Guernsey – A Key Jurisdiction for UK Listings

As at the end of 2020 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 briefing explains why Guernsey is the jurisdiction of choice for non-UK companies listing in the UK on both the LSE and AIM, although Guernsey companies can also list on various other stock markets, such as Euronext, Euronext Dublin, The Bermuda Stock Exchange, The International Stock Exchange, The New York Stock Exchange, The Stock Exchange of Hong Kong and The Vienna Stock Exchange. Walkers has a listings team who have extensive experience providing listing, advisory and administrative services in connection with listings on these exchanges.

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Guernsey is a leading offshore financial centre located in the same time zone as London

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 neutral jurisdiction

Guernsey’s prevailing rate of corporate income tax is 0%, providing tax neutrality to investors. Whilst income tax is charged at 10% or 20% rates on certain items of income, Guernsey holding companies or funds generally pay tax at 0% 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.

A Guernsey company can migrate tax residence whilst maintaining flexible corporate law

A Guernsey company is tax resident in Guernsey by default. However, a Guernsey company can migrate its tax residence out of Guernsey where:

- it is tax resident in another jurisdiction (“Jurisdiction A”) under Jurisdiction A’s laws;

- it is “centrally managed and controlled” in Jurisdiction A (central management and control is generally the strategic control exerted by the directors so location of director decision making is crucial);

- either the highest rate of corporate income tax in Jurisdiction A is at least 10%, or Jurisdiction A has a double tax agreement with Guernsey that treats the company as being tax resident Jurisdiction A; and

- the company’s tax residence in Jurisdiction A is not motivated by the avoidance of Guernsey tax.

This allows a Guernsey company to migrate its tax residence 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 allows

a Guernsey company to qualify for UK REIT status – delivering the UK REIT tax benefits to investors – whilst accessing the benefits of the flexibility to return or distribute funds to investors

Pragmatic regulatory regime for corporate funds

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. There are two overall available regulatory routes for funds, the “authorised” fund route and the “registered” fund route.

Listed funds are typically “registered” funds, which have 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.

Subject to the 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.

Guernsey has adopted the highest standards of international tax and regulatory principles

Guernsey has adopted rigorous international tax and regulatory standards, and Guernsey has been “whitelisted” by both the Organisation for Economic Co-operation and Development (“OECD”) and European Union (“EU”) as a result. Guernsey also has a broad general antiavoidance rule, which prevents the avoidance of local tax.

Guernsey has adopted economic substance requirements and the EU has confirmed Guernsey as being a cooperative jurisdiction in respect of good tax governance. Guernsey is not “blacklisted” as a non-cooperative jurisdiction.

Guernsey was among the first jurisdictions to implement US FATCA and is an early-adopter of the OECD’s Common Reporting Standard (the “CRS”). Guernsey has also adopted BEPS minimum standards, the Country-by-Country Reporting regime, the spontaneous exchange of tax rulings and was one of the first jurisdictions to sign the OECD’s Multilateral Instrument to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting. To strengthen the CRS regime and go beyond the BEPS minimum standards, Guernsey has adopted the OECD’s Mandatory Disclosure Rules for CRS Avoidance Arrangements and Opaque Offshore Structures.

Further details of the international tax and regulatory standards adopted by Guernsey can be found here.

Walkers corporate and funds listings team

Walkers has a dedicated corporate and funds listings team with broad experience who can advise on all Guernsey corporate, regulatory and tax aspects relating to the structuring and launch of a listed company or fund on various stock exchanges around the world.

Matt SandersManaging PartnerT +44 (0) 1481 748
Kate StoreyPartnerT +44 (0) 1481 748
Chris Hutley-HurstSenior CounselT +44 (0) 1481 758
Adam PickeringSenior AssociateT +44 (0) 1481 748
Jessica RobinsonSenior AssociateT +44 (0) 1481 748
Chris KnowlesAssociateT +44 (0) 1481 748