A slowdown in new Cayman Islands company incorporations during the second half of 2012 negated strong numbers posted during the first half of the year, according to a report from financial services firm Appleby. Overall, the number of new company incorporations in Cayman in 2012 was about equal to 2011. An Appleby executive in Cayman sees reasons for hope in 2013.
According to Appleby’s latest “On the Register Report”, which provides insight and data on company incorporations in offshore financial centres, the volume of new company registrations in Cayman is still far below the numbers experienced prior to the global financial crisis, but is steadily edging back to levels last seen in 2008.
“The year was certainly buoyed by activity in the first six months of the year,” said Richard McMillan, managing director of Appleby Trust (Cayman) Ltd. “And there are signs that 2013 will be a watershed year in terms of seeing a universal return to pre-2009 activity levels across the offshore jurisdictions.”
Looking at both active companies and newly incorporated companies in 2012, registration levels in Cayman were up by 1 per cent compared to 2011, meaning that slightly more companies joined the register than left, according to the news release.
“The total number of new companies registered for the year remained almost identical compared to the previous 12-month period. The jurisdiction still has some way to go to reclaim the volumes of new company registrations experienced prior to the global financial crisis in 2009, but none the less remains comfortably ahead of the 2009 figures by some 14 per cent,” according to the report.
In the first half of 2012, new Cayman incorporations increased by 13 per cent compared to the second half of 2011. However, that number dropped by 13 per cent in the second half of 2012, compared to the first half of 2012.
According to the report, “It’s worth noting that compared to 2011 there appeared to be a drop off (56 per cent) in non-resident companies being registered in 2012. The reason for this is that these are considered to be outmoded now, and are being replaced by exempted companies in corporate structures.”
A bit of good news from the report is that Cayman “remains the jurisdiction of choice for North American [collateralised loan obligations] which continue to experience significant growth with ever increasing activity from existing and new managers.
“Each half year since 2011 has demonstrated consistent increases in deal value. We expect this trend of continued growth to continue well into 2013 and beyond.”
The offshore jurisdictions covered in the report include Cayman, Bermuda, British Virgin Islands, Guernsey, Isle of Man, Jersey, Mauritius and Seychelles. The report also separately looks at registers in the United Kingdom and Hong Kong.
Bermuda and Hong Kong each reported a 7 per cent increase in new company incorporations in the second half of 2012, compared to the first half of the year. “The pattern of a slower second half of the year continued to prevail elsewhere however”, according to the report.
“The ongoing weakened economic conditions continued to impact the overall market in the second half of 2012. There were 37,881 new offshore company formations in the jurisdictions covered by the report, a decrease of 3.6 per cent from the same period a year earlier, and a deeper decrease of 11 per cent on the preceding six months in 2012,” according to Appleby.
According to the report, BVI continues to dominate offshore company registration activity by volume. BVI registered about seven times as many new companies in 2012 as Cayman, its nearest competitor. Overall, there are about five times as many companies on BVI’s register as on Cayman’s register.
Out of the seven offshore jurisdictions in the report (except for Seychelles, whose data were incomplete), BVI accounted for 77 per cent of new company incorporations in 2012. BVI companies account for about 68 per cent of offshore companies registered in the eight jurisdictions.
Appleby described 2012 as “a year of consolidation following large increases in annual new incorporations between 2009 and 2011”.
Mr. McMillan said, “Continued uncertainty in some markets and the shift in focus from China/Asia to Africa for jurisdictions like Mauritius and the Seychelles are preventing a speedy return to the numbers of company formations recorded prior to the global economic crisis.
“Add to this several major international events during the second half of 2012, including the US presidential elections, continued economic uncertainties in the Eurozone and the once-in-a-decade change in leadership in China, and it’s hard to be surprised at the company registrations barometer struggling to quickly improve,” he said, “but we are seeing growth in some markets.”