Offshore Report | April 2021
Queen’s Gambit: Walkers riding the SPACs wave
Focus: Hong Kong at a Crossroads ogier.com
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Contents
Offshore elite firms thrive despite challenges 4
The SPACs phenomenon 10
Queen’s Gambit – a different kind of SPAC 16
Gibraltar: a hub for crypto entrepreneurs 18
Hong Kong at the crossroads 22
Editor: Designer: Chris Morrish Dominic Carman Creative Director, Pagelab T: +44 (0)7930 644201 www.pagelab.co.uk Reports Legal E: [email protected] Research Legal Ltd Consultant: Alex Berry Creative Director, Maltin PR
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3 Offshore Report | April 2021
Offshore elite firms thrive online despite challenges
Dominic Carman examines how offshore law firms have flourished during the Covid-19 pandemic
he offshore market is major OFCs have fared over the ▲ For the divided between the Caribbean complex: each offshore past year, the phenomenal rise of offshore elite, and the Channel Islands. Three it has been financial centre (OFC) has offshore SPACs (special purpose are British Overseas Territories: T business almost unique characteristics although acquisition companies) during the as usual during Bermuda, the British Virgin they still compete with one Covid-19 pandemic, Gibraltar’s the past year Islands (BVI) and the Cayman another in multiple areas of growth as a crypto-friendly Islands; the other two are Crown business. Collectively, OFCs jurisdiction and the future role Dependencies – Jersey and provide significant levels of of Hong Kong as a key source of Guernsey. regulatory and tax competition offshore business. The combined footprint of for their onshore counterparts, Primarily through mergers, the these firms has almost doubled but they are also complementary largest offshore law firms have since the global financial crisis. to their financial activities. developed their international Their growth has coincided This report seeks to examine office networks from a domestic with increased globalisation, how law firms operating in the base in one of five jurisdictions, greater transparency and tighter
4 April 2021 | Offshore Report
regulation. As the markets in which they operate become ever more sophisticated, their response is to become ever more specialised.
‘A very busy year’ For the offshore elite, it has been business almost as usual during the past year, albeit in the most unusual of circumstances. ‘We noticed immediately that workflows were high, more or less across the board,’ says Christian Luthi, chairman of Conyers. ‘We monitored it extremely closely because we were concerned about things falling off a cliff, since no one knew what to expect. It became clear that, not only were things remaining solid, but it was turning out to be a very busy year. That has translated into very lucky,’ says Jason Romer, group decent revenues.’ ❝ We were concerned managing partner at Collas Crill. Maples and Calder’s global ‘We were able to move our managing partner, Jonathan about things falling off a business remotely pretty much Green, summarises events: ‘All of cliff...but it turned out to be over a weekend. Every system we our practice areas and business had in place worked incredibly lines continue to be busy and a very busy year well.’ Phillip Kite, Harneys global the last 12 months have truly head of litigation, agrees. ‘All the demonstrated the resilience, Christian Luthi, chairman, Conyers IT seemed to work, especially in dedication and expertise of our London, Hong Kong and New lawyers, who all responded Tech dividend York, where law firms were incredibly well to the pandemic, Pre-Covid investment in tech already set up for remote access,’ all while keeping client service certainly helped to keep activity he says. levels at an all-time high,’ he says. flowing, as Alex Ohlsson, group Internationally, law firms ‘We are very proud to have been managing partner of Carey Olsen, have coped very well, confirms able to promote a record number explains. ‘The existing technology Walkers’ global managing of our lawyers across six of our responded incredibly well to a partner, Ingrid Pierce. ‘Certainly, international locations.’ working from home strategy,’ those who invested in If lateral hires provide a further he says. ‘It’s remarkable how technology have been able to litmus test of success, then Maples many businesses have had that manage the pandemic so that had a very good year as multiple experience.’ 13.4% it’s almost business as usual,’ she partners also joined the firm: in Jonathan Rigby, global Average PEP adds. Ireland, Claire Morrissey from A&L managing partner of Mourant, Goodbody and Lorna Smith from adds: ‘We were able to increase at Revenues grow Matheson; in Luxembourg, Jean- switch almost overnight to a Am Law 100 In the world’s largest legal Dominique Morelli from CMS; virtual working environment. firms last market, it has been more than in Hong Kong, Nick Stern from Immediately before the pandemic, year just business as usual. US law Freshfields Bruckhaus Deringer; we had completed the successful firms have never had it so good and in Jersey, Mark Crichton from deployment of a fully paperless, – at least according to a recent Walkers and Tim Morgan from mobile-enabled client on- report by Thomson Reuters, Mourant. Previously a barrister at boarding system, which really which concluded that average 8 New Square in London, Quentin came into its own last year.’ profits per equity partner at the Cregan also joined as a partner in A similar picture emerges Am Law 100 firms increased by Cayman. elsewhere. ‘We’ve been very an extraordinary 13.4% last year.
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Unlike their onshore will there be more insolvency counterparts in the UK who have ❝ We started off 2020 with related restructurings? I think, to file LLP accounts which then absolutely yes.’ become a matter of public record, 570 to 580 people and we It was a similar story at Walkers. offshore firms are distinctly coy ended last year with around ‘We’ve seen as a real increase about disclosing details of their in certain types of restructuring, financial results. While they may 660 people as a direct result notably in oil and gas, and not have done quite as well as obviously the airline and travel firms in London or New York, of client demand sector,’ says Pierce. Ohlsson some double-digit growth has has also seen a big uptick in still been achieved during the Edward Mackereth, global refinancing and restructuring, pandemic. managing partner, Ogier particularly in private equity- Edward Mackereth, Ogier’s owned businesses. ‘Restructuring global managing partner, gives (ESG). Ogier has also seen a big insolvency and the consequential an indication of just how well his uptick in parallel structures with litigation that arises from it have firm has prospered in challenging Luxembourg – often US vehicles been a significant growth area,’ circumstances. ‘I’m not going to structured through Cayman he says. discuss our profitability,’ he says. (CALUX products) – and a steady Rigby provides a panorama ‘But to give you an idea of how increase in traditional hedge fund of Mourant’s business. ‘BVI we have fared, we started off product launches. insolvency and restructuring 2020 with 570 to 580 people and continues to account for a we ended last year with around Debt and restructuring large share of our work in Asia, 660 people, as a direct result of At Conyers, there has been ‘a fair with much of the remainder client demand.’ share of restructuring work and comprising shareholder disputes, So what has been fuelling a lot of significant debt financing often with an asset tracing demand? Funds have been very work – Carnival and other large element,’ he says. strong at Ogier. In particular, cruise ship and container lines’, Although there is continued Mackereth points to the says Luthi. ‘Immediate debt growth in contentious development of impact and financing is needed in a crisis regulatory work in Jersey and sustainable investment funds situation and markets were happy Guernsey, Rigby has yet to see – legal and advisory services – to oblige. The question is: if this a significant uptick in insolvency primarily based out of Hong Kong, gets more embedded and you’re and restructuring instructions. in relation to Environmental, into a longer-term scenario, will Whereas in Cayman, the airlines Social, and Corporate Governance the wheels start to come off, and sector has been busy and
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Mourant has been advising on some high-profile restructurings. In retail, the firm advised Tailored Brands on its Chapter 11 restructuring. Fundraising has also been robust, according to Ohlsson, as Carey Olsen’s strong funds practice continues apace. Covid’s economic impact has been counterintuitive: in a normal downturn, fundraisings would reduce. Instead, the cycle has been compressed. ‘We’ve supported several fund managers in undertaking very large raises,’ he says. ‘That’s been the Covid story from a financial services perspective: fundraising and investment activity has continued.’ The Channel Islands compete with each other to create different products and services. Guernsey, to be heard by the ‘Over the past year, assets in the ❝ The existing technology Privy Council; the appeals in ETFS private wealth sector and the and Z Trust (re: insolvent trusts private funds space, have seen responded incredibly well being heard in the Privy Council) quite a bit of growth,’ says Dr to a working from home in Jersey; and Primeo v HSBC Andy Sloan, deputy CEO, strategy in two Privy Council hearings - at Guernsey Finance. strategy one for reflective loss, the other Guernsey’s place in the world, for limitation and contributory he adds, is based on being an Alex Ohlsson, group managing negligence. international citizen. ‘We are partner, Carey Olsen ‘As a firm, we’re regularly focusing on enhancing our instructed in connection with private wealth and family office Asia and the US.’ shareholder disputes,’ says services, the concentration on Harneys litigation partner Rigby. ‘Whilst recent market development of sustainability William Peake highlights one of conditions have generated some offer, and a focus on the Middle the biggest and longest-running new matters, market sentiment East, the Far East and the US, as a disputes in the Caribbean. ‘The doesn’t suggest a very substantial line of where capital and wealth $9.2bn Saad litigation (AHAB increase in this work due to are being generated.’ v Saad) is pending judgment in Covid-19. The most significant the Cayman Court of Appeal,’ shareholder dispute we’ve Disputes aplenty he says. ‘We advise the joint been involved in over the last According to Romer, Collas Crill’s official liquidators of the Saad 12 months is ETFS, a claim for Cayman litigation team has seen Investments Finance Company. unfair prejudice by private equity extraordinary growth. ‘It’s been This was the longest trial at investors against the founder led off the back of insolvency, first instance and appeal in the majority shareholder.’ The case shareholder activism, creditor-led history of the Commonwealth. is now going to the Court of restructurings and squeeze-out The judgment is eagerly awaited Appeal. mergers,’ he says. ‘A significant by onshore and offshore Jersey-based dispute resolution majority has come through Asia practitioners, given the broad specialist Baker & Partners and Hong Kong, but also from US range of important topics it will opened a new office in Cayman investment funds and institutional have to tackle and the amounts last October. ‘It has made steady funding structures. One of our at stake.’ strides,’ says managing partner fastest-growing practice areas is In addition to the Saad case, Steve Baker. In Jersey, he expects the merger appraisal practice in Rigby highlights three other ‘an uptick in insolvency related Cayman – that’s all driven out of cases to watch in 2021: TDT in litigation, in particular the
8 April 2021 | Offshore Report
recognition of foreign insolvency management. But for us, and published its Made In America practitioners’. indeed for the offshore industry tax plan, which aims ‘to make The biggest Jersey dispute as a whole, we’ve weathered the American companies and workers this year will be MB and S and storm OK so far.’ more competitive by eliminating Golovina v Rusal, he suggests. Few managing partners would incentives to offshore investment’. Rusal (Oleg Deripaska’s company) publicly echo this sentiment. Exactly what this will mean in was headquartered in Jersey. But in addition to the impact practice remains to be seen. It is alleged that in a breach on their business, the Covid-19 Mackereth comments: ‘The of confidence/unlawful means pandemic has taken a personal next big story looks set to be the conspiracy, it ignored designs and and professional toll on many possibility of a global new deal patents that belonged to another. individuals in different ways. on tax and BEPS, with the Biden Fritha Ford, disputes partner In interview, several managing administration’s Made in America at Hatstone, says: ‘In Jersey, a lot partners are at pains to emphasise plan signalling a new desire to of private wealth disputes have a the importance of maintaining co-operate internationally and certain layer of privacy that you staff morale. the OECD so far making positive don’t necessarily get elsewhere Although Covid-19 continues noises that the plan hits the Pillar – it’s a massive appeal for this to dampen economic activity, I and II objectives. At present, jurisdiction,’ she says. ‘In terms global financial markets have there is much still to be ironed of disputes we’re seeing, they recovered their equilibrium. By out. But if successful, this would are very much wanting to hold the time US voters firmly rejected introduce very significant changes trustees to account.’ Donald Trump last November, the to business and markets globally, S&P500, DJIA and Nasdaq were which will take months or years Rebound anticipated already back to their pre-Covid to work through. It will bring both But not every firm has found a levels. As leading indicators, challenges and opportunities, both silver lining during the pandemic. these indices have since grown anticipated and unanticipated, on One managing partner gave a by an additional 15% to reach a global scale.’ more nuanced assessment in new highs, promising better Meanwhile another cloud interview earlier this year: ‘Anyone times ahead – both onshore and seems set to lift as Covid who says they’re not struggling offshore. restrictions gradually diminish would be lying. Every sector of the One potential cloud looms on Dispute and national economies begin to economy and every business has the horizon. ‘Companies aren’t resolution benefit from a sharp economic struggled or suffered as a result going to be able to hide their specialist Baker rebound. On balance, the outlook of Covid, though businesses have income in places like the Cayman & Partners for offshore centres and the law opened a struggled in different ways. Some Islands and Bermuda, in tax new office in firms that operate in them is still financially, others socially. Others havens,’ said US President Joe Cayman last perceived as being generally very are struggling in terms of pure Biden in April, as the US Treasury October ▼ positive.
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The SPACs phenomenon
As the market takes a pause and the SEC steps in, offshore firms reflect on a 12-month SPAC boom
he big story so far this Activity has been high both ▲ Cayman is successfully brought SPACs to year, and it’s continuing onshore and offshore. increasingly market, it was a sign that things the preferred to expand outside the High-growth sectors, such had really taken off. T jurisdiction for original US base, is SPACs,’ says as biotech, fintech, healthcare offshore SPACs Edward Mackereth, Ogier’s global and life sciences are among the Record volumes managing partner. There is no most prominent issuers. SPACs Labelled by some as a craze, doubt that SPACs – an acronym have also provided a route to SPACs are a growing asset class for special purpose acquisition market for businesses ranging that can no longer be ignored, companies – are indeed big news. from established entertainment according to J.P. Morgan. The Although they have existed and software companies to SPAC phenomenon is also for decades on public markets, young, innovative, fast-growing evidenced by the numbers. Data a tipping point occurred in 2019 companies, as well as the more published by SPAC Research when private equity firms began speculative transformational shows that there are currently to use SPACs more often, creating developers of electric vehicle 560 active SPACs with a an explosion of interest over the technology and flying taxis. But combined value of $180bn+. The past 12 months in this relatively when fund managers, such as total amount raised in SPAC IPO arcane financial instrument. Oaktree, Apollo and Cerberus issuance in 2020 was $83.4bn
10 April 2021 | Offshore Report
in 248 deals (average size – $336m), which represents about 60% of all IPOs undertaken in the US last year. The comparable SPAC figures for Q1 this year surpassed the entire total for 2020: $88bn from 298 IPOs, comprising two-thirds of the aggregate US IPO market by value and three- quarters by volume. Among them are prolific SPAC issuers with a strong track record like Churchill Capital, FinTech Acquisition and Gores. If current trends were to persist, and that is a big if, the industry could potentially be looking at 1,000+ SPAC deals in 2021. A note of caution amid the exuberance: only 25% of SPACs listed since 2019 have completed deals so far, leaving 550+ companies looking for target SPACs are often referred to as M&A combinations, and there is ❝ The SPAC boom “blank cheque companies”, since a growing fear of funding supply investors do not know in advance shortages in a crowded market. continued at full pace where or when their money will Advising issuers and during Q1 of 2021 be invested. As shell companies underwriters is a highly with no commercial operations or competitive business for US Jonathan Rigby, global managing employees, SPACs are admitted to law firms: Davis Polk, Kirkland, partner, Mourant listing on a stock exchange for the Ropes & Gray, Skadden and exclusive purpose of subsequently White & Case continue to vie acquiring or merging with one for pole position in the SPAC is the dominant advisory law or more operating private target adviser league tables. Alongside firm offshore. In 2019, Maples companies in a specific industry. them is mid-town Manhattan did 19 of the 20 Cayman deals. When the IPO takes place, specialist, Ellenoff Grossman & Instructed on 70+ deals last year, because they do not know the Schole (EGS), which has currently the firm surpassed that figure in potential target, investors rely advised on more SPAC deals just the first quarter of 2021. on the expertise of sponsors in 2021 than any other firm, who have operating or investing according to Bloomberg Law. How do SPACs work? experience (or both), to identify Like Kirkland, EGS has advised Essentially, a SPAC is created by the right combination partner. more issuers than underwriters. a team of investors (sponsors) For the target company, merging Onshore, many SPACs that to acquire another company. 560 with a SPAC offers a cheaper and intend to pursue US targets are still As publicly-traded investment Number faster alternative to going public incorporated in Delaware. But the vehicles, SPACs raise funds via itself. trend has been shifting offshore. an IPO to complete a targeted of active To date, SPACs have primarily Suzanne Correy, corporate partner acquisition within a specified SPACs – with been NYSE- or Nasdaq-listed at Maples and Calder, notes: time frame, typically 18-24 a combined acquisition vehicles. Having raised ‘We’ve seen the market evolve months. Investing in and listing value of funds via an IPO, the money in terms of the relative number a SPAC is much quicker and less $180bn+ is then placed by the sponsor of Delaware SPACs and Cayman burdensome than a conventional in a trust account prior to the SPACs. There used to be many IPO. No roadshows are needed, acquisition or merger taking more Delaware SPACs, but that is for example. Instead, the sponsor place. SPACs are required by no longer the case.’ does an IPO for the SPAC, raising their charter to complete the If Cayman is increasingly the money to find a private company initial business combination – or preferred jurisdiction, then Maples to take public. de-SPAC transaction – within
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the specified time period, or to liquidate and return the gross proceeds raised in the IPO to the shareholders.
Cayman leads Increasingly, SPACs have been using an offshore incorporated company to list. Over the past two years, more than a third have been incorporated in BVI or Cayman, with the majority choosing the latter. These jurisdictions offer stability, tax neutrality and wide acceptance on global exchanges, as well as flexibility to structure incentives as investors require. Alex Ohlsson, group managing partner of Carey Olsen, says SPAC activity in the US has resulted in ‘an uptick in formation and listing work for our Cayman office, since Cayman vehicles tend to be Ogier Cayman assisted Kismet utilised by the US markets’. ❝ If there’s even a small on two SPACs for a combined Cayman is both a sophisticated $500m IPO on the Nasdaq, Arya and a straightforward jurisdiction chance that the post- Sciences Acquisition Corp III to use for a SPAC, explains business combination on a $350m SPAC merger with Matthew Gardner, head of Nautilus Biotechnology, and Maples’ Cayman corporate company might be located ITHAX Acquisition Corp on its practice and managing partner $241.5m IPO on the Nasdaq. of the firm’s Cayman office. ‘It outside the US, it makes Ogier also acted as BVI counsel is relatively straightforward to on the $138m Nasdaq IPO of East list on a US exchange using a sense to set up your SPAC Stone Acquisition Corp. Cayman company, while the laws and practices for effecting in Cayman PE-backed deals the subsequent business Michael Johns, corporate partner, Last October, Virgin founder Sir combinations, which may include Maples Richard Branson raised $460m moving the company back by creating VG Acquisition, a onshore, are well established,’ he new Cayman-registered SPAC. says. sponsors looking at launching Davis Polk and Maples advised Jonathan Rigby, global SPACs in the near term.’ Mourant Virgin. Russell Willings, partner at managing partner of Mourant, recently acted as Cayman Harneys, says: ‘While it couldn’t notes: ‘The SPAC boom continued counsel on the establishment by any means be described as at full pace during the first of L Catterton Asia Acquisition, an early user of SPACs, Virgin’s quarter of 2021. We’re seeing which is focused on the consumer use of a SPAC in October 2019 an increasing focus on the issuer technology sector across Asia. to fund Virgin Galactic (for trips vehicle being established in ‘Cayman and BVI law vehicles into space) and the group’s Cayman and expect this trend to have been used extensively – subsequent enthusiasm for SPACs continue. The Mourant Cayman that’s been particularly strong – their next one is investing in team has been very busy advising in Asia,’ says Mackereth. ‘While the D2C genetic testing service on these transactions, with many the US (SPAC) market has been 23andMe (a $3.5bn deal) – have still in the pipeline.’ slowing, European timezone contributed to their profile and He adds: ‘Interestingly, we’re markets like London, Amsterdam use for funding other space and now seeing demand from our and Luxembourg have been biotech businesses.’ clients in Asia, with a number of looking to market equivalent In Cayman, Harneys has advised highly regarded private equity products,’ he says. Proficient Alpha Acquisition Corp,
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a US incorporated SPAC, on its business combination with Lion Group, a Cayman entity; NFC (a SPAC) on its $1.4bn acquisition of United Family Healthcare, a premium private healthcare operator in China; and NCF Wealth Holdings, a $2bn Chinese fintech company in relation to its acquisition by a Nasdaq- listed SPAC, Hunter Maritime Acquisition Corp. For Cayman-based firms such as Walkers, SPACs have also provided rich pickings. The firm’s global managing partner Ingrid Pierce notes: ‘There has been a lot of SPAC activity in the tech space, plus combinations with large PE houses backing these deals. We’ve seen our traditional institutional private equity clients getting involved because there’s so much investor appetite.’ She explains: ‘Part of that has been driven by the amount of capital out there to be deployed. ❝ evolved in the way that they are People are just waiting for the There has been a lot of structured.’ right opportunity and then SPAC activity in tech, plus Browse through the S-1 jumping on it. Because some tech forms of ‘newly organised blank businesses have exploded in value, combinations with large PE cheque’ companies, issued by there are always people looking the US Securities and Exchange for new, creative ways to derive houses backing these deals Commission (SEC), and you will see a catalogue of elite US law and monetise the value that might Ingrid Pierce, global managing come out of those combinations.’ firm names advising the issuers Most notably, Walkers Cayman partner, Walkers and underwriters where Maples has advised Queen’s Gambit on acts as the Cayman adviser. two SPACs (see box on page 16). on SPAC deals in Cayman, with In the past year, these include: Walkers has also advised Vector some notable success in high- David Polk, Ellenoff Grossman, Capital in connection with an profile deals like Queen’s Gambit. Fried Frank, Kirkland, Latham, upsized $450m IPO of its SPAC, In its sights is the undisputed McDermott Will & Emery, Paul Vector Acquisition Corporation king of the offshore SPAC jungle, Weiss, Ropes & Gray, Shearman II, on the Nasdaq, and Ace Maples, which has advised on & Sterling, Sullivan & Cromwell, Convergence Acquisition Corp in more than half of all deals done Skadden, Weil, and White & connection with its agreement to offshore over the past two years. Case, among others. ‘Many of the enter into a business combination Maples has the advantage of US law firms that act for SPACs with Achronix Semiconductor having developed its expertise also act for the underwriters on Corporation, a high-end FPGA over many years. ‘Initially SPACs other deals,’ says Correy. semiconductor company. Walkers were a niche market,’ says Michael Johns, corporate also assisted Apollo Global Gardner, who started doing partner at Maples, points out that Management on an upsized SPAC deals nearly 20 years ago. flexibility is a key advantage. ‘If $600m IPO of Apollo Strategic ‘The market for SPACs became there’s even a small chance that Growth Capital II on the Nasdaq. challenging in the immediate the post-business combination aftermath of the global financial company might be located Maples wears the crown crisis, but their popularity has outside the US, then it makes Under Pierce’s leadership, Walkers been rebuilding steadily over sense to set up your SPAC in has been chasing hard to catch up the last decade. They have also Cayman,’ he notes, adding: ‘It is
14 April 2021 | Offshore Report
very easy to get a Cayman SPAC Grab’s $40bn SPAC deal between July 2020 and February back into the US, but harder to In early April, the FT reported 2021, according to Refinitiv move a US SPAC out of the US.’ that SPAC funding may be drying data. It has since fallen by 20%. Some Maples clients opt for up, pointing to ‘a slowdown Investors are also undertaking multiple SPACs. In recent years, for one of Wall Street’s hottest greater due diligence on the veteran Hollywood executives products after a record-breaking managers who put SPAC deals Jeff Sagansky, ex-CBS, and Harry quarter’. Advisers were said together. For SPACs that have Sloan, formerly CEO of Metro- to be ‘struggling to find Pipe already gone public and are Goldwyn-Mayer, have teamed up (private investment in public looking for a target, there is to do Cayman SPACs ((Global, equity) financing to complete further pressure to get the deal Silver, Double, Diamond, Flying their planned acquisitions’. done. and Platinum) under the Eagle Bill Gates, an early backer of Meanwhile, the SEC has brand. QuantumScape, a NYSE SPAC, promised closer scrutiny of Their seventh and latest SPAC, then went on CNBC to suggest revenue and profit projections Soaring Eagle Acquisition Corp. – that investors do what he’s doing put out by businesses going which raised $1.5bn in February – and only get involved with quality public via SPACs. This includes was advised by White & Case and SPACs. accounting procedures. Maples. Sloan is Soaring Eagle’s Given what happened in Some SPACs have improperly CEO and chairman and Sagansky Q1, according to key market accounted for warrants sold or one of its founding investors. participants, the market arguably given to investors, according ‘We have a number of clients needs a pause on the IPO front to a statement issued by John who have done more than one as it digests the frenetic level Coates, acting director, division of SPAC,’ says Johns. ‘Some are even of activity. The IPOX SPAC corporation finance at the SEC. establishing more than one SPAC Index, which tracks the SPACs’ But even if some of the froth in at the same time.’ performance, rose by 88% the SPAC market is blown away,
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the medium-term outlook for Corp – by far the biggest such conditions for SPAC sponsors, (quality) SPACs, onshore and combination to date. Skadden including a proven track record offshore, remains buoyant. and Hughes Hubbard & Reed for managing money. Less than a week after are advising Grab; Ropes & The European market for the bearish FT story came Gray is advising Altimeter SPACs also seems set to pick an announcement that the Growth; WilmerHale is advising up. February saw the launch Singapore-headquartered ‘super Altimeter Capital Management of Lakestar SPAC I SE, a app’ Grab, which was founded in and Altimeter Capital Markets Luxembourg-incorporated SPAC, 2012 as an Uber-like ride-hailing (affiliated with Altimeter Growth); which will focus on an acquisition service and now offers services in and Cooley represents the in the tech sector in Europe. The everything from food delivery to placement agents. Frankfurt Stock Exchange landed online banking, would float on the €275m IPO, the largest the Nasdaq in a $39.6bn (£29bn) A global phenomenon SPAC IPO ever in Germany and deal. As southeast Asia’s most Encouraged by the huge the first such IPO in the last 10 valuable startup, Grab expects volume (and value) of US years. Euronext Amsterdam and that its total ‘addressable market’ activity, other countries are Deutsche Börse also anticipate will grow to $180bn by 2025, looking at SPAC potential in growing interest in SPACs and an compared to $52bn last year. It their markets, creating further increase in listings. has not excluded the possibility of potential offshore. In Hong But the biggest deals are a secondary listing on a southeast Kong and Singapore, regulators expected on the London Stock Asian exchange. are considering tighter listing Exchange (LSE), when the rules In a show of strength for the frameworks than the US, allow. ‘SPAC revolution set to SPAC market, Grab struck the according to Bloomberg. Hong unlock Big Bang 2.0 for the City record-breaking merger deal Kong regulators are reportedly of London’ stated one headline, with US-based Altimeter Growth considering setting special referencing London’s financial
Queen’s Gambit: ‘Investing is a game of chess’
ngrid Pierce, Walkers global managing partner, describes ‘I see investing as a game of chess,’ says Grace. Taking it as ‘a super interesting deal’ – the $300m IPO on the the SPAC route to raise funds was ‘a really extraordinary INasdaq of Queen’s Gambit Growth Capital, which is experience, understanding the value of such a vehicle,’ incorporated as a Cayman exempted company. she explains. ‘When I saw how it worked, I just thought: Labelled ‘a fundamentally different kind of SPAC’, by wow, what a great structure. It’s really beneficial to every its CEO Victoria Grace, Queen’s Gambit is emblematic of stakeholder, supports early investors, the founding team, the increasing ESG (environmental, social, and corporate the management team and the stock.’ governance) focus of investment. ‘The younger generation The net result, she suggests, is that ‘you’re providing cares a lot more about the environment, sustainability and a company with a fully funded balance sheet, so the doing good,’ she says. ‘I’m very happy about that, and it’s management team can focus purely on execution and only going to continue in that direction.’ delivering product to the market, as opposed to doing multiple rounds of financing and raising capital’. Disruptive solutions Beyond its ESG credentials, Queen’s Gambit has other Queen’s Gambit will target a platform that ‘provides unique characteristics. ‘We are all women,’ says Grace. disruptive solutions to its sector that promote sustainable ‘Whereas 99% of SPACs are run by men. You can count development, economic growth and prosperity’. Sectors of on one hand the number where there is a female CEO. We potential interest include clean energy, healthcare, financial don’t just have a female CEO, we have an entire female technology, industrials, mobility and emerging technology. team.’ The female-led management team and board A nod to the recent Netflix miniseries, Queen’s Gambit includes: CFO Anastasia Nyrkovskaya, who serves as CFO is one of the oldest opening moves in the game of chess. of FORTUNE Media, as well as Starwood Capital senior Grace was taught how to play by her father as a child in managing director Jennifer Barbetta, and Jamf Holding Corp Moscow. ‘My dad is a math professor, so there was no CFO Jill Putman. choice but to play chess,’ she says. These lessons served her well. A successful career in Wall Street led her, in 2015, to Excellent lawyers founding Colle Capital Partners – an opportunistic, early- The Queen’s Gambit legal advisory team is comprised of stage technology venture fund. Vinson & Elkins in New York and Walkers in Cayman. ‘They
16 April 2021 | Offshore Report
services deregulation in October 1986. The story underneath detailed a landmark government report by Lord Hill, which was published in March. Hill’s report called for UK regulators to allow SPACs to list in London and the easing of share listing restrictions, including a range of deregulatory measures that would aim to ‘ensure the UK remains one of the most attractive places to grow and list successful, innovative companies’. The recommendations were, reportedly, very well received by Rishi Sunak and Boris Johnson, suggesting that London will FCA (Financial Conduct Authority) ▲ Rishi Sunak Willings says: ‘The recent indeed open up to SPACs. will shortly be consulting on his welcomed a announcement that the UK listing In his Budget 2021 speech, proposals.’ The FCA has said that, recent review rules will be amended is clearly done ‘changing Sunak welcomed the review subject to consultation feedback, the rules to with a view to making the UK more ‘changing the rules to encourage it will ‘carefully consider’ the encourage more attractive for SPACs, and is one more companies to list here’, recommendations and plans to companies to more step in changing the SPAC adding: ‘Let me thank Lord Hill for create the relevant rules by the list here’ from being a US phenomenon to a leading this landmark review... the end of the year. global phenomenon.’
❝ When I saw how it worked, I just thought: wow, what a great structure Victoria Grace, CEO, Queen’s Gambit Growth Capital have been excellent,’ says Grace. Attorneys are really important, she adds. ‘The efficient ones devise a structure very quickly and negotiate the right plan and don’t focus on things that don’t matter. You can over-lawyer everything. That’s why you really want to have lawyers who have pretty good business acumen and understand what is the business decision and what is the legal decision.’ really understand how everything works, how to structure Grace notes: ‘Lawyers make your life easier because they it, and make it very easy to execute a transaction.’ help you with structuring the deal. Really good lawyers So pleased is Grace with her SPAC experience that enable you to be creative with the structure, because you’re Queen’s Gambit has another one lined up, which already trying to accommodate a lot of different stakeholders. has SEC approval. ‘The second SPAC was prepared because You want to accomplish everybody’s goals – it could be we see so many opportunities,’ she says. ‘We thought: what a liquidity consideration, a voting consideration, a board if several companies want to do deals with us, what are we structure, dealing with some investors that want to cash going to do when we have only one vehicle? That was the out. All these are really critical issues and obviously, the key accelerator to launch another one. So we have our next stock itself is a complex structure. So you need lawyers that vehicle ready to go.’
17 Offshore Report | April 2021
Gibraltar: a hub for crypto entrepreneurs
First it was gaming, now Gibraltar’s DLT regulations have led to an ecosystem of crypto investors and advisers
ibraltar has much to from a cluster of big brand ▲ Gibraltar one of the first in the world to celebrate. Not only have names choosing it as a low-tax was the first pass DLT regulations. ‘That seed all its adult citizens been operational hub: Stan James European was planted in the government’s G jurisdiction vaccinated against Covid-19, (Unibet), William Hill, 888Casino to pass DLT mind by a small group of lawyers but a treaty has finally come into and the first iGaming company regulations who saw an opportunity to force between Spain and the UK to base itself there, BetVictor. regulate this type of activity,’ says on tax cooperation. Post-Brexit, About 15% of Gibraltar’s 34,000 Anthony Provasoli, who co-leads Gibraltar can now apply EU- workforce is employed in the the fintech team at Hassans, equivalent legislation in terms of gaming industry. Gibraltar’s largest law firm. tax transparency and the fight But there is a new techno kid against money laundering. on the Rock: cryptocurrencies Crypto world firsts As one of the world’s premier and other digital assets using The Gibraltar Financial Services jurisdictions for online gaming, distributed ledger technology Commission (GFSC) then with 35 licensed operators, (DLT). In 2018, Gibraltar was the introduced one of the world’s Gibraltar continues to benefit first European jurisdiction and first bespoke licensing regimes
18 April 2021 | Offshore Report
for fintech firms using DLT. When has led the way in DLT and the Gibraltar Blockchain Exchange ❝ That seed [of DLT blockchain technology,’ he says. (GBX) was granted a full licence regulation] was planted in ‘If it’s now going to be a major by the GFSC, the Gibraltar Stock centre for this type of activity, Exchange (GSX) became the the Gibraltar government's we’re going to see DLT-related world’s first stock exchange to disputes being litigated on the own a regulated blockchain mind by a small group of Rock.’ exchange. These initiatives created lawyers eToro SPAC headlines and attracted Anthony Provasoli, corporate It is perhaps no surprise that investment. Gibraltar has since Gibraltar’s DLT innovation welcomed major cryptocurrency partner, Hassans overlaps with the SPAC companies, including multi- phenomenon. In a deal currency wallet Xapo, and Selwyn Figueras, a former reportedly worth more than exchanges, LMAX and Huobi. member of the Gibraltar $10bn, Hassans’ client eToro Globally, it now has the fourth Parliament and now a Hassans recently announced that it highest number of domiciled partner, develops the point. intends to go public via a merger crypto hedge funds. ‘What we’re seeing is a repetition with FinTech Acquisition Corp V, ‘An ecosystem of crypto of what happened in gaming,’ a SPAC led by Betsy Cohen, chair entrepreneurs has developed he says. ‘When we set up of FinTech Masala. here,’ says Provasoli. ‘In response, the gaming industry, a lot of eToro is one of the world’s the expertise amongst the entrepreneurs came to Gibraltar largest social trading platforms, professional service providers - to set up their businesses, but offering investment in stocks lawyers, accountants, bankers very quickly it became their home. and cryptocurrencies. Its – has had to keep pace. It’s In crypto, as in gaming, it’s a story Gibraltar subsidiary, eToroX, is culminated in exactly what of entrepreneurs putting down a fully regulated cryptocurrency we wanted to create: a DLT/ roots here.’ exchange. Once the merger crypto/tech hub in Gibraltar for Elliott Phillips, partner at completes, it is expected that companies to settle and operate Signature Litigation in Gibraltar, eToro will be publicly listed on within a regulated environment.’ sees another angle. ‘Gibraltar the Nasdaq.
19 Offshore Report | April 2021 Advertising feature The tried and tested route into Europe post-Brexit
Dr Andy Sloan, deputy chief executive, strategy, at Guernsey Finance, says the island’s tried and trusted reputation as a home for alternative funds is well earned
uernsey has often our access to Europe’s financial watched – with a calm services markets also remains £120bn G detachment – the waxing unchanged after Brexit. We have of regulated and waning of the UK’s mercurial various equivalences that remain private equity relationship with the European unchanged, data protection funds are institutions over half a century. being one. Our relationship with domiciled in The island, whose relationship the European Commission and Guernsey with Britain is through the Crown, the European ESAs and national not through the state, as a Crown competent authorities for tax and Dependency, alongside Jersey regulation remain unchanged. post-Brexit environment a long and the Isle of Man, remained time ago. Our current MoUs outside of the European Union with the EU 27 remain as they during the 40-plus years of British ❝ Guernsey has long were. National Private Placement involvement. Regimes under AIFMD always Our trading relationship played a bridging role, provided a proven, faster and outlined back in the day in the cheaper route to market than UK’s Treaty of Accession – being linking investment capital the passport. No change there based on trade in goods, given either. that back then it was mainly flows between UK, EU and agricultural and horticultural US markets Uncertain world exports – stated that we were The double whammy of part of the Customs Union, but continuity and certainty is outside the Common Market As a result, Guernsey offers something to be highly prized by and the European Union for continuity, certainty and fund professionals, particularly services. Guernsey was never stability. It is a potent mix, in today’s uncertain world where a member of the EU and was highly regarded in particular by there remains huge opacity in the always, and remains, considered GPs, especially those looking relationship between UK and EU a third country in areas of our for a tried-and-tested route to financial services. own competencies – tax and market into the EU and the UK. Under NPPR, a Guernsey AIF legislation. Our old ESMA-facilitated MoU can be marketed to targeted The net result of all that is under AIFMD with the FCA was investors in selected EU member that the basis and operation of re-papered across to work in a states, regardless of whether
20 Advertising feature April 2021 | Offshore Report
the AIFM is domiciled inside or that is going to be more valuable ▲ Guernsey substance and expertise of the outside the EU. This means that than ever during the next few is part of the firms operating here. It is how a Guernsey AIFM can market and years, with continued friction in Customs Union, the island became the dominant but outside operate as before. This certainty the relationships of others. the Common jurisdiction in the private equity is highly beneficial to AIFs seeking Allied to continuity of market Market and the space, in particular offering the capital from Europe. access, Guernsey continues European Union common-law framework familiar In today’s challenging market, to provide security of assets for services to London-based lawyers, and the a proven, tested route to and reputation. Continuing high levels of service expected. placing private funds can be the conformity with international Another potent mix. difference between the success standards on regulation, tax and failure of a fund launch. transparency and beneficial For more information UK fund lawyers have described ownership is of huge import, contact: Guernsey’s position as “incredibly given political risk appetites. Rupert Pleasant strong” and “arguably light years Guernsey has a strong track Chief Executive ahead” of the UK in terms of record in this area and has 01481 743000 market access. fostered a deserved respected [email protected] reputation when it comes to Proven path international standards. A Guernsey has long played a premium for today’s investors. bridging role in the space, linking Guernsey has long been an investment capital flows between attractive domicile for alternative UK, EU and US markets. A investment funds, based on the smooth, proven path is something combination of professionalism,
21 Offshore Report | April 2021
Hong Kong at the crossroads
Never has the conflict between politics and business been more acute, but offshore law firms in Hong Kong remain confident about its future
he big offshore law will mark the halfway point of should have autonomy in its firms maintain a strong “one country, two systems”: the governmental system and in Tpresence in Hong Kong, guiding principle for Hong Kong its legal and financial affairs. which continues to generate an since it ceased to be a British Hong Kong’s Basic Law, the city’s enormous flow of work in deals, colony. constitution, guarantees freedom disputes, finance, funds, listings of assembly and speech, as well and private wealth. Collectively, as an independent judiciary. their local offices have expanded ❝ Hong Kong is a city over recent years to surpass the Tipping point 300-lawyer mark, making it in transition as the PRC Fearful that China is undermining the third most-heavily lawyered their autonomy and infringing jurisdiction by offshore firms increasingly flexes its their civil liberties through the after Cayman and Jersey. muscles national security law, which But Hong Kong is a city criminalises secession, subversion in transition as the People’s and “collusion with foreign Republic of China (PRC) Designed to last for 50 years forces”, a large percentage of increasingly flexes its muscles in before the PRC assumes full Hong Kong’s 7.5 million citizens this unique Special Administrative control in 2047, the principle took to the streets in 2019. Region (SAR). Indeed, 2022 confirms that Hong Kong Months of protests ensued,
22 April 2021 | Offshore Report
culminating in significant it will put Martin Lee in jail, China ▲ The big headline: ‘Companies consider violence. Time will tell if this was will stop at nothing.’ offshore firms writing Hong Kong out of maintain a a tipping point. The geopolitical drums still legal contracts.’ In anonymous strong presence The November 2019 District beat. US President Joe Biden in Hong Kong interviews, senior lawyers at Council elections saw pro- has continued his predecessor’s ten large law firms told the FT democracy (anti-Beijing) parties hostility towards China, albeit that they had seen ‘a surge in win by a landslide, shortly before with more sophisticated rhetoric, queries from clients, mostly Covid-19 first emerged in Wuhan. confirming that he would work headquartered in the US and Protests naturally subsided. with US allies to hold China Japan, about whether to write But in March 2021, new accountable for its actions in Hong Kong out of governing electoral rules were introduced Hong Kong. After taking office, law and arbitration clauses to ensure a system of “patriots Biden said that he had told when conducting business in the governing Hong Kong”. President Xi during a lengthy financial hub or entering into In April, seven of Hong Kong’s conversation: ‘As long as you joint ventures with Chinese and most prominent pro-democracy and your country continue to so other Asian counterparties’. campaigners, including veteran blatantly violate human rights, The managing partner of a barrister and legislator Martin we are going to continue in an major US law firm in Hong Kong, Lee SC – who helped to write the unrelenting way to call it to the who has worked in the territory Basic Law – and billionaire media attention of the world, and make for nearly a decade, told the tycoon Jimmy Lai, were found it clear what’s happening.’ FT: ‘We are now getting a lot guilty of participating in peaceful of questions from companies protests. Lai is in prison; Lee Contract fears about this; it has never occurred received a suspended sentence. A Earlier this year, the FT ran before in my time. We have large Washington Post headline ran: ‘If another Hong Kong-related private equity clients who never
23 Offshore Report | April 2021
used to care about arbitration things in context: ‘Hong Kong, clauses, coming to us with the ❝ Everybody was worried and Asia more generally, simple question of: “Is it safe to continue to form an important leave Hong Kong as the seat [of about whether Hong Kong part of our global strategy. Hong arbitration]?”’ would continue to be the Kong remains one of the world’s Some offshore players see this most important finance centres as an opportunity to get more gateway (to China). But ten and a significant proportion work, arguing that if clients are of the world’s leading global no longer going to use Hong years later, Hong Kong was law firms have a presence Kong law, they may choose there, with many continuing to an alternative with which they still the gateway, and ten invest for future growth. Last are already comfortable: BVI, year, we announced a series Cayman, or Bermuda. Ogier’s years after that, it still is of promotions in Hong Kong, global managing partner Edward Phillip Kite, global head of reflecting our growth and our Mackereth says: ‘It entirely litigation, Harneys continued commitment to this depends on where you’re sitting. key market.’ If you’re sitting in China, it’s an He adds: ‘The fact that the exciting opportunity, there’s a have for over 35 years). Hong Asia Pacific region has grown new market opening up and Kong still has a very important from 10% of global private these are exciting times. If you’re role to play in terms of raising equity assets under management sitting in the US, or potentially capital as a financial centre for in 2010 to 25% in 2020, is in the UK, it’s more complex. But China and the region.’ testament to the fast pace at overall, the HK market has never 25% which the region has evolved been busier for us.’ Optimism prevails of global over the past decade and the Christian Luthi, chairman of Notwithstanding Hong Kong’s future opportunities for doing private equity Conyers, reflects a commonly problems, China’s human rights business here. There is also held view that most law firm abuses, and the wider issue assets under increasing sophistication in the clients invariably separate politics of US-China trade relations, management deals that are being done from a from business. ‘Confidence in the offshore law firms remain largely are now in legal perspective – in their size, role of Hong Kong has certainly optimistic that Hong Kong the Asia complexity and value.’ taken a bit of a hit,’ he says. business will continue to trump Pacific region One look at the markets tells ‘But business is going to remain local politics. its own story. ‘Hong Kong and there and, as a firm, we remain Mourant’s global managing the PRC are presently enjoying committed to that market (as we partner, Jonathan Rigby, puts a bull run in terms of capital
24 April 2021 | Offshore Report
markets work and we see this he says. ‘In the last year it’s trend extending well into 2021,’ ❝ Some offshore law firms calmed down a little, but activity says Jonathan Green, global have faced a challenge in is still very robust, particularly managing partner of Maples. in red-chip listings. There were ‘Beneficiaries include significant hiring for their Hong Kong about 110 offshore IPOs, 99 of technology, biotechnology or which were Cayman out of Hong healthcare businesses that have offices Kong. We advised on 43 of those primarily listed either on the transactions.’ Hong Kong Stock Exchange (HKSE) or the Shanghai Stock and $10bn deals coming out of Swing to Singapore? Exchange.’ He also points to China last year,’ he says. ‘There’s China’s response to the demand for listings by premium also a material uptick in Hong pandemic has received notably established business companies Kong transactional work and mixed reviews, although its listed on the Nasdaq and NYSE, SPACs have seen a massive surge. suppression of Covid-19 case which are ‘interested in pursuing We’ve chosen to headquarter our numbers and deaths is widely a dual listing on HKSE or in the ESG (environmental, social and regarded as having been a great PRC’. corporate governance) drive in success. Mackereth is equally Hong Kong, because we see that Phillip Kite, global head of upbeat, thanks to Ogier’s as an area of really significant litigation at Harneys, says: Hong Kong office achieving potential growth.’ ‘Everybody was initially worried double-digit growth last year. Conyers’ HK workload also about the impact on their ‘Notwithstanding a pandemic continues to be very strong, business from a decline in Asia and travel restrictions, there was according to Luthi. ‘The financial work, but the government dealt some very big-ticket M&A work year 2020 was one of the biggest with the Covid crisis incredibly – we’ve done a couple of $5bn we’ve seen out of Hong Kong,’ robustly. We all saw that. In
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China, the bounceback has been offices. ‘It hasn’t been an issue remarkably quick – much quicker ❝ Hong Kong and the PRC for us, but in terms of recruiting than we thought. A difficult are enjoying a 'bull run' in people to move to Hong Kong, year was anticipated but we’ve there are some questions that actually had a better year than terms of capital markets will have to be answered,’ he we expected.’ says. ‘The extent to which the The thing about Hong Kong work. We see this extending Chinese government can give is how resilient it is, notes Kite. foreign businesses confidence ‘It’s absolutely remarkable,’ he well into 2021 will be the deciding factor.’ says. ‘In 1997, at the handover, Jonathan Green, global managing Last year, Collas Crill decided everybody was worried about to close its small Hong Kong and whether Hong Kong would partner, Maples and Calder Singapore offices. continue to be the gateway. But ‘Interestingly, we found that ten years later, Hong Kong was to Singapore. That’s not a Covid Chinese law firms are exerting still the gateway, and ten years issue. Presumably, it’s a response their authority and influence after that, it still is.’ to concerns arising from the in a far greater way,’ says A different perspective is political situation in Hong Kong.’ Jason Romer, the firm’s group offered by Alex Ohlsson, group Ohlsson’s point is echoed by managing partner. ‘They’re not managing partner at Carey Olsen. Ingrid Pierce, global managing that keen about sending matters ‘We’re fairly recent entrants to partner of Walkers. ‘Hong Kong to Hong Kong offshore law the Hong Kong and Singapore continues to be a very important firms, which then send it to their markets, with relatively small hub, it’s still a key gateway at the counterparts in the Caribbean. offices. As a consequence, we’ve moment to China and the other They’re now able to instruct us seen them grow quite quickly centres around,’ she says. ‘But directly in Cayman or the BVI.’ up to 20 people in both places. we’ve certainly seen some clients Singapore is benefiting from an looking to diversify into other Bespoke visas inflow of work from Hong Kong regional centres, complementary To the fury of Beijing, UK as a number of institutions, places like Singapore.’ Foreign Secretary Dominic Raab particularly Western-based Luthi notes that some offshore announced last year that, in light financial services businesses, have law firms have faced a challenge of the China-imposed security relocated work from Hong Kong in hiring for their Hong Kong laws, British citizenship would
26 April 2021 | Offshore Report
be offered to 2.9 million people Mackereth. ‘We’ve also had citizens coming into Jersey in the living in Hong Kong. ‘We will not interest in terms of our own next five years.’ duck our historic responsibilities,’ home jurisdictions, in particular No-one can predict exactly he said. Jersey. I wouldn’t be surprised how the Hong Kong story will Raab explained that the if there was an entrepreneurial play out. Offshore firms based ‘bespoke’ visa route would let hub of Chinese and Hong Kong there are certainly keeping a British National Overseas (BNO) weather eye on events. At least individuals, who were Hong one firm is planning to open in Kong citizens before 1997, and the PRC, while another is seeking their dependents come from ❝ As long as you and to expand its existing mainland Hong Kong to work or study in footprint. the UK for a period of five years. your country continue Although Hong Kong will The UK BNO visa launch in to so blatantly violate definitely continue as an January has seen interest in UK important gateway to China, properties soar among Hong human rights, we are it is equally certain that more Kong nationals. Britain says it contracts are now being drafted expects about 300,000 Hong going to continue in an to avoid future disputes being Kong citizens to apply for the heard there. Whatever the special visas by 2026. unrelenting way to call it to outcome, offshore firms are ‘There is undoubtedly a flow sufficiently nimble to make of funds coming out of the the attention of the world, the necessary adjustments in Hong Kong region, in particular and make it clear what’s response to client demand in terms of private wealth and political reality. Ultimately, structuring, and a possible happening China is simply too big and too relocation of Hong Kong important a market for their citizens towards the UK,’ says President Biden to President Xi clients to ignore.
27 Offshore Report | April 2021
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