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Growth of the Corporate Services market and why the Channel Islands have become the go-to jurisdictions

10 July 2018

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Intertrust is one of the largest providers of corporate services administration in the Channel Islands. Alice Read, Head of Corporate Services in the Channel Islands, and Marie McNeela, Head of Corporate Services in Guernsey, lead the 50-strong team. Here they discuss the growth of the corporate services market and why the Channel Islands have become the go-to jurisdictions for corporate clients.

What is Corporate Services administration?

Alice Read: Corporate Services administrators work alongside legal and tax advisers throughout the lifecycle of many companies, covering everything from implementing the structure and ensuring that the articles replicate the entity to dealing with the necessary regulatory approvals. Administrators like Intertrust typically have a very active role in many companies. For example, we provide the majority of the directors on the company boards and we often take responsibility for any transactions or acquisitions that the company is going to make. When there are changes to the composition of the company, such as a change of shareholders or directors, we update the documentation and notify the regulator. We file annual returns and make sure the company stays in compliance with the law and local regulations.

We’re not the architect of the structures, that role is for the legal and tax advisers. We’re the builder, so we start by working with the advisers to determine which jurisdiction or jurisdictions an entity needs to be in and then build and manage it from there. The beauty of what we do is that we free up the client’s time, so they can focus on their own core business activities to make their business thrive.

What types of clients require these services?

Marie McNeela: Clients can range from emerging market businesses and smaller privately held and early stage businesses right up to companies that list on major stock exchanges, private equity firms and fund managers. The industries that these companies work in are extremely diverse, such as cleantech, energy, financial services, food & beverages, healthcare, infrastructure, media, natural resources, pharmaceuticals, retail, technology, telecommunications and utilities.

Clients are increasingly looking for a globally consolidated service as they have entities around the world and so require a single point of contact close to where they’re located in the same language and time zone as them. Worldwide best practice and local knowledge is a powerful combination and one that clients are demanding today.

An example of this is when a client urgently requires a new entity, as part of a fast-paced transaction, to act as a holding company for an acquisition target; our scale and internal support functions allow us to react quickly and respond to the needs of the client so that tight deadlines can be met.

How central is regulation to corporate services?

Alice Read:
 Regulation is becoming more complex and clients want to deal with a local expert who can make sure they remain compliant. They don’t want the hassle of having to think about their corporate governance requirements in multiple jurisdictions and would rather focus on their core business.

So many clients have global structures and want to work with one service provider globally. They need someone who provides an understanding of local dynamics and expectations, with full attention to the compliance requirements. Importantly, post financial scandals such as the Paradise Papers, clients are looking to move from less well regulated jurisdictions to the more highly regulated centres such as the Channel Islands and we’re starting to see a growth in clients relocating their entities to the islands.

Even GDPR in Jersey is different to the way it’s applied in the UK, for example, under the Jersey data protection law entities that are deemed to control data must register with the Jersey Data Protection Commissioner although this isn’t a requirement in the UK.

Marie McNeela:
 Given how well regulated Guernsey and Jersey are, our infrastructure gives confidence to companies who place services here. It’s a safe pair of hands – and that’s contributed to the flight to quality. Clients want attentive, professional providers who insist on accounts being done and paperwork completed properly with full audit trails.

Alice Read:
 There’s definitely less risk here. Even in the UK corporate services is not regulated by the financial services regulator. In contrast, our regulators don’t allow us to set up companies and then deal with the KYC later. We properly assess the risk before we take on business and, where necessary, we put mechanisms in place to manage that risk.

Marie McNeela:
 For some clients having a professional corporate services provider helps mitigate their risk because their corporate governance and documentation is being verified correctly.

Why is good governance important?

Alice Read: When it comes to an action, such as the raising of capital or an Initial Public Offering (IPO), all of the company documentation will be thoroughly scrutinized, therefore it’s important that everything has been properly documented and recorded. It’s the corporate administrator’s responsibility to ensure that decisions are made by the board, not just by one director, that these decisions are properly documented and that full and thorough records are kept.

Are there innovations in the corporate services sector?

Marie McNeela:
 Yes, for example we’re developing a new global client portal that will cover all jurisdictions, including those where we use third party service providers. Clients want to consolidate service providers globally and this portal will allow them to see all the key corporate and statutory data in one easily-accessible and secure online platform.

What challenges do you face in corporate services?

Alice Read:
 Keeping on top of increasing regulation is a continuous challenge, but one that we rise to with the help of our global compliance team.

Marie McNeela: There are so many more reporting requirements nowadays with initiatives such as FATCA and CRS. These make life more complicated and challenging for clients but we’re in the right place to help.

And what about the future?

Alice Read: On the corporate side, industry consolidation ties in with clients wanting services in multiple jurisdictions so there will be fewer but bigger providers in the market and for that reason at Intertrust we’re ensuring that we innovate and keep ahead of the market.