Wednesday, July 11, 2007

Indian Companies in the Isle of Man

In the FT today:

Indian companies eye world from Isle of Man

Incorporations of India-focused companies in the Isle of Man are rising sharply thanks to favourable taxation and access to global stock exchanges in which corporate India raises money for aggressive expansion.

Cains, the Isle of Man law firm, says business is booming from India-focused companies incorporating in the tiny Irish Sea tax haven. Nearly half of the 27 India-focused companies listed on Aim were incorporated in the Isle of Man as of the end of April. Cains is working to incorporate 10 more India-focused companies during the next few months.

"There are a lot of companies that will be competing on the world stage," said Mike Edwards, a director with Cains.

Last year Cains received only "occasional inquiries" from India-focused companies. "We now we get inquiries almost every week," said Mr Edwards.

While the Isle of Man is attracting more business overall from emerging markets such as China, Brazil, Russia and Africa, India is "leading the pack". There are only a handful of China-focused companies incorporated in Isle of Man.

Investment firms Evolvence India Holdings and Promethean India were two of the latest companies to incorporate in the Isle of Man this spring. The list also includes power plant maker KSK Power, an arm of property developer Unitech and Bollywood media group Eros International.

Increasing numbers of Indian companies, particularly in smaller, nascent industries, are incorporating overseas in order to list outside India and so avoid stringent domestic rules.

The Bombay Stock Exchange, for example, requires a minimum issue size for large cap initial public offerings and minimum market capitalisation. Small cap companies that launch initial public offerings must have minimum income for three years, minimum market capitalisation and at least 1,000 public shareholders after the issue.

Isle of Man is one of several overseas locations favoured by Indian companies seeking money from a broader market to fund global acquisitions and domestic expansion.

"Indian companies are on an acquisition trail abroad. It makes sense to incorporate in a neutral territory and [to use] it as a platform to buy shares or assets in the wider world," said Mr Edwards.

But the main reason for the Isle of Man's increasing popularity is that it has no corporation tax.

Other favourable tax policies in the self-governing British crown dependency include no withholding taxes on interest or dividend; no capital duty; and no stamp duty.

The Isle of Man's legal system, based on the English model, resembles India's.

Other tax havens such as the Cayman Islands may not be so convenient for doing business in India and the UK because of time difference. Jersey and Guernsey have stricter regulatory approval processes than Isle of Man.

Mauritius is the most popular tax haven for businesses involved with India because of its double taxation treaty.

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