Private Equity Fund Administrators

Langham Hall Hong Kong appointed as administrator by NewQuest Capital Partners

2011-05-09T03:15:00.000-07:00

NewQuest is a private equity manager lead by the former Bank of America Merrill Lynch Asia private equity team.

We are delighted to announce that Langham Hall Hong Kong has been appointed by NewQuest Capital Partners, a newly-established private equity manager lead by the former Bank of America Merrill Lynch Asia private equity team, to administer the NewQuest Asia Fund I, L.P.. The fund is backed by a syndicate of limited partners comprising Paul Capital, HarbourVest Partners, LGT Capital Partners and Axiom Asia and has acquired substantially all of Bank of America Merrill Lynch’s non-real estate private equity portfolio in Asia.

Andrew Read, Partner and Head of Asia at Langham Hall said: “We are excited to be working with such a well regarded investment manager and team. We look forward to developing a long standing relationship with NewQuest."

Darren Massara, NewQuest’s Managing Partner, said: “Having considered a number of administrators, we selected Langham Hall who have a particularly strong focus on private equity funds. Their detailed approach, deep sector knowledge and reputation for excellence and class leading systems were key considerations in our selection.”

Langham Hall has been appointed as the onshore administrator to Chamonix Private Equity

2011-04-26T02:13:00.000-07:00

Langham Hall has been appointed as the onshore administrator to Chamonix Private Equity

UK private equity fund administrator Langham Hall has been appointed as the onshore administrator to Chamonix Private Equity, the London based private equity investor. Langham Hall will be providing accountancy and administration services for the fund that has acquired a portfolio of five non-core businesses from plastic packaging manufacturer Linpac Group.

“We are excited to be working with such a well regarded and experienced team. We look forward to developing a long standing relationship Andrew Hartley and Jane Crawford’s team,” said Langham Hall’s Head of Private Equity Mark Coppin.

Andrew Hartley said, “Having considered a number of administrators, we selected Langham Hall who have a particularly strong focus on private equity funds. Their detailed approach and experience, sector knowledge, reputation for excellence and class leading systems were key considerations in selecting Langham Hall.”

Langham Hall has been appointed as the offshore Guernsey Administrator to Cubera VI

2011-04-26T01:57:00.000-07:00

Private equity fund administrator Langham Hall has been appointed as the Guernsey administrator to Cubera VI.

Cubera VI is a secondary fund focusing on purchasing LP shares in Nordic buy-out funds, the advisor to the fund is Cubera Private Equity AS a Nordic investment firm specialising in secondary transactions in the Nordic private equity market. Since inception in 2006, Cubera Private Equity has established six private equity structures.

Cubera Private Equity represents the most comprehensive team set up for secondary transactions in Nordic private equity. The professionals have more than 60 years of combined private equity experience and been responsible for more than 40 secondary transactions, 57 primary fund investments, 100 direct investments and 50 exits

Axel Hovo Daasvand said, “Having completed first close in our first Guernsey based fund, I applaud the way Langham Hall has assisted us throughout the process of documentation and registration of the fund. I look forward to working with them throughout the life of our fund.”

Mark Coppin Head of Private Equity at Langham Hall said " We are delighted to have been appointed Administrator to Cubera Private Equity's new fund and to increase our presence in the Nordic region, which we believe is an important geography for both private equity and real estate. We look forward to working closely with Axel and all of the team at Cubera".

7th April 2011

Langham Hall wins “European Property Fund Administrator of the Year” award

2010-11-24T02:32:00.000-08:00

Langham Hall is delighted to announce that it has won the “European Property Fund Administrator of the Year” award at International Custodian and Fund Administrators ceremony held in London at the Northumberland Hotel, on 23rd November 2010. Rob Short, principal – collected the award on behalf of the Langham Hall team. Rob Short commented "Given that it was an independent judging panel and the quality and size of the other nominees we are clearly delighted to have won this award. We continue to believe that real estate funds need a highly specialised and more flexible platform to be able to cope with the nuances of this asset class."

Langham Hall has been shortlisted for the BVCA "Specialist Professional Services Firm of the Year" for the second year running

2010-03-02T01:21:00.000-08:00

Langham Hall has been shortlisted for the British Venture Capital Association (BVCA) "Specialist Professional Services Firm of the Year" for the second year running. This recognises not only our achievement in Private Equity but also highlights how we consistently deliver above the norm and provide our clients with bespoke solutions. This nomination builds on our success, last year, when we were privileged to be selected winner of this prestigious award and believe that this industry recognition is statement of how Langham Hall is a market leading specialist in the funds arena. Co-founder Rob Short commented "We are delighted that once again our efforts are being recognised in this way by the industry. To be short listed for a second time, after winning the award last year, in such a competitive field highlights our continued focus on quality rather than quantity."

AIFM DIRECTIVE UPDATE

2009-12-18T05:06:00.000-08:00

The outgoing Swedish Presidency of the European Council has circulated a progress report on negotiations relating to the Alternative Investment Fund Managers Directive and has produced its final "compromise text", although still subject to debate, are encouraging and improve on the conditions for valuation and delegation, on which agreement will not be reached before the Spanish assume the Presidency in January.

The progress report identifies the key outstanding issues and the compromise proposal makes some concessions to the issues unresolved.

The issues of capital requirements, depositary, third countries and portfolio company disclosure remain a concern for the private equity industry and EVCA is working on its own draft amendments, supported by its subcommittee, the Public Affairs Executive (PAE).

Please visit www.bvca.co.uk/in-europe for further information about the BVCA’s campaign on the EU AIFM Directive.

The Impact of the Carbon Reduction Commitment Energy Efficiency Scheme Order on Private Fund Managers

2009-12-16T08:59:00.001-08:00

The Carbon Reduction Commitment ("CRC") Energy Efficiency Scheme Order ("Order") is due to be brought into force in April 2010 and is likely to have a significant impact upon many private equity and property firms managing UK based investments.

Introduction

The Order sets out a "cap and trade" scheme, which seeks to reduce carbon dioxide emissions by large non-energy intensive organisations in the UK. It will apply to organisations (Participants) whose annual UK electricity usage exceeds 6,000 MWh (equivalent to an annual bill of approximately £1,000,000).

The scheme works by requiring Participants to pay for allowances in respect of their carbon dioxide emissions. Monies collected through the scheme are then recycled to Participants using a publicised "league table", with the intention of providing benefits to those who are most successful in reducing their energy usage over time.

Participants

The Order will require certain organisations to be combined both for the purposes of qualification for, and ongoing compliance with, the CRC scheme. Parent undertakings and their UK subsidiary undertakings (defined by reference to the Companies Act 2006) will be grouped together as "combined participants" to form a single Participant. As currently proposed, liability for compliance with the Order will be placed jointly and severally on all entities within the Participant, although the parent undertaking is likely to be the entity carrying out the compliance obligations and liaising with the Environment Agency.

Consolidating in this manner could have unexpected effects within the private funds industry - which typically has not been required to consolidate in this way for accounting purposes. The ultimate form of, and likely interpretation of, the Order remains unclear at the present time but it is possible that unrelated investee companies within a portfolio will be grouped together as subsidiaries of either the fund or the manager in a single "Participant". This could result in many investee companies which would not, on the basis of their own electricity usage, have qualified for the scheme being required to participate in the scheme as part of the wider Participant. It is also possible that managers managing more than one fund could be treated as a parent of each of the funds - resulting in the grouping of investee companies held in completely unrelated portfolios. Given the joint liabilities established by the Order, there is clearly considerable potential for confusion to arise as to how the costs and liabilities arising from the Order be allocated.

Consideration will also need to be given as to whether any cornerstone investors could be considered to be the parent of the Participant for the purposes of the Order, although this would be unlikely unless such an investor held over 50% of a fund.

Fortunately, the Government has decided in the latest response to consultation that a Participant could be "disaggregated" into a combination of "significant group undertakings" ("SGU"s) as long as, among other conditions, the SGUs and remaining part of the Participant each have qualifying emissions (e.g. over 6000MWh).

Advantageously, where an SGU is disaggregated, the remaining entities in the Participant will no longer be jointly and severally liable for that SGU's compliance and will not need to report on its emissions. It appears that disaggregation of SGUs can be done as part of the registration process, at the beginning of subsequent phases or when an SGU is acquired by an existing Participant.

Ensuring that the remaining part of the Participant still qualifies may still however be problematic for private equity and other fund structures for the following reasons:

Even if a potential Participant wishes to disaggregate SGUs, it will have to go through the process of working out, to begin with, what the Participant consists of for registration purposes.
If they satisfy the Companies Act tests, fund level entities will still have to take part in the scheme in respect of fund level emissions.
Those entities may well have to choose at least one portfolio company to participate with so that the combined emissions remain over 6000MWh (with joint and several liability).

What happens if the fund wants to sell only some entities from an SGU, or from the remaining part of the Participant is not clear. Would a fund have to "re-aggregate" an SGU to ensure the 6000MWh threshold is again met?
Effects of the Scheme

Registration

Participants will initially qualify for inclusion in the scheme based on their 2008 electricity usage and will need to register with the online CRC Registry during the registration period (1 April 2010 to 30 September 2010). Guidance recently issued by the Environment Agency suggests that, where a Participant wishes to disaggregate any SGUs, registration of the Participant as a whole must be completed by 30 June 2010 to allow the relevant SGUs to register separately by the September deadline.

Emissions to be included in the Scheme

Once a Participant qualifies for the scheme, all consumption of all fuel types will be included within the scheme although there are certain exemptions (such as energy used for transport).

Phases and Cap Setting

The scheme will work on a "cap and trade" basis. This means that a total 'cap' on the amount of emissions in the scheme will be set by way of 'allowances' issued by the Government. Each Participant must buy enough allowances each year to cover its emissions either through fixed price or auction sales of allowances, trading of CRCs on the secondary market or through the "safety valve" mechanism by which Participants can buy allowances under EU Greenhouse Gas Emission Trading Scheme.

Introductory phase

An introductory three year "phase" contains a monitoring-only year commencing in April 2010 for which no allowances have to be bought. In the second and third years, allowances will be sold by one-off sale in April each year at a fixed price of £12 per tonne of carbon dioxide emitted. There will be no cap on Participants' emissions; they will simply have to buy sufficient allowances to match their emissions.

Capped Phases

From 2013, the scheme will run in five-year capped 'phases' with a steadily reducing number of allowances (set by the Government) available over time. Allowances will be auctioned in this phase.

CRC Trading

A Participant emitting more than its purchased allowances during the year (either in the introductory or capped phases) will need to buy allowances on the secondary market or through the "safety valve". There will be a 4 month window for Participants to trade allowances following the end of the compliance year. Each Participant will need to have an online account at the new CRC Registry, which will allow trading of CRC allowances.

Recycling Payments and the Performance League Table

The scheme is intended to be revenue neutral. As such, receipts from allowances in any compliance year (paid in April) will be returned to Participants in October by way of a recycling payment.

Administration, Reporting and Monitoring

The Government's emphasis is intended to be on minimal administrative burden for business. For example, there will be reliance on self-certification of emissions (backed up by an independent risk based audit regime). In addition to registration (see above), there are significant ongoing reporting obligations (such as submission of an annual report collating CRC emissions) which will be satisfied through an online registry.

The CRC regime will be funded by a number of charges placed on Participants including registration and annual subsistence charges.

Property funds

The application of the Order to funds containing investment property portfolios will cause additional complexity and cost as a result of the attribution of responsibility for emissions. This will, in particular, affect multi-let properties. In broad terms, the responsibility for CRC falls on the person who pays the electricity bill. In multi-let properties, landlords may well pay the bills for common areas and for tenant's leased areas and recharge the monies through service charges. Depending on the particular circumstances, difficulties may well arise for landlords who will be responsible for tenant's emissions without clear ways of either being able to charge tenants for CRC costs under their leases, or of forcing tenants to reduce their energy usage (and thereby the costs of compliance). Added to this, the complexity of calculations involved and the fact that the Order operates at group level, is likely to lead to disputes and litigation between landlords and tenants in some cases. The property industry is currently trying to identify equitable and consistent ways for landlords and tenants to deal with CRC administration and costs to mitigate these problems.

Next Steps For Fund Managers

The Environment Agency is currently in the process of writing to organisations it believes will be Participants and has recently issued guidance on the registration process. Potential Participants should commence preparations (to the extent they have not already done so) to compile data necessary for registration under the scheme and identify relevant individuals to take ownership of CRC within participating organisations. At the same time, organisations should be starting to think about how the scheme will work in practice for them and to consider what sort of changes they might need to make to relevant contracts. For example, consideration should be given to adding indemnities into investment agreements relating to investee companies to provide that each investee company will be responsible for its own liabilities under the scheme. Other administrative arrangements will need to be made to facilitate compliance with the Order and these may also need to be legally documented.

Managers should begin discussing the issues and relevant timetables with their investee companies as soon as possible. Specifically, Participants should be taking the following steps:

Establishing the extent of their Participant. For private fund managers, this will involve analysing their fund structures and the nature and extent of their interests in portfolio companies and/or other properties.
Considering whether they come within the CRC scheme, based on their UK electricity usage for 2008.

Considering whether particular portfolio companies which are SGUs could be disaggregated to operate the CRC on a standalone basis.
Appointing individuals within the relevant Participant to be responsible for CRC reporting and compliance.

Dealing with the registration pack and co-ordinating across the other entities within the Participant to ensure that reporting lines are in place.

Langham Hall appointed onshore administrator to the new AEGON Target Healthcare Property Fund

2009-12-10T06:39:00.000-08:00

Langham Hall is delighted to announce it has been appointed as onshore administrator to AEGON Asset Management’s new healthcare fund.

The closed end fund intends to focus on the UK's growing need for healthcare as its baby boomer generation retires and increasing longevity creates the need for specialist care facilities.

It is AEGON Asset Management's first new property fund launch since the arrival of its property team from Aviva Investors in 2008.

The fund will be managed by AEGON Asset Management's property team led by directors Phil Clark, Gerardine Davies and David Wise.

Rob Short Partner at Langham Hall says: “We are excited to be working with such a well regarded investment manager and team. We have worked together with Phil and his team in the past and look forward to developing a long standing relationship on this and future funds at AEGON.

Clark says: “Having considered a number of administrators, we selected Langham Hall who have a particularly strong focus on real estate funds. Their detailed approach at asset level, coupled with their deep sector knowledge and reputation for excellence and class leading systems were key considerations in selecting Langham Hall.”

AEGON Asset Management UK has over £41bn of assets under management and is a part of AEGON NV, one of the world’s largest financial services groups.

Langham Hall is a specialist provider of real estate accounting, administration and consultancy services. With over $8bn of total commitments under administration and serving over 40 funds Langham Hall has developed a reputation for highest quality administration and complex accounting solutions to the real estate and private equity industry.

LANGHAM HALL - BEWARE OF GREEKS BEARING GIFTS

2009-11-27T08:13:00.000-08:00

Langham Hall November Technical Bulletin on taxation of offshore funds

Introduction

A new offshore funds taxation regime comes into force on 1 December 2009, details of which are now set out in the recently published Offshore Funds (Tax) Regulations 2009 (the "Regulations").

HM Revenue and Customs' ("HMRC") objective in taxing of offshore funds has not changed in 25 years. It is to prevent UK investors from rolling up income offshore and converting it into capital. With the marginal top rate of income tax rising to 50% next year, whilst capital gains tax remains (so far) at an attractive 18% rate, it is not difficult to see why the conversion of income to capital will increasingly become an HMRC target.

Two years ago the Government published a discussion paper proposing changes to the taxation of offshore funds so far as UK investors were concerned. The objectives were, as is often the case now, stated to be the clarification, simplification and modernisation of the existing regime. When the legislation comes along, one can usually find subtle changes which actually have the effect of increasing the tax base, blocking loopholes and increasing the likely tax take. As put in the Explanatory Memorandum to the Regulations "the purpose is that, as far as possible, UK investors make their investment decisions for commercial reasons and not to obtain unintended tax advantages".

At present, UK offshore fund investors are taxed wholly on an income tax basis unless their fund is categorised as a "distributing fund". In order to obtain distributor status, a fund has to distribute at least 85 per cent of its income. This income is liable to UK income tax. It however leaves 15% (a not inconsiderable figure in the current low interest environment) which can be accumulated together with the fund's capital gains. Further, if the fund is one where investors are unlikely to be able to realise their investment within seven years, it currently avoids the whole regime.

Extending the Tax Base

Prior to the Finance Act 2009, the definition of offshore fund was based on the regulatory definition of a "collective investment scheme" (as set out in the Financial Services and Markets Act 2000) constituted by a non-UK company or a unit trust scheme where the trustees are non-UK resident.
The new definition, inserted as section 40A Finance Act 2008, detaches the tax definition of an offshore fund from a circumscribed regulatory definition to a definition, in HMRC's words, based on "characteristics". Broadly speaking an offshore fund is now to be any vehicle which (i) enables investors to participate in and receive profits from, the acquisition, holding, management or disposal of property where (ii) the investors do not have day to day control of the management of the property and (iii) a reasonable investor would expect to be able to realise their investment by reference to the net asset value of the property or an index of any description.

• The exemption for funds where an investor could not reasonably expect to realise all, or part, of their investment within seven years has been dropped. A number of offshore vehicles which were not previously offshore funds may now fall within section 40A.

• The exact scope of section 40A is uncertain. In particular, there is now no reason why hedge funds and funds of funds should not be caught. Managers will have to look urgently at their individual investment vehicles on a case by case basis.

Extending the Tax Take

The new regime replaces the concept of distributor status (ie distributing and non-distributing funds) with that of reporting and non-reporting funds.

An offshore fund can apply to HMRC to be a "reporting fund". For UK investors, gains realised on the disposal of investments in reporting funds will, in most circumstances, be subject to tax on chargeable gains. By contrast gains realised on disposals of investments in "non reporting" funds will be subject to income tax.

The downside is that, to secure reporting fund status, all of an offshore funds income attributable to a UK investor will be taxed in the hands of the UK investor to income tax. Further, this is now the case whether the income has been remitted to the UK investor or not. Not only has the 15% retention margin been abolished, but UK investors may find themselves being taxed on income they have not received.

In view of the current significant rate differential between income tax and capital gains tax for UK individual investors and the exemption from tax for many UK institutional investors (for example authorised funds, investment trust companies and pension funds), the ability to offshore fund managers to obtain reporting fund status may be critical for funds targeted at UK investors.

Becoming a Reporting Fund

In order to become a reporting fund, the manager must apply to HMRC within three months of the first day of the period of account for which it is to be a reporting fund. The application must include documents such as :

• A statement of the first period of account for which it is proposed that the fund should be a reporting fund.

• An undertaking that no period of account will exceed 18 months.

• A statement of whether the fund intends to prepare its accounts in accordance with IAS and, if not, which generally accepted accounting practice it intends to use.

• Undertakings to comply with the requirements to provide information to investors and HMRC.

• A copy of the prospectus.

Once HMRC have given reporting fund status, the Regulations set out in detail how the accounts are to be prepared and how the fund's reportable income should be computed. If a fund has no, or negative, income it will be required to make nil returns.

Reporting funds will also be required to prepare and send a report to each investor who is resident in the UK, within six months of the end of the reporting period, detailing the amount actually distributed to investors (which is taxable to income tax), the excess of the amount of the reporting income over the amount actually distributed (which is also taxable to income tax), the dates of distributions and a statement as to whether the fund remains a reporting fund. The income figures are used as the basis for the UK investor's self assessment tax return.

Reporting funds will also be required to provide to HMRC audited accounts, a computation of reportable income, a copy of the report made available to investors, the reported income of the fund and a declaration that the fund has complied with its obligations. This information must, again, be provided within six months of the end of the period of account. Although the Treasury's Impact Assessment on the Regulations refers to the anticipated costs as being limited to "some small one-off costs for managers who will need to familiarise themselves with the new rules" and generally to a "reduction in administrative burdens", the new regime is likely to result in significantly increased administrative costs for two reasons. Firstly because most UK investor offshore funds will now probably be established as reporting funds (and new funds may be brought into the net), and secondly because of the necessity to provide information both to investors and HMRC.

Anti-avoidance

With the abolition of the 15% retention and the 7 year rule and income taxation on an accrual rather than a receipt basis, it is difficult to see why a UK investor would want to invest in a non-reporting fund. Investing in a fund outside the Regulations is another matter and promoters may be tempted to try and find a way round the definition of an offshore fund. They should be aware that Section 40G Finance Act 2008 enables the Treasury to rewrite the only stated exception from the Regulations, broadly a fund with non-income producing assets which are only accessed on a winding up of the fund.

A reporting fund may be required by HMRC to leave the reporting fund regime if it is in breach of its obligations and the breach is serious. It can also be required to leave if it has made four minor breaches (a breach for which there is a reasonable excuse or which is inadvertent and is remedied as soon as possible) within a period of ten years beginning with the first day of the period of account in which the first minor breach occurs.

If a fund is required to leave the reporting fund regime by HMRC it will be unable to apply to rejoin the regime at a later date. Clearly this may have serious repercussions for UK investors.

To visit our website click here.

Langham Hall would like to thank Charles Suchett-Kaye of RPC for the above article.

Rob Short

London Office:
Amadeus House
27b Floral Street
London WC2E 9DP

T:+44 (0)20 7812 7051
E: rob.short@langhamhall.com

Charles Suchett-Kaye
Reynolds Porter Chamberlain LLP

T: +44 (0) 20 3060 6000
E: Charles.Suchett-Kaye@rpc.co.uk

Langham Hall Nominated for Private Equity Fund Administrator of the Year Award

2009-09-29T01:42:00.000-07:00

We are delighted to announce that Langham Hall has been nominated within the “Private Equity Fund Administrator of the Year” category at this year’s Private Equity News Awards for Excellence in Advisory Services.

Building on our recent success, earlier this year, at the British Venture Capital Association (BVCA) Private Equity Awards, where we were selected winner of the “Specialist Professional Services Firm of the Year,” we believe that this industry recognition is a clear statement of how Langham Hall has developed into a leading specialist in private equity fund administration and real estate fund administration.

Co-founder Rob Short commented “Since we set the business up we have always tried to focus on quality rather than quantity. It is rewarding for both management and staff that our efforts are being recognised in this way”.

Langham Hall is a provider of private equity fund accounting, private equity fund administration and consultancy services to over 40 real estate funds and private equity funds from London, Jersey, Guernsey, Luxembourg and Hong Kong.

Should you wish to find out more about Langham Hall, please do not hesitate to contact us.

Please click to view our website www.langhamhall.com