966,957 2,556,356 Q1 2012 977,286 2,609,998 Q2 2012 1,006,444 2,647,802 1 These figures exclude Mauritius and Seychelles as these jurisdictions do not report detailed enough figures 2 Includes figures as at Dec 2011 for Mauritius and Seychelles
4 KEY GEOGRAPHIC TRENDS BERMUDA According to the data, Bermuda remains an attractive place to incorporate. The number of new company incorporations has been steadily returning to the figures last seen in 2008. In 2011, 983 new companies joined the register, of which 802 were exempted companies, and 20 overseas companies and 161 local companies. BERMUDA: NEW INCORPORATIONS 2008-2011 2008 1,245 2009 809 2010 902 2011 983 The data shows that the number of new company formations dipped in 2009 but has grown steadily since this time. While there are many potentially adverse circumstances still developing that could derail the recovery from the global economic crisis, we feel that Bermuda should be optimistic that it has a strong value proposition as a location for global businesses. For the first half of 2012, the number of new companies registered stands at 465, and based on prior years this suggests that by the end of 2012,we could see the total number of companies being registered increasing for the fourth year running. In particular over the last 12 months we have seen considerable interest in, and formation of, trusts and underlying companies for the financing of large asset and infrastructure transactions in Eastern Europe. There has also been a growing interest in Bermuda as a preferred domicile by Latin-American companies, particularly with the signing of Tax and Information Exchange Agreements (TIEAs) with Mexico and Argentina, and a TIEA with Brazil is well advanced. We expect Bermuda will continue to grow its share of company incorporations in 2012. It has always had a good reputation as a well-regulated location for international business, and in fact has taken a leadership role in working with international bodies to develop appropriate regulatory frameworks. There continues to be a strong emphasis on adapting Bermuda s legislation to keep pace with the evolution of our customers businesses, and a good example is Bermuda s drive for compliance with Solvency II. BERMUDA: NEW COMPANIES BY TYPE 2011 No. of deals Exempted companies Overseas companies Local 802 20 161
5 KEY GEOGRAPHIC TRENDS cont. BRITISH VIRGIN ISLANDS CAYMAN ISLANDS The BVI continues to dominate the offshore new company registration activity by volume. Since 2008, the jurisdiction has consistently maintained a six-fold lead ahead of its nearest comparator, the Cayman Islands. Our data shows that the Cayman Islands is currently the fastest growth jurisdiction for new registrations, with a 13% increase in companies joining the register since the previous six months. The number of new company incorporations registered in 2011 exceeded those of 2008 and looking at the figures for the first half of 2012 which already stand at 33,065, we see no reason to believe that this trend will not continue. In 2011, 9,064 new companies joined the register, of which 7,980 were exempted companies, 156 were classified as non-resident, 485 resident and 443 foreign companies. In particular we are seeing a trend in incorporations for companies in the information and technology sector, and the natural resources, mining and extraction sector, with particular interest in the buoyant markets of Africa, Latin America, Eastern Europe, Mongolia and Australia. We expect the BVI to continue to grow its share of company incorporations in 2012. The jurisdiction is well positioned, balancing cost effectiveness, product ubiquity and service quality. Sustained demand for the BVI business company from traditional sources of business, for example China and Hong Kong, is likely to be supplemented by new market sources looking for value and flexibility in an uncertain global economy. CAYMAN: NEW INCORPORATIONS 2008-2011 2008 11,861 2009 7,863 2010 8,157 2011 9,064 CAYMAN: NEW COMPANIES BY TYPE 2011 BVI: NEW INCORPORATIONS 2008-2011 2008 61,716 2009 47,477 2010 59,624 2011 64,729 Exempt Non-Res Res Foreign This dramatic outpacing of many other jurisdictions is for a variety of reasons. Broadly we attribute this to the contractual flexibility and legal certainty enjoyed by companies incorporated in the Cayman Islands. Cayman also has one of the deepest pools of sophisticated professionals offshore (lawyers, trust professionals, accountants and bankers.) 7,980 156 485 443 9,064 It is worth noting that Cayman is seeing an increase in the use of Cayman Companies to hold investments in North America in view of the increasing regulation in these markets. We are also seeing toxic and distressed assets placed in Cayman structures as part of the work-out strategies to deal with these assets. We expect this trend of fast growth to continue well into 2013 and beyond.
6 KEY GEOGRAPHIC TRENDS cont. MAURITIUS/SEYCHELLES In 2011 the number of companies added to the register in Mauritius and Seychelles was 2,332 and 16,485 respectively. Mauritius is experiencing a steady return to the number of company registrations recorded in 2009.The jurisdiction showed a slight fall (1%) in formations for 2011 but after enduring a major slow down during 2011, global prospects are steadily strengthening again especially in relation to private equity funds into Africa. For the past 20 years, Mauritius as a jurisdiction has been the preferred destination for inbound investment in India. As Africa is the new emerging market we expect that there will be a shift from inbound investment into Asian countries (China and India mainly) to outbound investment from the latter into Africa. We will watch the 2012 figures with interest to see if this prediction in a shift of growth plays out. MAURITIUS: NEW INCORPORATIONS 2008-2011 2008 3,846 2009 2,105 2010 2,348 The Seychelles is the offshore economy witnessing the greatest growth in activity, albeit that this jurisdiction s data lags behind the other jurisdictions we are tracking for this report. The jurisdiction only reports the cumulative total of companies and recorded 100,877 companies as being incorporated by the end of 2011 versus 84,392 in 2010. A growth of 20%. During the last 12 months we have seen a shift in origin from Asia (mainly India) to Africa. The sector focus is mostly in the telecommunications, mining and energy development. The types of companies that were incorporated were mostly investment holding companies but we have also noted some interest in Collective Investment Schemes (funds). The reason for the rapid growth of Seychelles as a preferred destination for company formation lies in the fact that the jurisdiction operates one of the fastest International Business Company registers in the world. It has developed an efficient system that facilitates the swift incorporation/engagement of this dynamic legal vehicle. Same-day incorporation and the registration process in Seychelles is simple and very straightforward and inexpensive. SEYCHELLES: NEW INCORPORATIONS 2008-2011 2011 2,332 2008 13,751 2009 12,408 2010 14,779 2011 16,485 RESEARCH METHODOLOGY The data for Appleby s On the Register has been collected from reported figures produced by the national registers of Bermuda, Cayman Islands, Guernsey, Hong Kong, Isle of Man and the UK, as well as Jersey Finance, The Central Bank of Seychelles and the Financial Services Commissions of Mauritius and the British Virgin Islands.
LOOKING FOR OFFSHORE COMPANY INCORPORATION ADVICE? Our Fiduciary and Administration group provides a broad range of offshore fiduciary services to high net worth individuals, private companies, funds and an enviable array of global corporations through our affiliated companies, all part of the Appleby group. The group consists of motivated individuals from disciplines including legal, administration, compliance, accountancy, chartered secretarial and banking. Clients gain an integrated solution across service areas, whether in a single location, or across multiple jurisdictions. As the structures we administer can often have a multijurisdictional footprint, we are accustomed to liaising with professional advisors from around the globe and in dealing with the communication complications that can arise in such circumstances. What sets us apart is our commitment to the delivery of service excellence; this underpins all that we do. Whilst technical expertise is a given, we maximise the value and effectiveness of our client structures by offering a highly personal, client-focused and proactive service, and a fresh perspective. With no ties to any banks or investment houses, our team of professional specialists can select the best solution available. Our independence, combined with our commercial acumen, attention to detail and responsiveness, ensures we meet our clients needs on time, every time. ABOUT APPLEBY Appleby is the world s largest provider of offshore legal, fiduciary and administration services. We have around 800 people, including 80 partners, operating from 12 offices around the globe. This includes the key offshore jurisdictions of Bermuda, the British Virgin Islands, the Cayman Islands, Guernsey, Isle of Man, Jersey, Mauritius and the Seychelles, as well as the international financial centres of London, Hong Kong, Shanghai and Zurich. Together, our teams service clients based all over the world. We advise global public and private companies, financial institutions, and high net worth individuals, working with them and their advisers to achieve practical solutions, whether in a single location or across multiple jurisdictions. For further information contact: Farah Ballands, Partner and Global Head of Fiduciary & Administration fballands@ Appleby Global Group Services Ltd 2012. Published in the Isle of Man. All Rights Reserved.