Making a PSC Profit

08/17/2010 08:32 pm ET | Updated May 25, 2011

Perhaps you noticed back when Associated Press reported August 9 that Aegis Defence, a British company which is one of the major private security contractors in Iraq, as well as other countries, has set up a Swiss holding company that effectively moves the British firm's headquarters to Switzerland. The holding was set up in March 2010, the share exchange was in July.

Aegis Defence Services Ltd., is now wholly owned by a shell company in the northwestern city of Basel,

The local daily Basler Zeitung reported that Aegis' seven owners -- including founders Tim Spicer, Mark Bullough, Jeffrey Day and Dominic Armstrong -- have swapped their shares for stakes in the Basel-based holding company.

The three remaining shareholders in Aegis are James Ellery, one-time head of the U.N.
mission in southern Sudan, retired British diplomat John Birch and former U.K. army chief Peter Inge, according to the newspaper.

A source sent me the Share Exchange Agreement detailing the conversion of Aegis Defence Services to Aegis Group Holdings AG, which was signed by all parties,

This is a straightforward share exchange whereby each of the shareholders has swapped their shares in the UK company for a new Swiss company set up to own the UK company. The SEA is the document which underlies the transfer of Aegis ownership and control "offshore" from the UK to Switzerland, presumably for tax efficiency. Assuming all operations, billings and management now takes place through the holding company, i.e., outside of UK tax jurisdiction and, reportedly, some of the shareholders have relocated to Switzerland for this purpose, then future profits will be subject to Swiss, not Uk taxes.

Here is a listing of the shareholders and their shares.

Dominic Armstrong 125,000
John Birch 10,000
Mark Bullough 250,000
Jeffrey Day 13,800
James Ellery 10,000
Peter Inge 20,000
J Day Group Limited 250,000
Timothy Spicer 446,200

At the time of the agreement each share was worth 0.10 CHF (Swiss Francs), or about nine cents (USD) per share, at current conversion rates.