18 March 2011 | By Abigail Townsend
21 November 2013
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Informa, the FTSE250 publishing group behind Lloyd’s List and Datamonitor, relocated to Switzerland in 2009. But informal discussions had been ongoing since 2006, says company secretary and general counsel John Burton. “I work quite closely with our group tax director [Bas ter Balkt],” says Burton. “He joined us through an acquisition and that company was based offshore, so one of the things he was always keen for us to consider was a redomicile.”
There were specific tax reasons for the move: Informa generates around 80 per cent of group earnings overseas and yet was taxed under the UK regime. But Burton was conscious that prudent financial planning alone would not convince the board.
“Bas thought we could be the first mainstream listed company to go offshore,” he says. “But internally there was naturally some caution and we didn’t know how well it would go down, so we decided to wait and see.”
It was only when other companies started relocating - such as drugs group Shire and media giants WPP and United Business Media, who all moved to Ireland - that the topic was considered seriously, especially as it coincided with rumoured plans by the then government to increase tax on profits earned overseas.
“Clearly, we started looking at this hard again once the redomiciles in 2008 were announced, but we were also trying to work out where the government was going to go - we would only want to do it if it was thought necessary and the right thing to do for the longer term,” Burton recalls.
The first major decision was where to domicile, and one of the biggest factors affecting that was the rules on controlled foreign companies (CFCs).
“If the tax on income profits paid in the foreign jurisdiction is less than three-quarters of the tax that would have been paid in the UK, the income profits are apportioned to the UK parent,” explains Burton. “Initially, the rules were drafted widely but contained broad exemptions for so-called acceptable foreign activities, which allowed many UK groups to structure their activities so that the CFC rules did not result in significant UK tax.
“However, in recent years the UK government has made multiple amendments to tighten the application of the exemptions, and the rules have become increasingly complex and the cost of compliance is high.”
It was important, therefore, that the new holding company was domiciled in a jurisdiction that did not have CFC rules. Ireland was never a favoured destination.
“Bas always wanted to bring us to Switzerland and it’s interesting how that’s playing out [following the financial crisis], says Burton. “Switzerland is well-established for tax. Its rules are stable and less complex, and the authorities often give binding rulings. Informa also felt that Switzerland was a more desirable setting for senior staff.”
So, from autumn 2008 Burton and his team started to talk about the move “seriously”, receiving bespoke tax advice from
PricewaterhouseCoopers and working out what was and was not possible. Burton presented to the board at one of its regular meetings in December and, at the start of 2009, got the green light. The decision was taken to domicile in Zug, the eponymous capital of the Swiss canton.
Although the whole of Switzerland has low corporate tax rates Zug, located around 30 minutes south of Zurich, has one of the lowest. Informa also decided to incorporate in Jersey, but delisting from London was never considered.
“Tax is a major cost for a company, but at the same time institutional shareholders are naturally protective of their rights,” says Burton. “We’re a global company and [Switzerland] is a sensible headquarters location. But shareholders want to retain their protections and the UK has one of the best structures for listed companies in the world.
“We did look at whether [the new holding company] should be a Swiss company but we wanted to make the redomicile as straightforward and attractive to shareholders as possible. The benefit of being a Jersey company is that generally the same company law rules apply, and where they don’t we ensured the relevant protections were set out in the articles. Also, Jersey courts have a good reputation and use the same language. A Jersey company domiciled in Switzerland seemed to provide the best of both worlds.”
Once the locations had been decided on, the next step was to create the holding company to effect the move. A prospectus outlining the plans was published in April and shareholders, who had to approve swapping their existing shareholdings for ones in the new company, were given until the start of June to vote. On 29 June there was a court hearing for the scheme of arrangement, which sanctioned the changes. That was also the last day of dealing in the old Informa shares. At 8am the next day Informa’s shares were cancelled and shares in the new company were admitted to the main list of the London Stock Exchange.
Three days later there was a court hearing in Jersey to reduce the company’s share capital, a “technical procedure required to create a reserve from which dividends may be paid”, Burton explains. It was a flurry of precisely coordinated hearings and listings, but by the end of it Informa was domiciled in Switzerland, incorporated in Jersey and listed in London.
To ensure these tight deadlines were met Burton and his team worked to two timetables: a broad overall schedule and a more intricate day-by-day one.
“We were the first listed company to come to Switzerland so you couldn’t just copy out of the back of someone else’s prospectus,” says Burton. “We thought and talked long and hard to legal, tax and other advisers. None of this was a tried and tested process so we could not take things for granted.”
The other issue complicating an already complex process was the launch of a rights issue. Wanting to ensure it would not breach the terms of its borrowings - at that stage, around £1.3bn - Informa announced plans to raise £242m from shareholders in spring 2009.
“It seemed like a great adventure, but it was a killer,” says Burton.
Burton believes he has drawn two major lessons from the experience; the first is the importance of communication.
“Getting all these processes through the board was challenging in itself,” he says. “The flow of information to the board is perhaps the most crucial aspect of being a company secretary. Non-executive directors require information, but they need quality rather than quantity so you have to look carefully at what you give them. We had to talk the board members through the pros and cons. It was an important decision for them.”
Most of all, it reminded the former CMS Cameron McKenna partner of the benefits of working with colleagues across the company.
“It might seem obvious, but you had to work as a team,” he says. “Finance, tax, corporate finance, treasury, legal, the company secretary office - they all mucked in.”
Burton and his team worked closely with external advisers but the strong in-house approach gave them an edge. As he sums up, it allowed them to set the agenda.
“I love it when an adviser says, ’Are you sure you want to do that?’,” he concludes.