ISSUE 2 SEPTEMBER 2008

www.gibraltarlawyers.com

Communiqué Introduction By Christian Rocca

Taking a few minutes to read the articles in this, our second and summer edition of the Many challenges lie ahead as the world faces a Communique, has reinforced my belief that the creation of an ISOLAS newsletter was a variety of widely documented and accepted great idea. The content ranges from the socio-economic difficulties... informative pieces on gaming and corporate finance, through to the more social aspects of proves to be a welcome opportunity to Our Litigation lawyers have also had an the firm, particularly the successful foray of spend time with friends and clients in an extremely busy summer. Working on a our first Rugby Sevens sponsored team on informal, fun, yet always competitive, number of different matters they have also the international scene. The newsletter is an environment which helps strengthen our been engaged in the largest Litigation easy and direct forum for keeping our clients relationships. Maintaining and developing dispute ever to be heard by our Courts. A and partners informed about what we’re doing close relationships with clients is a stalwart thank you to them for their enormous and, importantly, all the issues you need to be of the ISOLAS success story and, even effort these past months. aware of regarding , both as an today, it forms a large part of who we are. I would also like to take this opportunity international finance centre and as our home. The launch of our Small Business Unit and to welcome on board Kieron Becerra In this edition of the Communique you’ll the roll-out of our client portal system ACCA. Kieron, who previously worked for read about our visit to Zurich, Lugano and located on our website Fiduciary Fund Administration, will be Geneva earlier this year. The whistle-stop www.gibraltarlawyers.com is a reflection of joining us in September. tour of the Swiss financial capitals proved the exciting times the Firm is currently Finally, I’d like to wish the readers, our tremendously successful and I was enjoying. In addition to that, we are seeing clients and partners, the very best as delighted by the friendly and warm a significant growth in the funds industry business returns to normality after the welcome we received from colleagues in locally, and I’m happy to report that our summer break. the industry with whom I’d had no Funds people are being kept very busy previous contact. Participants at the indeed. Growth, however, is not without its In this issue Seminars found the Gibraltar story and its consequences. For me, though, a happy Page opportunities of significant interest. consequence is that we will shortly be 1. Introduction During our time there we forged close ties welcoming a newly qualified lawyer to the with many new partners and I am looking ranks of the Firm. Christian Caetano, 2. Corporate Lending forward to returning there later this month. younger brother of one of our senior 3. Switzerland Seminars I’ve recently had cause to focus on fine- associates, Steven Caetano, will be joining Small Business Unit tuning my handicap because, in ISOLAS in September to work with Albert Rugby Sevens September, we’ll also be holding our Isola and Joey Garcia to address the annual golf day at La Reserva Golf Club in increasing demand for Gibraltar-based 4. Interview with Elaine Bingham Sotogrande. A truly spectacular location Funds. I look forward to working with him 5. Gaming review provides the backdrop for what every year and wish him every success for the future. ISSUE 2 CORPORATE LENDING by Christian Hernandez insolvency procedures have been commenced against the company. Practice in Gibraltar is for the firm to carry out a review of the public records of the company on file and available for inspection at Companies House to ascertain that no order or resolution has been filed for the winding up of the company as well as making enquiries at the Supreme Court Registry of Gibraltar, to ascertain whether there is any petition on file for the winding up or liquidation of the company. It goes without saying that any decision has to be properly authorised by the company. Board meetings have to be convened in accordance with the In corporate financing transactions, have to be registered at Companies House articles of association of the Company and security is key. Banks invariably choose to within 21 days of the date of creation of remain quorate throughout so that the protect themselves by taking security over the security. Effective registration items can be validly debated. Producing the borrowing company/companies’ assets. subsequent to the payment of the statutory appropriately drafted minutes of a meeting Where the borrower is a Gibraltar fee will render the charge effective against would usually be viewed as satisfying these company, or a Gibraltar company is part of any liquidator or administrator of the requirements. In certain instances and for the group structure offering security for a company and the security holder will rank added comfort, it is sometimes advisable transaction, certain key issues need to be as a secured creditor. that the shareholders also approve any transaction, and in this way confirm, that taken into account which might not In addition to full registration and as a the Directors are acting within their necessarily be relevant in a modern-day result of the ‘Slavenburg’ ruling, security powers. UK context, even though Gibraltar law is, created by an overseas company charging in the main, based on the laws of property in Gibraltar (e.g. shares in a Tax treatment of companies in Gibraltar & Wales. This is due, in large part, to the Gibraltar company) should be delivered to The way in which companies in Gibraltar fact that Gibraltar’s company law is based Companies House for the particulars of have been taxed has undergone significant on the old UK Companies Act 1929, and the charge to be noted on the ‘Slavenburg’ change in the last few years. Following the that it is therefore not entirely up to date register. Even though the security cannot phasing out of tax exempt companies, the in spite of wholesale amendment and strictly be registered in Gibraltar as the new tax rate is soon to be confirmed after review over the years. These ‘Gibraltar overseas company does not have a place of a long awaited judgment by the European issues’ need to be borne in mind where a business in Gibraltar to which the Act Court of Justice. Gibraltar company is entering into finance would apply, Companies House would For the time being, many companies are documentation, regardless of whether or provide written confirmation that the currently not subject to tax because their not the facility is backed by security. documents have been presented to the income does not “accrue in, derive from or is Can the purchaser of a company secure Registrar for registration. not received in” Gibraltar. The basis for this is borrowing against the assets of the Corporate Benefit, Solvency & written guidance issued by the Commissioner company which is being acquired? Corporate Authority of Income Tax issued at the request of the Under Gibraltar law, there are currently It is a requirement under Gibraltar law Chairman of the Finance Centre Council restrictions on so-called ‘financial that the directors of a company exercise which defines what constitutes income assistance’, the classic situation arising their powers properly for the benefit and “accruing in” Gibraltar. The effect of the when an acquiror purchases a target in the best interests of the company. guidance is to essentially limit tax liability to company using bank financing that is Transactions which are not ostensibly locally-generated income. In addition, for secured and guaranteed by the target beneficial to the company could added comfort, many companies are putting company itself. However, since Gibraltar’s potentially be set aside as void. This could their own circumstances to the financial assistance provisions are still in be viewed as problematic for a company Commissioner of Income Tax and receiving their original state and have not once been wishing to cross-guarantee and cross- individual tax rulings, which on the whole amended since their inception, it would collateralise obligations owed by its have been favourable. seem that, under carefully considered subsidiaries and parent companies. In For any further information, full details circumstances, Gibraltar companies may addition, solvency is of paramount and specific legal advice on any of these be able to provide financial assistance importance where the issue of lending is points, please contact Christian without contravening current legislation. involved and the lender would want to be Hernandez, partner and head of the Creation and perfection of security satisfied that the company is not and will corporate finance team on Section 28 of the Companies Act lists the not become, as a consequence of entering [email protected]. types of security which are required to be into any facility documentation, unable to Alternatively, please contact him on the registered in Gibraltar, particulars of which pay its debts. Equally important is that no office’s general number, +350 200 78363 Switzerland Seminars ISBU by Selwyn Figueras by Selwyn Figueras ISOLAS, in association with the Gibraltar vehicle of choice for a growing number of Early June saw the launch of ISOLAS Small Finance Centre, attended and addressed a investors coming to the Rock. Business Unit (‘the ISBU’) at their offices in series of seminars dealing with Gibraltar as a One of the hot topics of discussion was the Portland House. An informal gathering of a centre for wealth management in Switzerland advantages of Gibraltar’s implementation number of small business owners and during the last week of May 2008. of the EU’s parent/subsidiary directive and entrepreneurs in Gibraltar, the ISBU hosted A total of three half-day seminars were the extension to include non-EU based the launch with a view to establishing its held in Zurich, Lugano and Geneva, a assets within that legislative framework. credentials as a team of lawyers with the capital of global wealth management and The effect of this is that Gibraltar-based resources, experience and commerciality to the crown jewel in Switzerland's finance funds holding assets anywhere in the world help small businesses succeed. industry. The Park Hyatt in Zurich through a multi-tiered, EU corporate Over the last few weeks, the ISBU has been played host to the first of the three structure, can take full advantage of the running, in conjunction with the local daily, seminars where a number of Gibraltar's provisions of the parent/subsidiary the , its series of Small leading executives addressed a large directive to move profits through that Business articles dealing with a wide range of number of professionals and covered a structure without withholding tax being issues key to successfully establishing and variety of subjects relating to wealth applied in any of the jurisdictions. This running such a venture. Practical advice is management in Gibraltar. The second of framework has, without doubt, made of what the ISBU is about. Accounting and the seminars was held at the Grand Hotel Gibraltar a realistic alternative to the financing, two examples of issues which have Eden in Lugano and the last and best- established funds capitals of the world such historically been the remit of other attended event was hosted by the Chief as the Cayman Islands. In addition, the professionals, are now issues that the ISBU Minister, Peter Caruana, at the Four increasing use of the experienced investor will be happy to help you to embrace and, Seasons Hotel in Geneva. The events were fund product, a fund capable of being where necessary, develop tailored solutions in attended by a cross-section of the financial established in very short order without the each individual case. With its network of community in Switzerland, ranging from approval of the FSC (mere notification of contacts in all fields of the local market, the lawyers and accountants to fund managers the fund will suffice) as a cell within a ISBU can provide you with commercial, real- and bankers all interested in learning more company (as provided for by Gibraltar’s world and practical advice and put you in about all the advantages Gibraltar offers. protected-cell company legislation) means touch with the people who can provide you Topics covered by the speakers included a that Gibraltar proudly boasts all the with the solutions you need. discussion by Marcus Killick, CEO of the features and products it needs to succeed Speaking at the launch, Selwyn Figueras Financial Services Commission, about the on the international funds scene. explained that the ISBU is not about legalese regulatory framework here in Gibraltar, The 2008 Swiss seminars proved a and advice in the abstract. “The ISBU brings followed by talks relating to current trends tremendous success. Plans are already you the combined experience of a team of and challenges in wealth management, the being made for seminars to be held in lawyers with extensive experience in all matters tax regime in Gibraltar and the experience Prague and Vienna and, if the Swiss relative to small business, with the resources of a Swiss asset management company seminars are anything to go by, the Finance and the network you need to succeed.” whilst setting up an operation in Gibraltar. Centre can be assured of continuing success The coffee morning was certainly a hit and Albert Isola, of ISOLAS, delivered an and Gibraltar’s growing popularity and one to be repeated as the ISBU continues its entertaining and engaging talk about the recognition on the international stage. efforts at putting the right information out uses of one of Gibraltar's 'sexiest' financial Gibraltar, it seems, is making all the right there, information everybody needs but not services products, the experienced investor moves where the international Funds everyone can find. fund. Albert spoke of the advantages of industry is concerned and, despite the The ISBU looks forward to meeting with this quick to set up, cost effective and contrasting global forecasts, the continuing members of Gibraltar’s small business flexible operation in addition to the use of growth in this sector seems to indicate that community and is happy to help you deal with Gibraltar’s protected cell company as the good times lie ahead. anything your business might throw at you. The Pillars of Hercules fly P.O.H into a fiercely contested final against Team. In the most exciting game of the day Puerto Santa Maria, a top Spanish division P.O.H came out on top 17-7 and went on to the Gibraltar flag with the side who P.O.H had beaten earlier in the face Cau Valencia who were swept aside in support of ISOLAS day. Unfortunately the Gibraltar team went the Semi Final. The final took place between down 12-7 finishing as runners up. P.O.H and Viator Barbarians in a replay of by Joey Garcia The Puerto tournament was the next stop on the earlier match. However, early injuries to The ISOLAS sponsored rugby sevens team the circuit with a strengthened team which key players cost the team dear, and P.O.H ‘Pillars of Hercules’ (P.O.H) launched included All Black Justin Marshall, and finished the tournament as runners up. their inaugural season this year competing England International Iain Balshaw as in the Gibraltar sevens tournament, as well coaches. P.O.H defeated the Andalucia The next tournament for P.O.H will be the as the International Puerto Santa Maria 7’s Selection, and Alcobendas, a Spanish New York Sevens in November where they will tournament. Division de Honor team, to qualify top of be representing Gibraltar at the event. All in all Strong performances in the Gibraltar their group. In the next stage they came up a great effort with some excellent results along tournament with some lovely flowing rugby, against the Viator Barbarians which included the way and ISOLAS have been delighted to and four consecutive victories brought a few players from the Spanish National be involved in the sponsorship of the team. SEPTEMBER 2008 Interview with Elaine Bingham Partner, ISOLAS and although the volume of sales may have seen some slowdown, values aren’t yet being affected What are the opportunities for Gibraltar in the coming year? As people get more and more nervous about borrowing funds for property purchases in Spain, there’s an opportunity for Gibraltar-based British and International banks to lend more for such purchases. There’s a certain sense of added security gained from borrowing from a Gibraltar-based bank than a Spanish one, particularly given the economic turmoil Spain is seeing at the moment. Gibraltar’s relative insulation from the crisis is an attractive selling point at the moment. What do you do on your time off? What time off? Oh, time off from work? Entertain and look after a 3 year old with far too much energy! I guess it would be finding time to exercise and travel! Name one thing you’re terrified of but feel you have to do during your lifetime. What are you doing right now? increasing fuel and commodities prices causing significant worry throughout Self-righteous as it may sound I think it We are running a very busy property international markets. The challenge is to would have to be to do some sort of hands- practice at ISOLAS dealing with a wide remain flexible and open to new ideas and, on charity work somewhere in under- variety of clients, from first-time indeed, opportunities that may rise from privileged Africa. The reality of what this purchasers to developers of commercial the ashes of these difficult times. As always may be is terrifying but something I feel I property, luxury and other housing in in times of financial turmoil, a lawyer’s role would like to do far more than conquering Gibraltar. We’re also busy assisting in a in business can change from facilitator to my fear of extreme heights by jumping out number of financing projects for lending litigator where disputes arising as a result of a plane. Does that make sense? institutions. As part of our tax practice of financial difficulties endured by one or we’re being kept busy with regular more of a number of parties to a previously applications for CAT2 status residency in affordable/successful arrangement seek to STOP PRESS Gibraltar received from the newest EU protect their positions. ISOLAS is proud to member states. Although we might have announce that as this expected recent changes to the tax regime How about Gibraltar? edition of the in Gibraltar (no tax on investment income, Gibraltar’s economy seems to have been Communique went to occupational pensions and dividends from quite well insulated from the economic press, the firm's M&A companies listed on a recognised stock difficulties the rest of the world is currently team has been shortlisted to receive the exchange) to affect the number of enduring. The property market in award of best M&A team of the year for applications for CAT 2 status, any Gibraltar continues to grow, albeit at a rate Gibraltar, one of the World Finance Legal reduction in numbers there may have been reduced to the explosive growth we’ve seen Awards for 2009. On being asked what this is being more than compensated for by over the last eight to ten years. The meant to the firm, M&A Partner, Christian business generated from the EU newbies! Spanish property market is seeing what many call a crisis, with thousands being Hernandez, commented that "this is a very What do you see as the laid off and hundreds of developments on welcome recognition of the efforts of the challenges/opportunities for hold or scrapped altogether. No such team here at ISOLAS and we're very proud trouble in Gibraltar, still an attractive to be in the running." As for the future, you in the coming year? investment proposition. The local market "we're very encouraged that we’re working at There’s no denying the worldwide is two tiered: the luxury/high net worth the cutting edge of the industry, achieving economic slowdown, what with the sub- property sector and the lower-end, more our clients' goals in this field. We certainly prime crisis yet to fully reveal itself and affordable sector. There’s no in-between plan to continue to do so." ISSUE 2 SEPTEMBER 2008 Gibraltar Gaming Review by Steven Caetano A proposed code of practice for the Gaming industry in Gibraltar is currently undergoing a process of consultation between the Gibraltar Regulatory Authority and the industry. Steven Caetano reviews the proposal in a two-part article for our Communique. This, the first of two items on the subject, deals with the reasons behind the move, background to the Gibraltar e-gaming industry and the main thrust of the proposed code. Why introduce a Code of Practice? The Gibraltar online gambling industry as we know it today has cemented itself as the main pillar of the local economy. The e- gaming industry seems to have largely survived the effects of the US ban as a whole, and whilst some land based sectors have shown signs of decline due to, for instance, the UK smoking ban, the Gibraltar based providers stand firm. The timely introduction of the UK Gambling Act which led to Gibraltar- operators and industry members alike to Act in a way that maintains the good based providers being able to advertise in gain a greater understanding of the reputation of Gibraltar. the UK has proved significantly positive, statutory framework to which they are The principal method by which its and it is quite common nowadays to see subject. The underlying objective of this responsibilities will be exercised is: effort is to ensure proper and the adverts of most of these major players a) Through regular and direct liaison proportionate licensing and regulatory on UK prime time television. with key individuals in the industry; controls leading to a fair, secure and It has to be said that the Gibraltar e-gaming transparent environment, whilst at the b) Risk based programmed visits and industry has come a long way since the same time ensuring that such safeguards examinations of relevant equipment doom and gloom of the US ban, for a do not curtail business profitability and and information; number of reasons, not least the dynamism. c) Consideration of licensees reports as geographical advantage of this jurisdiction agreed or considered necessary; (within the EU) which, allied to The intention is to finalise the code of unparalleled levels of regulation, makes practice by October 2008 with a view to d) The examination of complaints from Gibraltar a well established proposition for implementation soon thereafter. the public including any underlying or any major gambling company in the world. The Licensing and Supervision systemic issues they identify; and Given the wide recognition of the of Gambling Activities in e) Advising the Minister, the Licensing Gibraltar Gambling Industry as one of the Authority and the industry as world’s most dynamic and innovative Gibraltar necessary. industries and already (and for quite some The licensing authority for Gibraltar is What needs to be borne in mind is that the time) being the home to many of the currently the Minister responsible for Commissioner has the power under the world’s leading online gaming operators, Gambling, who is presently the Chief Act to take the steps to initiate the the and the Minister in his capacity as Minister for revocation of a licence or amendment Gambling Commissioner have recently Gambling. This includes the Gambling thereof or where necessary initiate Court commenced a consultation process to Division of the Ministry of Finance of the proceedings against a particular licensee or ensure that standards under which its Government of Gibraltar. The Minister’s individual believed to be in breach of the licensees operate remain at the forefront of responsibilities are administered through Act or any regulations or codes issued sound and effective regulatory practices the Finance Secretary’s office at No. 6 thereunder. Such action is not taken and controls. Convent Place. lightly and therefore the policy of the To this end the established regulatory The Gambling Commissioner who Commissioner is to work with the bodies in Gibraltar, recognising the need regulates the Gibraltar gambling industry industry to ensure that such action never to ensure customer protection and is the Gibraltar Regulatory Authority (“the becomes necessary. safeguard wider social responsibility, have GRA” or “the Commissioner”). Section 6 sought to provide guidance in interpreting (4) of the Act requires the Commissioner Interpretative Guidance significant provisions of the Gambling Act to ensure that licensees act within the It is intended that the final version of the 2005 (“the Act”) to further enable terms of their license agreements and the new Gambling Code of Practice will ISSUE 2 SEPTEMBER 2008 Gaming Review cont. by Steven Caetano provide interpretative guidance to the The different forms of gambling although Duty to Publicise Rules Gibraltar Gaming Industry at large. This dealt with independently under the Act All licensees are expected to publish their will be the first code of practice issued under separate definitions have the widely rules where they are visible and accessible under the provisions of the Act. understood and conventional definitions to all those who visit or use their facilities It is largely recognised that whilst many of attached to them. For instance gambling is for gambling. These include the terms and the Act’s provisions are self evident and a reference to gaming, games of chance conditions of use as well as the house rules require little elaboration, some areas and betting and non remote gambling is or game rules relevant to the game or require a degree of analysis, for example: gambling to be conducted on a face to face service being provided. a) The provision of routing reports to the basis although this includes telephone Gambling Commissioner (Regulatory betting undertaken by licensed The meaning of ‘readily accessible’ is Returns); bookmakers in approved premises. interpreted as broadly a live link from the home pages, about us page, and customer b) Technical standards; A remote gambling licence will be required registration pages of the relevant websites under the Act where a licence holder has at c) Anti-money laundering measures; to a dedicated page displaying the relevant least one piece of gambling equipment d) Responsible gambling practices; and rules and terms and conditions. situated in Gibraltar. e) The provision of operating procedures Where a remote licence holder controls a or internal controls. Responsible Gambling series of websites or brands or operates Practical distinction between Remote operators are expected to have through joint ventures the rules should be accessible as above for each specific website. land based and online providers systems in place to enable customers to Our new, modern reception area request to be self excluded and for such Terms of use and game rules are usually It is noteworthy that the proposed code request to be dealt with immediately. This under constant review by providers, and distinguishes between holders of remote should include providing specific this is usually due to specific customer and non-remote gambling licences despite information on the process and requests or systemic errors leading to the vast majority of the industry lying in consequences of self-exclusion. Self- misinterpretation or abuse. It is therefore the remote sector. Notwithstanding the exclusion systems modelled on established sensible to maintain an adequate level of Act, many of its provisions also apply to industry bodies such as gamecare, Gamble supervision and if in doubt, always consult land based operators. Aware, E-cogra and the RGA would be local counsel or the GRA to ensure that Key Definitions deemed as effective systems for the purposes the general terms and conditions (and of fulfilling this particular requirement. rules of play) comply with the Act and the The Act makes illegal the provision of any terms of the operating licence. Gambling facilities in Gibraltar (i.e. Notwithstanding this, self-excluded betting, gaming, machine based slots and persons could very well circumvent the In the second part of this article, Steven lotteries) unless the provider of the provisions of any self-exclusion methods will review more details of the proposed gambling holds an appropriate licence or and when this occurs the affected code including data protection matters, the gambling is excluded by way of operators should not normally repay equipment requirements and offering his exemption in special circumstances such as deposits to the customer but instead to a conclusion on the effect the proposed code domestic social fundraising functions etc. charitable cause. might have if and when implemented. Up and coming events

Date Event Location 16th September 2008 ISOLAS/Fiduciary Golf Day La Reserva Golf Club

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