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International Structures

Almaty, Kazakhstan

Presented by Elena Baranova – Ogier Jersey

May 2011

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International Structures Questions

• What structure and where?

• Onshore or offshore?

• What does it cost?

• What is the tax treatment?

• What is the best?

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Structures

• Holding Companies

• Joint Ventures

• Merges and Acquisitions

• Listing

• Other Tools

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Onshore or Offshore

• Company will be subject to laws of incorporation

• Taxation

• Stock exchange requirements-what entity can be listed?

• Similarities and differences

• Reputation and status

• Legal system

• Infrastructure and size

• Location

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Holding Companies

• For real estate, ports, airports, intellectual property, mining and natural resources and all other

• Types of asset use Channel Islands holding companies

Examples of assets held through Channel Island structures:

• Rio Tinto/Alcan – used Jersey company to hold European and Global food, pharmaceutical and tobacco packing business which was sold to Amcor, an Australian company

• Four Seasons Hotel, London

• Ports in UK and Australia

• London City and Gatwick airports

• Consolidated Minerals – mines in Australia, Venezuela and elsewhere

• Gas pipelines in Chile

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Joint Ventures

• Use of Channel Islands company as JV platform

• Driven by stamp duty savings – provides a tax neutral, flexible platform for all investors

• Investor comfort – based on English principles and respected and robust court system

Case Studies:

• UC Rusal Plc was originally the joint venture between EN+ (Deripaska), SUAL, Glencore, and then subsequently Onexim

• Cazenove/JP Morgan

• Cazenove used a Jersey holding structure to hold its 50% share in JP Morgan Cazenove

• When JP Morgan exercised its option to buy the Cazenove 50% share it do so by purchasing the shares of the Cazenove partners in the Jersey company

• Although the directors of the Jersey company were resident in England the stock transfer form was executed in Jersey and so the transfer was free of stamp duty saving the Cazenove partners millions of pounds

• The cost of running the structure was minimal compared to the savings

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Typical JV Structure

Individualshareholder

Individualshareholders

JV1(x jurisdiction)

JV2International

holdco

Internationalholdco

M&As

Agreement

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Mergers and Acquisitions

• Setting up new companies to acquire a target

• Can be a business or share acquisition

• Important consideration is ability to exit

• Channel Islands companies can be sold or listed easily

• Quick to set up structures without difficulties

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Mergers and Acquisitions continued

Case studies:

Challenger/LBC Terminals

• LBC Terminals is a European wide business owning terminals at ports in various EU countries

• Challenger Financial Services Group in Australia and 4 other non UK investors invested through a Jersey company to acquire the business

Investors

Jersey Company

Malta Company

Malta Company

LBC

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Mergers and Acquisitions continued

• Malta was used because of the double tax treaty network but the client did not want to structure the deal directly through Malta

• Why? Difficulties in doing business, language issues, not English law based, uncertainty with courts/judicial interpretation if anything went wrong, quality of advisers in Malta

• Structure is a mix of on and offshore to make it tax efficient but still flexible

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Mergers and Acquisitions continued

• Rio Tinto

• Rio Tinto Alcan on the sale of its European Food, Global Pharmaceutical and Global Tobacco segments of its Packaging Division to the Australian based Amcor Limited in a deal value of at slightly more than US$2 billion

• Rio Tinto Alcan transferred its European Food, Global Pharmaceutical and Global Tobacco segments of its Packaging Division to a newly incorporated Jersey Company

• The sale of the division from Rio Tinto Alcan Inc to Amcor Limited

transfer Jersey New CoRio Tinto Alcan

Amcor

sale

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Listing

• Questions which the Company should ask itself –

• Investors will!

• Equivalence to onshore jurisdiction?

• Will our structure be recognised without question by third parties?

• What are corporate governance standards in theory and in practice?

• What shareholder protections are in place?

• Protection against dilution

• Take overs

• What information is available to investors and other third parties from public sources?

• Can you settle share deals through the share settlement system?

• Can you get a share certificate if you want one?

• Is jurisdiction an OECD Issuer territory?

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Listing continued

• Channel Islands companies usually inserted on to the top of an existing structure

• Cash shells with no assets can also be listed which will then make an acquisition

• Companies have been listed in London, New York, Toronto, Hong Kong, Frankfurt, Amsterdam, Paris and Moscow (Rusal linked depository receipts)

• Many FTSE 100 or 250 companies are Channel Islands Companies (all FTSE 100 companies which are incorporated offshore are Jersey companies)

• No need to issue depositary receipts when listing in London (unlike BVI and Cayman)

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Typical Holding Structure

Holding company(Jersey)

Tax Resident in Holland

Sub-holdingCompany(Holland)

Sub-holdingCompany

(Kazakhstan)

Kazakhstancompanies

Foreigncompanies

IPO

Pre-IPO Strategic Investors

Pre-IPO Debt Funding

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Listing continuedUC Rusal Plc

• Aluminium manufacturer and alumina producer in Russia and elsewhere

• Controlled by Oleg Deripaska

• Listed in Hong Kong, Paris and Moscow

PetroKamchatka

• Company migrated from Alberta, Canada to Cyprus

• Owns oil exploration rights in Kamchatka, Russia

• Share exchange through a takeover offer to swap shares in Cyprus company for shares in Jersey company

• Jersey company listed via a reverse takeover in Toronto

• Case Studies:

Randgold Resources

• Gold mining in Africa

• Listed in London and FTSE 100

• Jersey Company with Jersey and African subsidiaries

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Moving from private to public company - issues

• Corporate governance

• Audit to standards of the relevant exchange

• Anti-money laundering, bribery and corruption

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Other Tools

• Migration of companies

• Merger of companies

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Advantages of Jersey Holding Company

• Tax neutrality - no income tax, capital gains tax, corporation tax, stamp duty or VAT

• Flexibility of legal structures and legislation

• Access to justice - respected judicial systems and availability of court time

• Corporate model – similar to England

• Stable jurisdictions – politically and economically

• Significant expertise in the Islands

• Convenient time zone

• Banks (including Sberbank and VNB in Russia) are familiar with and comfortable lending to Channel Island companies

• OECD white listed

• Service providers properly regulated

• In addition, now that Switzerland has agreed to information exchanges just like all other

• countries around the world, there is a level playing field with no bank secrecy advantages.

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Making mistakes early on can lead to

longer term problems…

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Questions & Answers?

Jersey

Elena Baranova

elena.baranova@ogier.com

+44 1534 753662

www.ogier.com

The information contained in this presentation comprises general observations only and not specific legal advice that may be relied on. In particular, to the extent that any observations are included in relation to matters other than questions of Jersey law, such observations are drawn from general experience on matters of this nature on which we have provided Jersey law advice. Such observations have not been separately researched, verified or updated by us. This presentation does not constitute legal advice on these points.

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