Investment Funds Merge In Jersey

by Robin Pilgrim, LawAndTax-News.com, London

14 September 2005

The first merger of two investment funds in Jersey under the merger provisions of the Companies (Jersey) Law 1991 as amended, which came into force in 2002, has been carried out by law firm Bedell Cristin.

The merger was between two open ended umbrella investment funds, Close Global Funds Limited and Close International Foundation Funds Limited, with a combined net asset value of GBP415 million and over 6,000 shareholders.

Close Global Funds Limited, which was incorporated in the Cayman Islands, was redomiciled to Jersey before the merger went ahead, as the statutory merger provisions require both merging companies to be incorporated in Jersey. Close Global Funds Limited had a net asset value of GBP300,500,000 prior to the merger, and was incorporated in the Cayman Islands, managed and administered in Jersey by Close International Asset Management Limited and listed on the London Stock Exchange.

Once redomiciled to Jersey, Close Global Funds Limited merged with Close International Foundation Funds Limited, a Jersey-incorporated investment fund with a net asset value of GBP114,200,000, which was also managed by Close International Asset Management Limited but not listed on any stock exchange. The merged company continued under the name "Close Global Funds Limited". Simultaneously with the merger, Close Global Funds Limited was de-listed from the London Stock Exchange and listed on the Channel Islands Stock Exchange

Martin Paul, head of Bedell Cristin’s Investment Funds and Private Equity Group, says: “It is always rewarding to be involved in cutting edge work and this case is significant for both the local funds industry and Jersey as a whole. Mergers such as this one are going on elsewhere in the world and it is important that as an offshore jurisdiction, the Island keeps up with what the market is demanding. The case as a whole was also particularly unusual because it involved the redomiciliation of an investment fund. Such redomiciliations are still very rare and it is a tribute to the regard with which Jersey is held globally that the decision was taken to move the fund here.”

Emily Haithwaite, the senior funds lawyer who managed the transaction, explains that the original structure of Close Global Funds Limited meant that the fund had to comply with three different regulatory authorities and the decision was taken to streamline its set-up for regulatory simplicity and administrative ease. The merger has led to a reduction in the aggregate overall fee paid out of the fund which will be of ultimate benefit to the shareholders.

The whole process took about six months to complete, with four months of that devoted to the merger. This was particularly complicated as the merged fund such a large number of shareholders and 17 different sub-funds. This meant that a number of EGMs and class meetings had to be held to approve each stage of the transaction.

“This kind of merger is ideal where there are funds which are not operating as efficiently as they perhaps could. It also provides the shareholders with more choice in terms of which sub-funds they can switch between without incurring administrative fees,” says Martin.

Simon Dowling, of Close International Asset Management, says: “With Close having a physical presence in both the Cayman Islands and Channel Islands, careful consideration needed to be given to the ultimate domicile of the combined entity. Given the scale of our business in Jersey, the location of our client base and the attractions of Jersey as a jurisdiction, the decision to choose Jersey was natural.

“The changes made to the Companies Law legislation in 2002 certainly helped in what was a complex process, as did the comfort that Bedell Cristin, who had been associated with the Foundation Funds since their establishment in 1994, were willing to manage the process within a sensible time frame. The dynamics and complexity of the exercise were such that the propensity for miscalculation was always present. We are extremely pleased and relieved that the whole process progressed so well, and would repeat the exercise should the opportunity arise.”

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