TRUST AND COMPANY MANAGEMENT

Trust and Company management has been a traditional business for Gibraltar. The sector is made up of a mix of professional accountancy and legal firms, firms providing a variety of financial services business, and pure company management practitioners. Gibraltar has a well-developed legal and financial infrastructure for trust and company management. With a large established base of trusts, and a growing reliance on corporate work, the volume of trust and corporate litigation is becoming significant. The sector continues to grow at a steady rate.
This is an important sector in the overall structure of the finance centre and therefore it is paramount that the standards and procedures adhered to by those involved are synonymous with the quality and professionalism associated with the provision of financial services in Gibraltar.

INSURANCE

The number of Insurance companies continues to grow, making this the biggest growth area in Gibraltar’s finance centre. At present, there are 51 companies licensed under the Insurance Companies Ordinance 1987 to carry on insurance business in Gibraltar. The number has doubled since 2002 and very nearly quadrupled since 1999. Employment in the insurance industry grew by 42 persons in the year to March 2005.
Gibraltar has fully implemented EU insurance directives, and under the ‘common passport’ rules, Gibraltar insurance companies can therefore write business into the EU without needing to establish a presence in the jurisdiction concerned.
Gibraltar captives can write business anywhere within the EU, and there is provision for both protected for both protected cell companies and rent-a-captives.

COMMERCIAL TRADING COMPANIES, BETTING AND E-COMMERCE INDUSTRY

Gibraltar has always attracted certain types of trading operation, whereby a Gibraltar company can reap some or all of the profits generated by trades taking place elsewhere.
The management of trading operations often generates administrative or sales or customer-handling jobs, and the Government of Gibraltar offers incentives to attract such companies.
Gibraltar also has an unusually sophisticated telecommunications environment, which is vital in setting up e-commerce operations. As a result of this Gibraltar currently homes a flourishing Gaming and E-commerce industry. It is to be expected that other industries will follow betting and gambling in establishing sales, marketing and service operations offshore to take advantage of the e-commerce possibilities in low tax jurisdictions.
Over the last decade, Gibraltar has witnessed a dramatic growth in its gaming industry. The last three to four years in particular has seen the establishment of major casino operators.

GAMING INDUSTRY

In particular, operations based in territories which housed embryonic start ups have viewed Gibraltar as one of a number of more established centres to which to migrate their gaming activities. Significantly, 888.com and PartyGaming chose Gibraltar as their jurisdiction for the establishment of a European base. The rapid growth of both groups from Gibraltar has consolidated the importance of the industry in Gibraltar and created further significant employment locally and a platform for public listing on the London Stock Exchange.

Gibraltar gaming companies have recently been making headlines. PartyGaming Plc and 888 Holdings Plc have in particular attracted a great deal of attention as each has successfully floated on the London Stock Exchange. These represent the first time Gibraltar based businesses have been listed on a major exchange. It is likely that these moves will see other groups identify Gibraltar as a convenient base from which to develop floatation plans.

HIGH NET WORTH INDIVIDUALS

Individuals with substantial assets and/or income who wish to enjoy the benefits of a beneficial tax environment may not avail themselves of the Qualifying (Category 2) Individual Rules 2004 (the Rules) and take advantage of these by establishing their tax residence in Gibraltar. This should facilitate an individual’s tax planning and may be useful in limiting tax liability in other jurisdictions on world-wide income.
Under the Rules, individuals in possession of a Qualifying Certificate are liable to tax only on the first £50,000 of assessable income. Under the rates of tax currently enforced in Gibraltar, the maximum liability to tax for such individuals would be approximately £20,000 per annum. There is, however, a minimum tax of £14,000 per annum, payable irrespective of the individual’s income in that year of assessment.
Under the sliding rates of tax imposed on an individual’s assessment income, receipt in Gibraltar of an amount greater than £36,000 per annum would expose an individual to an amount of tax greater than the minimum sum of £14,000 per annum, but always subject to the maximum amount outlined above.
Only individuals not currently resident in Gibraltar and who have not been resident in any of the previous five years of assessment may apply for a Qualifying Certificate.
In order to be successful, the Applicant must have, for the exclusive use of himself and his family, approved residential accommodation in Gibraltar. The Finance Centre Director may decide whether or not a property is an approved property. There are various modern, high quality developments in Gibraltar, which would be suitable as an approved property, as well as other properties located in and around the town centre.
Notwithstanding the residential status acquired by an individual who has obtained a Qualifying Certificate, such individual may make use of tax structures to assist in the planning of fiscal affairs. These tax structures are usually only available to non-residents of Gibraltar. Therefore, the use of a Gibraltar exempt company or a Gibraltar trust, neither of which (under certain conditions) are subject to taxation, may be available to such individuals. These possibilities together with the fact that there is no capital gains tax, inheritance tax or estate duty in Gibraltar make the jurisdiction an attractive proposition to individuals able to fulfil the criteria required.

STOCK EXCHANGE

Legislation to allow the setting up of GibEx, as the exchange will be known, is currently being drafted, and the bourse, which initially is expected to handle between 200 and 300 companies and funds – the level at which it will be economically viable – could be up and running by March next year.
The Rock’s modern communications network and the availability of local high-tech expertise will allow the exchange to use state-of-the-art technology from the outset, creating a bourse as sophisticated as any, according to Dr. Alexander Gancz, commissioner of the Vienna Stock Exchange for the past 30 years.

Hassans, which was instrumental in bringing some of the major internet gaming companies to Gibraltar, has played a major role in the Rock’s continued economic growth – not only in terms of the international clients it has attracted, but in drafting legislation for the territory’s banking, insurance and investment services – all significant developments in terms of Gibraltar’s ability to “passport” such services into the EU. Currently Senior Partner Levy (of Hassans) and his team are drafting the legislation relating to the establishment of the new exchange.
If, as seems likely, the project does take shape – and most things the indomitable James Levy, QC, throws his weight behind do – it will bring Gibraltar into line with most other financial services oriented jurisdictions. Several of the smaller international financial centres have established reasonably successful stock exchanges, while both Malta and Cyprus have flourishing burses.
Bank Medici chairman Sonja Kohn, who is also actively involved in the GibEX, believes that it could attract listings not only of some of the international firms which already have a presence on the Rock but also those companies in China, India and South America which seek European investors. It could also encourage some of Gibraltar’s bigger firms to seek local listing.

GIBRALTAR EXPERIENCED INVESTOR FUNDS

]The unique attraction of Gibraltar as a dependant territory of the United Kingdom and thus a full member of the European Union under section 227(4) of the Treaty of Rome 1973 is significant. This manifests itself in the recognition and development of Gibraltar as a quality and reputable jurisdiction in respect of financial services business. At the cornerstone of this progressive development, is the expedient evolution of a strong legal framework. This is evident in the transposition of most if not all EU Directives, including consolidation and extension of the Criminal Justice Ordinance 1995 being the primary legislation to combat money laundering in the financial services sector.
The Financial Services Commission as the statutory body corporate is responsible for regulating the four main markets of the financial services sector which are banking, insurance, investment services and company and trust management. Indeed, along with tourism and shipping, the financial services industry is now regarded as forming the third pillar of the Gibraltar economy. Apart from a robust regulatory regime, a multitude or factors such as low taxation, quick and efficient regulation and the recognition of passporting rights which allows Gibraltar registered investment companies to do business throughout the EU without further authorisation of the industry to the offshore investor.
An area which has witnessed steady growth in recent years is fund management encompassed in the investment services sector of the industry. Funds are a very creative form of investment which has captured the imagination of investors. There is a wide cross-section of funds which can be tailor-made to meet the profile of investors within the Fund. This may be exemplified in the jurisdictional approach where, generally, BVI, the Cayman Islands or Bahamas may be the preferred choice of domicile of the Fund due to their relatively lower level of regulation. In conjunction to the jurisdictional issues, the type of fund vehicle may range from the unit trust or open-ended investment company to the closed-ended investment company.
Of particular significance in relation to the private fund, The Financial Services (Experienced Investor Funds) Regulations 2005 (“the Regulations”) made under Section 52 of the Financial Services (Collective Investment schemes) Ordinance 2005, creates experienced investor funds (“EIFs”) provided notification is sought within 14 days of its establishment. EIFs can be set up as Gibraltar-domiciled companies, unit trusts or Gibraltar protected cell companies. These are funds designed for the professional, sophisticated or experienced investors as prescribed under the Regulations. In particular, investors in these funds must have a net worth (or joint net worth with that person’s spouse) excluding the investor’s principal place of residence, greater than Euro 1,000,000 or invest a minimum Euros 100,000. Notification is sought by the Administrator of the fund accompanied by a copy of the funds’ offering documents, an opinion from a lawyer of at least 5 years’ professional standing that the fund complies with the relevant legislation and the prescribed fee. Part III of the Regulations comprehensively sets out the information which must be included in the offer document.
EIFs must have an Administrator with physical presence and staff in Gibraltar and at least two Gibraltar resident Directors. There must also be an independent depositary or, in the case of hedge funds, a prime broker. The EIF must also have at least two authorised Gibraltar resident Directors and unit trusts must have at least one Gibraltar resident Trustee. EIFs must produce annual audited accounts.
Gibraltar licensed funds, including EIFs are exempt from payment of Gibraltar income and corporation taxes upon receipt of a certificate from the Commissioner of Income Tax which is obtained upon application once he is satisfied that the Fund meets the prescribed criteria. No death duties, capital gains tax, gift, wealth, inheritance, or capital transfer taxes are levied in Gibraltar. There is an element of nominal stamp duty levied on the issue of the shares. Funds are not required to withhold tax from any distribution of income or capital gains made to their shareholders.
Gibraltar also forms part of a niche jurisdiction with the implementation of protected cell company legislation. The shareholding is broken into different cells and although occasionally these may overlap, each cell is used for a different portfolio of business with the assets and liabilities of each ring fenced from the others in terms of any claims or profits which may accrue or be made against it. Such structure can be particularly beneficial in an umbrella structured fund to ensure segregation of the sub-funds. These umbrella structured funds can be used by separate clients or by a sole client wishing to promote several investment strategies.

In conclusion, Gibraltar has been described as a small but mainstream international financial centre. The financial services market is constantly evolving with market demands, in particular given that wealth is being created more rapidly than at any time in the world’s history. Hence the business of providing for the financial needs of the wealthiest individuals is changing dramatically as well. Gibraltar provides a well regulated and disciplined regulatory regime that has maintained an ability to be open-minded and flexible. Coupled with the aspiration to accommodate the requirements of investors, makes Gibraltar a highly attractive location for fund business. The industry is therefore, very confident in Gibraltar’s future in the fund market.