In just over a week, financial services giant Sagicor Financial Corporation (SFC) could get the vote it needs to move its headquarters to Bermuda from Barbados.
However, officials have assured that the move would not be a physical relocation of any of SFC’s business.
In a notice to shareholders dated April 29, 2016, the board of directors said a “majority of two-thirds” of shareholder votes was required at the annual general meeting on June 8 to continue with its registration in Bermuda and discontinuance in Barbados.
The company explained that continuance to Bermuda would require approvals from the Bermuda regulator, authorities in Barbados, as well as approvals under the Sagicor Financial Corporation’s corporate governance regime. Sagicor Financial will also require approval from the registrar of companies in Barbados (Corporate Affairs and Intellectual Property Office [CAIPO]).
Sagicor said it already received confirmation from the local tax authority that it will be treated as tax resident in Barbados after it moves its holding company from Bridgetown.
Following shareholder approval, Sagicor officials expect the company’s memorandum of continuance to be approved “shortly thereafter, subject to the appropriate filings”.
The company will remain a tax resident in Barbados, although it would be domiciled in Bermuda.
“This means that with respect to Barbados taxation, the continuance results in no change,” said the document.
The decision to relocate the company’s headquarters was taken in January last year, following the downgrade of the Barbados’ sovereign rating to B from BB- on December 19 by Standard & Poor’s, and the subsequent downgrade of Sagicor Life’s rating from BB+ to BB- and Sagicor Finance Limited’s US$150 million 10-year senior unsecured note to B because of “ratings on life insurers are capped at two notches above the sovereign rating of the country of domicile”.
The company said after carefully assessing the three shortlisted jurisdictions in which to register the company – Bermuda, Trinidad & Tobago and the United Kingdom – the board agreed that subject to appropriate shareholder approval, “the company should be continued into Bermuda and this was pursued”.
In their rationale, the directors of the company said they considered the proposed move practical, adding that they felt it was in the best interest of Sagicor that it “continues as an exempted company” under the laws of Bermuda and discontinued as a company under the laws of Barbados.
“In order to improve the company’s ratings, both corporate and securities, the company is seeking approval to ‘redomicile’ into Bermuda, which is an investment grade-rated country,” the notice to shareholders stated.
“This would be achieved via a corporate migration, or continuance, of the company to Bermuda and the discontinuance of the Company in Barbados,” it added.
“It is anticipated that on successful continuance into Bermuda, which has a stronger and more stable sovereign rating when compared with Barbados, Sagicor Financial Corporation could reasonably expect to receive a Standard & Poor’s rating lift to BB+ unhindered by the restrictions of the current Barbados rating,” the company said.
“Improvement in the company’s rating would result in reduced cost of capital, increased attractiveness to regional and international investors, and all the attendant ancillary benefits flowing therefrom. Accordingly, your board is pleased to present this re-domiciliation proposal to all shareholders for approval,” it added.
Only holders of common shares and convertible redeemable preference shares of the company, who the board said it was confident would support the proposal with their “affirmative vote”, will be entitled to vote at the meeting.
Also on the agenda for that meeting are the election of directors, the re-appointment of the incumbent auditors and directors’ authorization to fix their remuneration and the adoption of the audited consolidated financial statements for the year ended December 31, 2015.
Primary listing of the company’s shares on the Barbados Stock Exchange (BSE) as well as secondary listing on the Trinidad and Tobago Stock Exchange and the LSE will not be affected.
The company explained that the re-domicile meant it would be registered as an exempt company under the Bermuda Companies Act 1981, only requiring a resident representative, which it will arrange.
“No physical relocation of any SFC’s business to Bermuda is required. Additionally, the continued Sagicor Financial Corporation will have a registered office in Bermuda,” it said, adding that annual general meetings and emergency general meetings would be held in Barbados.
The cost associated with the move would be US$405. Sagicor Financial Corporation would be subjected to “an annual fee in Bermuda, subject to pro-ration in the first year if continuance happens after August 31”, the shareholder notice explained.
The document added that the annual fee for company would be US$31,120.
“There are also certain fees associated with the resident representative and registered office services that amount to approximately US$7,900,” it added.
In addition to its investment grade, Bermuda was chosen because of the ease of redomiciliation, tax impact, ratings stability as well as reputational risk.
Bermuda proved to be the best choice after other markets such as the UK, Trinidad and Tobago, Luxemburg, Switzerland, Ireland, Canada and Netherlands were examined.
“Bermuda is rated investment grade, it has a very tax friendly regime, it had no regulatory hurdles for our business and the ease of continuance meant it could be achieved in the most efficient way,” the document stated.