Migration to Bermuda - Publication of Circular

RNS Number : 3950W

EPE Special Opportunities PLC

01 August 2018

 

EPE Special Opportunities plc

Proposed Migration to Bermuda, Publication of Circular and Notice of General Meeting

EPE Special Opportunities plc ("ESO plc" or the "Company") today announces that it proposes to migrate the Company's jurisdiction of incorporation from the Isle of Man to Bermuda (the "Migration"). Under the AIM and NEX Exchange Growth Market ("NEX") Rules, the Migration will be treated as a cancellation of the admission of the Company's Ordinary Shares to trading on AIM. The admission to AIM and NEX will follow an up to six business day period of suspended dealings in the Ordinary Shares whilst the Company obtains a Bermudian ISIN. The Company has today published a circular to shareholders detailing all information about the background to, and the rationale for, the Migration (the "Circular").

The Migration is conditional on, amongst other things, the passing of the Resolutions to be proposed at the General Meeting.

Geoffrey Vero, Chairman of ESO plc, commented:

"The ESO plc Board are pleased to confirm their intention to migrate the Company to Bermuda. We believe the migration will provide a better value added tax, legal and regulatory environment for shareholders."

Key highlights:

·      The Board has concluded that the Migration is in the best interests of the Company.

·      The Directors believe that Bermuda offers a more appropriate value added tax, legal and regulatory environment for the Company going forwards.

·      Notably, the Migration takes the Company outside of the scope of VAT and in doing so brings the Company's arrangements into line with the arrangements of the majority of its peer listed funds.

·      Two key reasons for the decision to choose Bermuda as the preferred destination for the Migration were:

o  Reduced capital gains risk: the discontinuance of the Company under the Isle of Man Companies Act and the registration of the continuance of the Company under the Bermuda Companies Act should not be deemed to create a new legal entity. There are express statements to this effect in Isle of Man and Bermuda company law. Therefore, the continuance should not be treated as a disposal event for the purposes of UK capital gains tax, which would significantly disadvantage the Shareholders.

o  More secure VAT status: Bermuda's VAT status is perceived by the Board to be more secure than that of certain other off-shore jurisdictions given the changes potentially required to the tax regimes of the United Kingdom and other jurisdictions to effect Brexit.

Suspension and re-admission process

It is anticipated that there will be up to a six business day period of suspension of dealings of the Ordinary Shares on AIM and the NEX Exchange Growth Market between (1) completion of the Migration; and (2) cancellation and re-admission of the Ordinary Shares to trading on AIM and the NEX Exchange Growth Market, whilst a Bermudian ISIN is obtained in respect of the Ordinary Shares from the Bermuda Stock Exchange. A Bermudian ISIN can only be procured following completion of the Migration and it is anticipated that this process, together with the necessary applications to be made with London Stock Exchange, the NEX Exchange and Euroclear, will take approximately six business days to complete. Without a Bermudian ISIN the Ordinary Shares cannot be re-admitted to AIM or the NEX Exchange Growth Market. As a result, it is currently anticipated that:

·     completion of the Migration will occur on 12 September 2018;

·     suspension of dealings of the Ordinary Shares on AIM and the NEX Exchange Growth Market and in CREST will occur at 8.00 a.m. on 13 September 2018; and

·     the re-admission of, and dealings in, the Ordinary Shares (as continued to Bermuda) to and on AIM and the NEX Exchange Growth Market will occur at 8.00 a.m. on 21 September 2018.

The Circular, which includes all information about the background to, and the rationale for, the Migration can be found here: http://www.epicprivateequity.com/our-business/capital/epe-special-opportunities-plc/investor-relations/aim-rule-26/ 

Capitalised terms used in this announcement have the meanings given to them in the Circular.

Enquiries:

EPIC Private Equity LLP	Alex Leslie [phone]
FIM Capital Limited (formerly IOMA Fund and Investment Management Limited)	Philip Scales [phone]
Numis Securities Ltd Nominated Advisor & Broker:	[phone] Stuart Skinner / Charles Farquhar / Huw Jeremy

Background to the Migration

The Board has concluded that the Migration is in the best interests of the Company. The Directors believe that Bermuda offers a more appropriate VAT, legal and regulatory environment for the Company going forwards.

The Company migrated its management and business operations from the Isle of Man to Jersey such that it became resident for tax purposes in Jersey in May 2017 and, as a consequence, was outside the scope of VAT. Whilst tax resident in the Isle of Man, the Company paid VAT on the majority of fees incurred (including management fees payable to its investment adviser, EPE and other professional fees) as the Isle of Man is within the scope of VAT.  During the financial year ended 31 January 2017, the Company paid £310,161 in VAT. The Company was unable to recover any of such VAT.  Many of the Company's peer listed private equity funds are tax resident in territories outside the scope of VAT and therefore are not required to pay VAT on their fees. Given that the investment decisions taken by potential investors in the Company are, in part, based on the Company's running expenses (commonly summarised as the Company's ongoing change ratio, or OCR), the Company was at a competitive disadvantage to the majority of its peer listed private equity funds as its fees were increased by VAT. The migration of the Company's tax residency to Jersey was, therefore, to remove this VAT expense.  Jersey was selected for the interim step of migrating the Company's tax residency for, among other reasons, expediency and convenience and given that a number of the existing directors of the Company were resident in Jersey.

The migration of tax residency and operations, however, was intended to be an interim step ahead of migration of the incorporation of the Company to a jurisdiction outside of the scope of VAT. Migration of the Company's incorporation is advisable to bring the Company's arrangements in line with the arrangements of the majority of those of its peer listed funds - that are tax resident outside the scope of VAT - and to mitigate any possible doubt (whether legitimate or not) over the Company's tax residency outside of the scope of VAT.

The Board gave detailed consideration to a number of potential off-shore jurisdictions as a destination for the migration of the Company's jurisdiction of incorporation and chose Bermuda as the preferred destination.  As noted above, the Directors believe that Bermuda offers a more appropriate VAT, legal and regulatory environment for the Company going forwards.  The Directors believe that Bermuda is attractive to the Company given that, most notably, it is outside the scope of VAT (unlike the Isle of Man) in addition to, amongst other things, it having a legal framework which replicates many of the features of Isle of Man company law, it being an established centre for investment companies and it having a developed regulatory environment. 

Two key reasons for the decision to choose Bermuda as the preferred destination for the Migration were:

(a)  Reduced capital gains risk: the discontinuance of the Company under the Isle of Man Companies Act and the registration of the continuance of the Company under the Bermuda Companies Act should not be deemed to create a new legal entity. There are express statements to this effect in Isle of Man and Bermuda company law. Therefore, the continuance should not be treated as a disposal event for the purposes of  UK capital gains tax, which would significantly disadvantage the Shareholders.   This can be compared with certain other jurisdictions which either do not permit a continuance or where the continuance law does not contain the above statement.  In such jurisdictions, a scheme of arrangement would or might be needed to effect the re-domicile (for which Shareholders holding more than 5% of the Ordinary Shares would need HMRC clearance). A scheme of arrangement would be a significantly more involved, lengthy and costly process than the proposed Migration. Further, there is no guarantee that HMRC clearance would be received; and

(b)  More secure VAT status: in addition, Bermuda's VAT status is perceived by the Board to be more secure than that of certain other off-shore jurisdictions given the changes required to the tax regimes of the United Kingdom and other jurisdictions to effect Brexit.  The Board understands that there is a reduced risk that Bermuda's tax regime is impacted by the Brexit settlement currently being negotiated by the United Kingdom Government as compared to other offshore jurisdictions, such as Jersey, Guernsey and the Isle of Man.

It is therefore proposed that the Company be re-domiciled in, and migrated to, Bermuda. A comparison of the relevant differences between the Isle of Man Companies Law and the Bermuda Companies Law is set out in Part II of the Circular.

Effect of the Migration

On completion of the Migration, the laws of the Isle of Man cease to apply to the Company and the Company will thereupon become subject to the laws of Bermuda, as if it had been originally incorporated in Bermuda under the provisions of the Bermuda Companies Law. The registered office of the Company will be located in Bermuda after the Migration. Under the Bermuda Companies Law, the Migration would not be deemed to create a new legal entity or prejudice or affect the continuity of the Company.

Further, upon the Migration becoming effective in accordance with the laws of the Isle of Man and Bermuda:

(a)  the property of the Company prior to the Migration will continue to be the property of the Company;

(b)  the Company will continue to be liable for the obligations of the Company incurred prior to the Migration;

(c)  any existing cause of action, claim or liability to prosecution in respect of the Company existing prior to the Migration will be unaffected;

(d)  any civil, criminal or administrative action or proceeding pending by, or against, the Company prior to the Migration may be continued by or against the Company;

(e)  any conviction against, or any ruling, order or judgement in favour of, or against, the Company prior to the Migration may be enforced by or against the Company; and

(f)   service of process may continue to be effected on the registered agent of the Company in the Isle of Man in respect of any claim, debt, liability or obligation of the Company during its existence as a company under the Isle of Man Companies Law.

Shareholders should note that following completion of the Migration, each Ordinary Share will still be a share in the capital of the Company and that their beneficial ownership to the Existing Ordinary Shares held by them will not be affected by the Migration. Except for the actions set out in paragraph 7 (Action to be taken) of the Circular, Shareholders are not required or requested to take any action to approve or effect the Migration.

The Company's ISIN and SEDOL will change as a result of the Migration and the Company will make an announcement incorporating details of the new ISIN and SEDOL when they are available. This announcement is expected to be made on or around the Migration Date.

There is no requirement under Bermuda law for a Shareholder to hold a share certificate in order to be able to enforce their rights against the Company or to enjoy any of the privileges of being a Shareholder and unless a request is received from a Shareholders listed in the Company's register of members, the Company will not issue new share certificates.

Details of the impact of the Migration on the ability of Shareholders to settle and pay for interests in the Ordinary Shares through the CREST system are set out in paragraph 5 of the Circular.

Timing of and process for the Migration

In order to effect the Migration, amongst other things:

(a)  the Isle of Man Companies Law requires the Company to:

(i)   make an application to the Isle of Man Registry for consent to be continued in Bermuda and to be discontinued in the Isle of Man; and

(ii)   file the Certificate with the Isle of Man Registry once issued; and

(b)  the Bermuda Companies Law requires the Company to:

(i)   obtain all necessary authorisations required under the laws of the Isle of Man in order to enable it to continue as an exempted company registered in Bermuda;

(ii)   make an application to the Bermuda Monetary Authority for permission to continue into Bermuda as an exempted company; and

(iii)  make an application to the Bermuda Registry for continuance of the Company as an exempted company incorporated under the Bermuda Companies Law (which shall include provision of the previous year's financial statements) and obtain a certificate of continuance in respect of the Company.

Under the Isle of Man Companies Law, the Migration must be authorised by a resolution passed by members holding at least 75 per cent. of the voting rights exercised in relation to the resolution. The Migration will take effect, following the passing of the Resolutions, when all approvals are in place and on the issuance by the Bermuda Registry of the Certificate and the issuance of a certificate of discontinuance by the Isle of Man Registry, which is expected to be on or around 12 September 2018.

The Code

The Code currently applies to the Company pursuant to section 3(a)(i) of the Introduction to the Code, as it is a company which has its registered office in the Isle of Man and whose shares are admitted to trading on a multilateral trading facility in the United Kingdom, i.e. AIM and the NEX Exchange Growth Market.

Following completion of the Migration, the Company will not be a company to which the Code applies under sections 3(a)(i) or (ii) of the Introduction to the Code as it will not have its registered office in the United Kingdom, the Channel Islands or the Isle of Man. It will also not satisfy the criteria in section 3(a)(iii) of the Introduction to the Code as it will not have its registered office in the United Kingdom or another member state of the European Economic Area and its securities will not be admitted to a regulated market in the United Kingdom or another member state of the European Economic Area. 

The Board has decided not to incorporate provisions equivalent to the mandatory offer rules set out in Rule 9 of the Code, or any other provisions of the Code, into the New Articles which will be approved and adopted as part of the Migration. 

The Board has taken this decision on the basis that the Company will not be a company to which the Code applies following completion of the Migration. In addition, the Board has considered legal advice that such provisions (when included in the constitutional documents of a company that is not subject to the Code) would typically grant considerable discretion to the board of directors of the relevant company to determine matters that would be determined by the Panel in the case of a company that is subject to the Code and that the exercise of, or failure to exercise, their powers by the directors of the relevant company could potentially lead to personal liability for the directors in circumstances where such exercise, or failure to exercise, amounted to a breach of their duties as directors under applicable law (albeit that the Directors would have the benefit of the indemnification provisions in the New Articles). In addition, the Board understands that the Panel has a body of precedent and wealth of experience in interpreting the Code, while no such precedent exists in Bermuda and a Bermuda court would not be expected to have the expertise that the Panel or a UK court would have in interpreting provisions based on the Code.

Shareholders will be asked to approve the Board's decision not to incorporate provisions equivalent to  those contained in the Code into the New Articles.

Shareholders should note that, if the Migration becomes effective, they will not receive the protections afforded by the Code in the event that there is a subsequent offer to acquire their Ordinary Shares. Brief details of the Panel, the Code and the protections given by the Code are described in the Circular.

Information on, and rationale for, the AIM Cancellation and the NEX Cancellation

AIM Cancellation

Due to the change in the Company's jurisdiction of incorporation, the AIM regulation department of the London Stock Exchange requires that the Migration be treated under Rule 41 of the AIM Rules as a cancellation of the admission to trading on AIM of the Ordinary Shares. In accordance with Rule 41 of the AIM Rules, the Company has notified the London Stock Exchange of the proposed AIM Cancellation. Shareholder approval for the AIM Cancellation is being sought at the General Meeting as part of the Resolutions and is conditional on the consent of not less than 75 per cent. of the votes cast by Shareholders at the General Meeting. The AIM Cancellation is conditional on the Migration becoming effective.

It is anticipated that the AIM Cancellation will occur up to six business days after completion of the Migration, to be followed immediately thereafter by the re-admission of the Ordinary Shares (as continued to Bermuda) to trading on AIM. Dealings in the Ordinary Shares on AIM will be suspended from 8.00 a.m. on the business day following completion of the Migration until AIM Admission becomes effective.

Subject to the requisite Shareholder approval and to the Migration becoming effective on 12 September 2018, it is anticipated that the last day of dealings in the Ordinary Shares on AIM will be 12 September 2018, the suspension of dealings of the Ordinary Shares to AIM will occur at 8.00 a.m. on 13 September 2018, and the AIM Cancellation will become effective at 7.30 a.m. on 21 September 2018.

In connection with AIM Admission, the Company is required to publish certain documentation including the Schedule One Announcement. On the date of this document, the Company provided the London Stock Exchange with, and published, the Schedule One Announcement. The Directors anticipate that AIM Admission will become effective in accordance with the AIM Rules and that dealings in the Ordinary Shares (as continued to Bermuda) on AIM will commence at 8.00 a.m. on 21 September 2018. Copies of the Schedule One Announcement may be viewed upon request at the registered office of the Company (being IOMA House, Hope Street, Douglas, Isle of Man IM1 1AP) up until AIM Admission during normal business hours on any weekday (Saturdays, Sundays and public holidays excepted). A copy of the Schedule One Announcement is available, free of charge, on the Company's website at www.epespecialopportunities.com. A copy of the Schedule One Announcement will also be available for inspection at the General Meeting.

NEX Cancellation

In addition, the NEX Exchange will also require that the Migration be treated as a cancellation of the admission to trading on the NEX Exchange Growth Market of the Ordinary Shares. It is anticipated that the NEX Cancellation will occur up to six business days after completion of the Migration, to be followed immediately thereafter by the re-admission of the Ordinary Shares (as continued to Bermuda) to trading on the NEX Exchange Growth Market. Dealings in the Ordinary Shares on the NEX Exchange Growth Market will be suspended from 8.00 a.m. on the business day following completion of the Migration until NEX Admission becomes effective.

Subject to the Migration becoming effective on 12 September 2018, it is anticipated that the last full day of dealings in the Ordinary Shares on the NEX Exchange Growth Market will be 12 September 2018, the suspension of dealings of the Ordinary Shares to the NEX Exchange Growth Market will occur at 8.00 a.m. on 13 September 2018, and the NEX Cancellation will become effective at 7.30 a.m. on 21 September 2018.  In connection with the NEX Admission, the Company was required to publish the NEX Application Announcement and the announcement was published at the date of this document.  The Directors anticipate that NEX Admission will become effective in accordance with the NEX Rules and that dealings in the Ordinary Shares (as continued to Bermuda) on the NEX Exchange Growth Market will commence at 8.00 a.m. on 21 September 2018.

The Company also has unsecured loan notes admitted to trading on the NEX Exchange Growth Market, which will remain so admitted following completion of the Migration.  Details of the unsecured loan notes can be found on the NEX Exchange Growth Market's website (https://www.nexexchange.com/member?securityid=2074413).

Suspension of dealings of the Ordinary Shares on AIM and the NEX Exchange Growth Market

Dealings in the Ordinary Shares on AIM and the NEX Exchange Growth Market will be suspended from 8.00 a.m. on the business day following completion of the Migration until AIM Admission and NEX Admission, at which point dealings in the Ordinary Shares (as continued to Bermuda) on the NEX Exchange Growth Market will commence. This period of suspension of dealings of the Ordinary Shares on AIM and the NEX Exchange Growth Market is required whilst a Bermudian ISIN is obtained in respect of the Ordinary Shares from the Bermuda Stock Exchange.

A Bermudian ISIN can only be procured following completion of the Migration and it is anticipated that this process, together with the necessary applications to be made with the London Stock Exchange, the NEX Exchange and Euroclear in respect of the Bermudian ISIN, will take up to six business days to complete. Without a Bermudian ISIN the Ordinary Shares cannot be re-admitted to AIM or the NEX Exchange Growth Market.

Shareholder irrevocable undertakings

Irrevocable undertakings to vote in favour of the Resolutions have been received in respect of 9,815,399 Ordinary Shares, representing, in aggregate, approximately 34.68 per cent. of the Company's Ordinary Shares (excluding Ordinary Shares held in treasury).

General Meeting

Set out in the Circular is the Notice convening the General Meeting to be held at Ordnance House, 31 Pier Road, St Helier, Jersey, JE4 8PW on 24 August 2018 at 12.00 noon at which the Resolutions will be proposed. Resolution 1 and Resolution 2 are detailed in the Circular published today. 

 

END

 

 

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