Holding companies - overcoming a mid-life crisis?

comment - 17 June 2015

Holding companies - overcoming a mid-life crisis?

Aztec Group may be best known for its award winning Fund Services, however, Corporate Services has become a core part of our offering across all offices and now forms its own dedicated product group. Aztec Group adopts a qualitative approach to Corporate Services, leveraging the discipline of Fund Services to supply tied or standalone solutions to institutional sponsors requiring standalone SPV or trust solutions. This is perfectly adapted to an increasingly complex environment.

The formula for Corporate Services faces a mid-life crisis. Process driven firms compete to supply the basic mechanics of company formation and maintenance as cheaply as possible in each jurisdiction, growing ever larger to achieve increased economies of scale and a global footprint.

Little or no appreciation is given to the purpose or operation of these companies, which are entirely mechanically approached. Ancillary costs tend to be high.

The utility of this formula started to break-down as tax authorities across the world and inter-governmental organisations increasingly began to challenge the validity of these holding companies. They had no ‘substance’ after-all and were increasingly looked-through (from both sides) when applying tax rules. Industry initially responded by establishing a series of middle offices, but too often these middle office undertook the same basic corporate tasks (internally or on a sub-sourced basis) and supplied no qualitative (or value adding) management services at all.

In the aftermath of the Crisis, the pressures on the Corporate Services sector have become even more acute with the focus increasingly shifting from perceived regulatory gaps to international tax abuse. The various BEPS action plans are trying to bring taxation rights into line with value creation and tackle the abusive structuring.

The difficulty for the Corporate Services sector is obvious. No matter whether tasks are supplied in-house by a group services company or a third party, what is the role of third country holding companies and what do they need to do to avoid challenge? The question is particularly complex in a private equity co-ownership context where the private equity fund and any SPV’s established underneath it should simply be a capital conduit to supply equity funding to do a deal.

The answer is surprisingly straightforward. These companies must have an economic purpose other than pure tax mitigation and, if possible, demonstrate clear beneficial ownership of any proceeds realised. This is not a question of office space, employees or telephone lines but a qualitative understanding of the role to be played by a holding company and the value that it can add (for example, in terms of risk control, management services and/or legal neutrality). These roles can be achieved structurally and functionally, without artificiality (which we would strongly caution against). After all, the lines between legitimate tax management, aggressive tax avoidance and criminal tax evasion are very fine these days.

This is where our qualitative approach to Corporate Services can make all the difference with clients and any local middle offices. We understand what needs to be done, why it must be done efficiently and where costs should be incurred and where they should be avoided. It is all about good management, supplied in the relevant locality, to ensure maximum control.

If you require help, therefore, in setting up and operating SPVs or trusts including, for example:

+ a registered office and performing administrative services;
+ the provision and discharge of local management functions;
+ acting as trustee of trusts and employee benefit structures;
+ preparing annual and other financial statements;
+ co-ordinating advisors, banks or auditors;
+ arranging the execution and safe custody of transaction documents;
+ maintaining statutory records, registers and other records;
+ regulatory, statistical and tax registrations and reports

in jurisdictions such as Guernsey, Jersey, Luxembourg, the Netherlands, Sweden and the United Kingdom, then please contact me or James Duffield, our Head of Business Development.


previous comment / Andreas Demmel

The Netherlands for corporate structuring

In the first of this two part series, Andreas Demmel, corporate services specialist and head of our Netherlands office, introduces the main types of corporate vehicles used in the ... Read More

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If you would like to discuss outsourcing to the Aztec Group or are considering migrating a fund or SPV, please call James Duffield, Head of Business Development, on +44 20 3818 0250.

Aztec Group Guernsey

Aztec Financial Services (Guernsey) Limited
PO Box 656, East Wing, Trafalgar Court
Les Banques, St Peter Port, Guernsey, GY1 3PP

Telephone: +44 1481 749700
Facsimile: +44 1481 749749
Email: enquiries@aztecgroup.co.uk

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Aztec Group Jersey

Aztec Financial Services (Jersey) Limited
Aztec Group House, PO Box 730
11-15 Seaton Place, St Helier, Jersey, JE4 0QH

Telephone: +44 1534 833000
Facsimile: +44 1534 833033
Email: enquiries@aztecgroup.co.uk

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Aztec Group UK - London

Aztec Financial Services (UK) Limited
2 Throgmorton Avenue

Telephone: +44 20 3818 0250
Email: enquiries@aztecgroup.co.uk

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Aztec Group Luxembourg

Aztec Financial Services (Luxembourg) S.A.
8, rue Lou Hemmer, L-1748, Luxembourg – Findel
Grand-Duché de Luxembourg

Telephone:+352 246 160 6000
Facsimile: +352 246 160 6016
Email: enquiries@aztecgroup.eu

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Aztec Group The Netherlands

Aztec Financial Services (Netherlands) BV
Spaces Zuidas, Barbara Strozzilaan 201
1083 HN Amsterdam, The Netherlands

Telephone: +31 20 794 4820
Facsimile: +31 20 794 4821
Email: enquiries@aztecgroup.eu

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Aztec Group UK - Southampton

Aztec Financial Services (UK) Limited
Forum 3, Solent Business Park
Parkway South, Whiteley, Fareham, PO15 7FH

Telephone: +44 238 202 2300
Facsimile: +44 238 202 2309
Email: enquiries@aztecgroup.co.uk

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Aztec Group Sweden

Cetza Financial Services (Sweden) AB
Strandvägen 7a, 114 56, Stockholm, Sweden

Telephone: +46 8 124 488 88
Facsimile: +46 8 124 488 99
Email: enquiries@aztecgroup.se

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