Our Appleby Corporate team has been involved in a number of mergers and acquisitions (M&A) transactions involving buying, selling and/or restructuring businesses that have premises and/or people in Jersey.
Examples of our recent representative experience include popular sectors such as financial services and digital assets, such as:
- Acting for private equity firm Perwyn in relation to the purchase of the majority stake in Jersey Telecom’s “Internet of Things” business (June 2021).
- Advising PraxisIFM on the sale of their Fund Administration division to Sanne Group Plc (December 2021).
- Assisting a Jersey based professional services firm on its equity reorganisation and admission of investors (June 2021)
- Advising Suntera Global on the acquisition of the Nedgroup Trust operations in Jersey and Guernsey (December 2021)
This is the third of a series of three articles, each dealing with topics to be considered when buying, selling and/or restructuring businesses that have premises and/or people in Jersey to help clients and intermediaries navigate the M&A landscape from a Jersey perspective.
This article covers the following topics in the context of a Jersey based business:
- Issuing a Prospectus under Companies (Jersey) Law 1991
- City Takeover Code and the Companies (Takeovers and Mergers Panel) (Jersey) Law 2008
- TISE Listings on The International Stock Exchange
- Change of Control provisions in other material documents
ISSUING A PROSPECTUS UNDER COMPANIES (JERSEY) LAW 1991
A prospectus is a formal document to invite the public to become a member of a company or to acquire or apply for any securities issued by that company, and the Jersey legislation in this area has recently been amended.
The Companies (Amendment of Law) (No. 2) (Jersey) Order 2021 (the “Order“) came into force on 19 October 2021.
The Order amends the Companies (Jersey) Law 1991 (the “1991 Law“) by introducing a new definition of prospectus. The reform brings the definition of prospectus more in line with the UK and EU prospectus regimes, which makes it easier for Jersey companies to raise funds from sophisticated investors.
Under the new definition, the number of potential investors to whom an invitation can be circulated before the invitation constitutes a prospectus has been increased to 50 investors in Jersey and 150 investors elsewhere and, more importantly, certain qualified and professional investors will no longer be counted towards these limits.
The definitions of qualified investor and professional investor in the new exemptions are taken from the EU Prospectus Regulation and Jersey’s investment business regulatory regime respectively and are well-known to investors and those who operate in capital markets.
The Jersey prospectus rules will also not apply where the securities to be acquired or applied for are denominated in amounts of at least EUR 100,000 (or an equivalent amount in another currency) or where the minimum consideration for securities to be acquired by an investor is at least EUR 100,000 (or an equivalent amount in another currency).
As a result, it is now easier, cheaper and quicker for Jersey companies to access capital markets without prejudicing investor protection or the robust regulatory framework Jersey prides itself on.
CITY TAKEOVER CODE AND THE COMPANIES (TAKEOVERS AND MERGERS PANEL) (JERSEY) LAW 2008
The City Code on Takeovers and Mergers (the “Code”) is intended to ensure that shareholders in target companies are treated fairly and are not denied an opportunity to decide on the merits of a takeover, and that shareholders of the same class are given equivalent treatment by a bidder. The Code also provides a clear framework within which such takeovers are effected.
The Companies (Takeovers and Mergers Panel) (Jersey) Law 2009 (the “CTM Law”) has been in force since 1 July It gives the relevant minister in Jersey powers to appoint a body to oversee takeovers and mergers, and accordingly, the UK Panel on Takeovers and Mergers (the “Panel”) has been appointed. The CTM Law requires the Panel to make rules to give effect to certain provisions of the EU Takeover Directive (2004/25/EU). The Code has been adopted for this, giving it the same statutory basis in Jersey as in the UK.
The CTM Law confers on the Panel the power to give directions and issue binding rulings on the application of its rules, the power to request the production of documents and information and the ability to impose sanctions for the breach of its rules. The Panel can apply to the Royal Court of Jersey to secure compliance with its rules. The Panel can levy sanctions for breach of its rules and demand those found to be in breach of its rules to pay compensation. The Panel can also levy fees or charges in connection with the discharge of its functions under the CTM Law.
The Code applies to all offers for:
- Jersey companies if their securities are admitted to trading on any stock exchange in the Channel Islands or the Isle of Man or on a regulated market or a multilateral trading facility in the UK; and
- Jersey private and public companies which are considered by the Panel to have their place of central management and control in the UK, the Channel Islands or the Isle of Man, but in relation to private companies only when:
- any of their securities have been admitted to trading on a regulated market or a multilateral trading facility in the UK in the last 10 years; or
- they have filed a prospectus for the issue of securities with the registrar of companies in Jersey or any other relevant authority in the UK in the last 10 years. The Code does not apply to offers for open-ended investment companies.
The Code is intended to regulate (amongst other things):
- takeover bids and merger transactions of companies to which the Code applies, however effected, including by way of statutory merger or scheme of arrangement; and
- other transactions which have as their objective or potential effect (directly or indirectly) obtaining or consolidating control of companies to which the Code applies. Control, for these purposes, means an interest in shares carrying in aggregate 30 per cent or more of the voting rights of a company.
Attention should be given to whether the Code applies to a Jersey company where this analysis has not been undertaken already. Where a target company is subject to the Code, potential bidders must undertake their bid in accordance with the requirements of the Code.
TISE LISTINGS – THE INTERNATIONAL STOCK EXCHANGE
The International Stock Exchange (TISE) is based in Guernsey and issuers can have debt or equity securities listed on TISE.
In relation to debt securities, many private equity houses will list their intragroup acquisition loan notes as “quoted Eurobonds”, in relation to financing M&A transactions.
A quoted Eurobond is a debt security, issued by a company, that is listed on a “recognised stock exchange”. TISE is a recognised stock exchange by Her Majesty’s Revenue and Customs pursuant to section 1005 of the Income Tax Act (2007). If a quoted Eurobond is listed by an issuer on TISE, interest payments on such issue will be exempt from UK withholding tax
In relation to equity securities, shares in a company (including REITS – real estate investment trusts), or units in an investment vehicle can be listed on TISE. A stock exchange listing can offer access to a new pool of capital as some investors can only invest, or have to invest a certain proportion of assets, in listed products.
There are general notification events to TISE, and in particular an issuer must notify the TISE authority of any material changes to its ultimate beneficial owners within 10 business days of the change being effected. For the avoidance of doubt, such notification will be on a confidential basis. (listing rule 3.2.4)
CHANGE OF CONTROL PROVISIONS IN OTHER MATERIAL DOCUMENTS
It is feasible that certain documents to which the Jersey entities are party, might have “change of control” provisions whereby parties might need to consent, or be notified to the change of control in relation to a prospective sale or purchase of an entity.
Examples of this could be financing arrangements, or licences/leases on Jersey immovable property or insurance policies. Appleby has a full service corporate team who can advise on financing arrangements and a property department who can advise on licences/leases.
For further information, please contact:
Christophe Kalinauckas, Partner, Appleby