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11 th Annual Offshore Forum Thursday, October 11 th 2012

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Page 1: 11th Annual Offshore Forum - ConyersDouble Taxation Avoidance Agreements • Mauritius has entered into an extensive network of double taxation avoidance agreements with 36 countries

11th Annual Offshore ForumThursday, October 11th 2012

Page 2: 11th Annual Offshore Forum - ConyersDouble Taxation Avoidance Agreements • Mauritius has entered into an extensive network of double taxation avoidance agreements with 36 countries

WelcomeAnthony Whaley, Director, Bermuda

Page 3: 11th Annual Offshore Forum - ConyersDouble Taxation Avoidance Agreements • Mauritius has entered into an extensive network of double taxation avoidance agreements with 36 countries

Agenda

• Presentation:• Key note speaker – John Collis

• Bermuda – Chris Garrod• BVI – Anton Goldstein• Cayman Islands – Kevin Butler• Mauritius – Craig Fulton

Page 4: 11th Annual Offshore Forum - ConyersDouble Taxation Avoidance Agreements • Mauritius has entered into an extensive network of double taxation avoidance agreements with 36 countries

Offshore: Its Global AdvantageJohn Collis, Chairman, Conyers Dill & Pearman

Page 5: 11th Annual Offshore Forum - ConyersDouble Taxation Avoidance Agreements • Mauritius has entered into an extensive network of double taxation avoidance agreements with 36 countries
Page 6: 11th Annual Offshore Forum - ConyersDouble Taxation Avoidance Agreements • Mauritius has entered into an extensive network of double taxation avoidance agreements with 36 countries

Bermuda

Chris Garrod, Director, Bermuda Office

Page 7: 11th Annual Offshore Forum - ConyersDouble Taxation Avoidance Agreements • Mauritius has entered into an extensive network of double taxation avoidance agreements with 36 countries

Bermuda Reinsurance

Bermuda: “The World’s Risk Capital”

Third largest reinsurance market

Two recent trends:

• use of special purpose insurers for ILS/sidecar

transactions

• hedge fund sponsored property catastrophe

reinsurers

Page 8: 11th Annual Offshore Forum - ConyersDouble Taxation Avoidance Agreements • Mauritius has entered into an extensive network of double taxation avoidance agreements with 36 countries

Special Purpose Insurers

Introduced in 2009 23 licensed in 2011, 15 so far in 2012 Designed to only write sophisticated, fully

funded transactions Very low regulatory requirements

• minimum capital of $1.00• no return of capital restrictions• audit waiver• low licensing fees

Page 9: 11th Annual Offshore Forum - ConyersDouble Taxation Avoidance Agreements • Mauritius has entered into an extensive network of double taxation avoidance agreements with 36 countries

Sidecar Structure

HoldingCompany

Equity Investor

Cedant SPIReinsurer

DebtInvestor

Equity Proceeds

Dividends

Dividends

Equity Proceeds

ReinsuranceTrust

LoanProceeds

Premiums Interest

Page 10: 11th Annual Offshore Forum - ConyersDouble Taxation Avoidance Agreements • Mauritius has entered into an extensive network of double taxation avoidance agreements with 36 countries

Catastrophe Bond Structure

Special Purpose Trust

NoteholdersSPI ReinsurerCedingInsurer

Share capital $1

CollateralAccount

Note Proceeds

Direct Investment

Yield

Reinsurance Agreement

Reinsurance Premium

Page 11: 11th Annual Offshore Forum - ConyersDouble Taxation Avoidance Agreements • Mauritius has entered into an extensive network of double taxation avoidance agreements with 36 countries

Hedge Fund Sponsored Reinsurers

US hedge fund& others

Holdco

Class 4reinsurer

FundPortfolio

US hedgefund

Investment Management Agreement

$

$shares

shares

$

Examples:

Third Point Re – Daniel Loeb

PaCRe – John Paulson

S.A.C. Re – Steven A. Cohen

Page 12: 11th Annual Offshore Forum - ConyersDouble Taxation Avoidance Agreements • Mauritius has entered into an extensive network of double taxation avoidance agreements with 36 countries
Page 13: 11th Annual Offshore Forum - ConyersDouble Taxation Avoidance Agreements • Mauritius has entered into an extensive network of double taxation avoidance agreements with 36 countries

British Virgin IslandsAnton Goldstein, Associate, British Virgin Islands

Page 14: 11th Annual Offshore Forum - ConyersDouble Taxation Avoidance Agreements • Mauritius has entered into an extensive network of double taxation avoidance agreements with 36 countries

BVI

Number of BVI Incorporations by Year

010,00020,00030,00040,00050,00060,00070,00080,00090,000

2004

2005

2006

2007

2008

2009

2010

2011

2012

- Firs

t 6 m

onths

Page 15: 11th Annual Offshore Forum - ConyersDouble Taxation Avoidance Agreements • Mauritius has entered into an extensive network of double taxation avoidance agreements with 36 countries

Joint Ventures

• Neutral • Tax • Choice of Law

• Judicial Committee of the Privy Council• BVI Business Companies Act, 2004

Page 16: 11th Annual Offshore Forum - ConyersDouble Taxation Avoidance Agreements • Mauritius has entered into an extensive network of double taxation avoidance agreements with 36 countries

Joint Ventures

“Separate Classes of Shares”

Page 17: 11th Annual Offshore Forum - ConyersDouble Taxation Avoidance Agreements • Mauritius has entered into an extensive network of double taxation avoidance agreements with 36 countries

Joint Ventures

“Only ten out of 1,722 providers in America required notarised

documents in line with FATF standards.”

The Economist

September 22, 2012

Page 18: 11th Annual Offshore Forum - ConyersDouble Taxation Avoidance Agreements • Mauritius has entered into an extensive network of double taxation avoidance agreements with 36 countries

BVI Business Companies (Amendment) Act, 2012

• Company Names• symbols and emoticons ([email protected], Ltd.)

• purchase name from company• Security Interests

• partial releases• deeming provisions

• Conversion of Shares• expressly permitted

• Alternate Directors• sign written resolutions

• New Certificates from Registrar of Corporate Affairs• Dissolution after 7 years from strike off (rather than 10

years)

Page 19: 11th Annual Offshore Forum - ConyersDouble Taxation Avoidance Agreements • Mauritius has entered into an extensive network of double taxation avoidance agreements with 36 countries
Page 20: 11th Annual Offshore Forum - ConyersDouble Taxation Avoidance Agreements • Mauritius has entered into an extensive network of double taxation avoidance agreements with 36 countries

Cayman Islands

Kevin Butler, Director, Head of Office Cayman Islands

Page 21: 11th Annual Offshore Forum - ConyersDouble Taxation Avoidance Agreements • Mauritius has entered into an extensive network of double taxation avoidance agreements with 36 countries

Jurisdictional Update - Trending Up

• Number of companies increasing• Number of partnerships increasing• Deal flow increasing

Page 22: 11th Annual Offshore Forum - ConyersDouble Taxation Avoidance Agreements • Mauritius has entered into an extensive network of double taxation avoidance agreements with 36 countries

Jurisdictional Update - Trending Up

• Increase in new funds (lots of cash for the established manager)

• Still difficult for the start-up• Back to basics• Independent Directors for hedge funds

and private equity• Side letter update

Page 23: 11th Annual Offshore Forum - ConyersDouble Taxation Avoidance Agreements • Mauritius has entered into an extensive network of double taxation avoidance agreements with 36 countries

Cayman Enterprise City

• Special Economic Zone – only of its kind in the world.

• Forms ideal 21st Century hub for world’s knowledge based and high-technology industries

• Internet & Technology• media• biotechnology• commodities & derivatives• outsourcing• academia

Page 24: 11th Annual Offshore Forum - ConyersDouble Taxation Avoidance Agreements • Mauritius has entered into an extensive network of double taxation avoidance agreements with 36 countries
Page 25: 11th Annual Offshore Forum - ConyersDouble Taxation Avoidance Agreements • Mauritius has entered into an extensive network of double taxation avoidance agreements with 36 countries

MauritiusCraig Fulton, Associate, Cayman Islands andFormer Head of Office Mauritius

Page 26: 11th Annual Offshore Forum - ConyersDouble Taxation Avoidance Agreements • Mauritius has entered into an extensive network of double taxation avoidance agreements with 36 countries

Double Taxation Avoidance Agreements

• Mauritius has entered into an extensive network of double taxation avoidance agreements with 36 countries

• Benefits include:• No or greatly reduced capital gains tax payable

when a Mauritius company sells a stake in a company resident in the other treaty country; and

• Reduced or eliminated withholding taxes on dividends, interest and royalties remitted from the treaty country to the Mauritius company

Page 27: 11th Annual Offshore Forum - ConyersDouble Taxation Avoidance Agreements • Mauritius has entered into an extensive network of double taxation avoidance agreements with 36 countries

DTA Treaty Network

Wide/strong DTA treaty network, with strong African links, and more treaties forthcoming:

Bangladesh Mozambique Uganda MalawiBarbados Namibia United Arab Emirates MonacoBelgium Nepal United KingdomBotswana Oman Zimbabwe Being NegotiatedChina Pakistan AlgeriaCroatia Qatar Being Ratified Burkina FasoCyprus Rwanda Kenya CanadaFrance Senegal Nigeria Czech RepublicGermany Seychelles Republic of Congo GreeceIndia Singapore Russia MonacoItaly South Africa Zambia PortugalKuwait Sri Lanka Republic of IranLesotho Swaziland Awaiting Signature Saudi ArabiaLuxembourg Sweden Egypt St Kitts & NevisMadagascar Thailand Gabon TanzaniaMalaysia Tunisia Ghana Vietnam

Yemen*Also, TIEAs with Australia and Denmark in force.

Page 28: 11th Annual Offshore Forum - ConyersDouble Taxation Avoidance Agreements • Mauritius has entered into an extensive network of double taxation avoidance agreements with 36 countries

Standard Base Structure

Investor Dividends/interest/royalties with no WHT

Tax payable in Mauritius ranges from 0% to 3%

As low as 8% WHT instead

of 20%

IPPA benefits

Reduced/zero withholding tax (WHT) on

dividends/interest/royalties paid to GBC1

IPPA benefits

Category 1 Global Business Company (GBC1) Mauritius

Investment in SenegalInvestment in South Africa

Mining company in Madagascar

• Also basis of standard PE model (GBC1 as Holdco)• Can also provide for leverage via loan to GBC1 and onward loan into target

country

No WHT

Page 29: 11th Annual Offshore Forum - ConyersDouble Taxation Avoidance Agreements • Mauritius has entered into an extensive network of double taxation avoidance agreements with 36 countries

Sample Fund Structure

International investor(s)

invests

DTA treatySeeks to invest Bank in Mauritius(Custodian)

Investment in Africancountry

Mauritius fund(CIS/CEF)

invests

DTA treaty

Safeguard assets

Page 30: 11th Annual Offshore Forum - ConyersDouble Taxation Avoidance Agreements • Mauritius has entered into an extensive network of double taxation avoidance agreements with 36 countries

List of IPPAs

• Barbados• Belgium/Luxembourg

Economic Union• Burundi• China• Czech Republic• Finland• France• Germany• India• Indonesia• Madagascar

• Mozambique• Pakistan• Portugal• Republic of Korea• Romania• Senegal• Singapore• South Africa• Sweden• Switzerland• UK and Northern

Ireland

Page 31: 11th Annual Offshore Forum - ConyersDouble Taxation Avoidance Agreements • Mauritius has entered into an extensive network of double taxation avoidance agreements with 36 countries

Questions

Page 32: 11th Annual Offshore Forum - ConyersDouble Taxation Avoidance Agreements • Mauritius has entered into an extensive network of double taxation avoidance agreements with 36 countries

Conyers Dill and Pearman

David Lamb, Partner, Hong Kong Office

Mark Forte, PartnerBVI Office

Fraser Hughes, Counsel, Cayman Office

Peter Ch’ng, Partner, Bermuda Office

Christian Luthi, Partner, Bermuda Office

Craig McIntyre, Partner, Bermuda Office


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