EXECUTIVE SUMMARY

Welcome to this third edition of On the Register, an Appleby report that provides figures and insight about company incorporation activity going on in the major offshore jurisdictions around the globe, where we do the majority of our business.

This report looks primarily at the most recent data available, covering the first six months of 2013. There are a number of key themes that emerge from the statistics outlined on these pages. In particular:

  • The numbers of new offshore companies being registered are increasing in many jurisdictions compared to the last period, with most jurisdictions matching growth rates seen by onshore comparators the UK and Hong Kong.
  • However, in combination, the overall volumes of new offshore companies being registered was 3% lower in the first half of 2013 than in the preceding six months, due to a seasonal reduction in the British Virgin Islands (BVI) register that had a disproportionate effect on the figures.
  • The BVI continues to dominate offshore new company registration activity by volume, with a consistently maintained six-fold lead ahead of its nearest comparator, the Cayman Islands.
  • Mauritius showed the biggest increase in new company incorporations with 9% more added than in the second half of 2012.
  • The total number of active companies on the offshore registers has stabilised, following a decrease between 2011 and 2012. Since 2008, this total number has increased by 5% - a figure that is, as we would expect, outpaced by Hong Kong and the UK which report increases on 2008 figures of 53% and 16% respectively.
  • Bermuda is the offshore jurisdiction witnessing the greatest growth in total number of companies on its local register, with a 5% increase on the figures recorded at the end of December 2012. The next biggest growth (4%) came from Mauritius.
  • The UK and Hong Kong, as onshore comparators, continue to show signs of recovery compared to the previous six months, which is encouraging as it indicates the global economy is strengthening in the Asian and European markets. Both are demonstrating positive growth, with the UK showing a particularly impressive 11% more new incorporations being registered during the period.
  • Elsewhere, other onshore comparators are also mirroring this recovery. Russia has just surpassed its previous peak, set at the end of 2009, with 4,922,200 active companies now listed on its register.

We hope you find the analysis on the following pages useful. Please don't hesitate to get in touch with your usual Appleby contact should you have any questions.

Farah Ballands
Partner, Global Head of Fiduciary & Administration Services

THE COMPANY FORMATION ENVIRONMENT

New Company Incorporations

As the global economy appears to be stabilising, the company registration data reveals that levels of new company registrations in several jurisdictions have accelerated following a faltered growth pattern during the second half of 2012.

In the first half of 2013 there were 38,416 new offshore company incorporations in total. Although this represented a small decrease of 3% on the preceding six months in 2012, this was primarily due to a seasonal decline in incorporations in the British Virgin Islands (BVI), which has a disproportional effect on the total figures. Elsewhere, with growth at around 8-9%, most offshore jurisdictions are close to growth levels seen in onshore comparators the UK and Hong Kong. The UK is, as we would expect, leading this growth with an 11% increase.

* Estimated figure

Total Active Companies Listed on the Offshore Registers

When looking at the total numbers of companies active on the registers, the offshore markets are expanding at an identical rate to their onshore counterparts, compared to the second half of last year. Most have reported increases to the total number of active companies on their registers of between 1% and 5%. The only exceptions are the BVI (the biggest offshore register, which due to a seasonal dip in new registrations appears to have flat-lined), and the Isle of Man (where steady activity is being masked by a front-loaded removal of dissolved companies from its register during Q1 each year).

When added together, the total number of companies on all offshore registers is now 5% larger than pre-recession 2008.

Onshore Comparators

If, as we believe, the major financial centres of the UK and Hong Kong are indicators for the health of the offshore jurisdictions then, as we predicted in our previous report, 2013 is turning out to be a watershed year. The steady growth of the UK market since the global financial crisis in 2009 is telling, and Hong Kong is hot on its heels.

Turning west to the United States, the latest available data only goes up to 2011 and still shows continued decline, which is of course unsurprising. What is encouraging though is that the figures reveal this decline has slowed. In 2008/09 around 200,000 companies were removed, but by 2011 the registry had only shrunk by 20,000 compared to the previous year. It appears that the US market has bottomed out, and we would expect the figures to start creeping back up when the 2012 data is published.

Further justification for this confidence that the US market is experiencing a similar return to growth to onshore comparators can be seen in Delaware. Here, we have tracked new incorporations since 2009 and these rose by 9% between 2011 and 2012. Little affected by the global recession, the Delaware registry has been steadily growing by approximately 30,000 companies each year since 2009. This steadying of growth is driven by the formation of new LLCs which make up two thirds of all incorporations in the state. In March 2013, Delaware became home to one million corporate entities.

Finally, looking at Russia's registry of companies reveals further mirroring of recovery seen in the US, UK and Hong Kong. Data from The Federal State Statistic Service in Russia reveals that numbers of active companies on the register peaked at the end of 2009, before the effects of the global recession were felt. The register then shrank by almost 100,000 the following year. Since then, it has gradually recovered and as of mid-2013 it has surpassed the 2009 peak, with 4,922,200 active companies now listed.

To read this Report in full, please click here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.