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A 2018 update on Hindawi’s corporate structure

A 2018 update on Hindawi’s corporate structure

Hindawi’s CEO, Paul Peters, provides an update on the corporate restructuring Hindawi has recently gone through.

In the past few months, I have been asked by a number of people about Hindawi’s presence in the UK and in Egypt and how this is reflected in our corporate structure, so I thought it would be helpful to write a post to explain the company’s origins, the corporate restructuring Hindawi has recently gone through, as well as our plans for the future. My primary focus will be on Hindawi’s corporate and legal nature, although I will provide some context to explain the reasons behind certain developments in the company’s structure.

Going back to the very beginning, Hindawi was founded in Cairo by Ahmed Hindawi and Nagwa Abdelmottaleb shortly after they returned from graduate school at the University of Pennsylvania. The company was first incorporated in 1997 under the name “Electronic Publishing House” and operated initially from a small office in the apartment building where Ahmed and Nagwa were living.

Within a few years, the company had grown and the founders applied for a license to operate within one of Egypt’s Free Zones, which the government had created to nurture businesses that primarily served the international market. The advantages of moving into the Free Zone included the tax incentives that it provided, a streamlined regulatory process that addressed many of the administrative challenges of operating an international publishing company in Egypt, and high-quality office spaces within a well-located area of Cairo that would otherwise be prohibitively expensive. In 2001 the company was granted its license and reincorporated in the Nasr City Free Zone under the name Hindawi Publishing Corporation.

For more than a decade Hindawi’s sole presence was the office in Cairo and the company had no legal presence outside of Egypt. The first change to Hindawi’s legal structure came in September 2013 as a result of my decision to relocate to the United Kingdom after having lived in Cairo for nearly 10 years. In order for Hindawi to be able to employ me we needed to establish a legal entity in the UK, so we established Hindawi Limited as a wholly owned subsidiary of Hindawi Publishing Corporation. At that time we had no intention of expanding Hindawi Limited into anything more than a small service provider that could support Hindawi Publishing Corporation from the UK.

By early 2014, I had begun to work on a side project to develop a collection of video-based courses in business and management that we hoped to license to companies for corporate training purposes. Once it became clear that this project would require significant investment, and that it would have no overlap with Hindawi’s scholarly publishing activities, we decided to separate it from Hindawi Publishing Corporation and fund the initial costs using a personal seed investment from Ahmed Hindawi. In order to do this, we transferred the ownership of Hindawi Limited to Hindawi Holdings Limited, a Jersey-based holding company that was created in January 2015 with Ahmed Hindawi as the sole owner.

In spite of our strong desire to keep legal complexities to a minimum, we were advised that having a parent holding company in Jersey would provide greater flexibility in taking on external funding for this new business, particularly if we wanted to bring on investors from outside the UK. Whether or not that would have been the case is impossible for me to say, since later that year we ceased development on this project for reasons I will explain below.

By the middle of 2015, several important developments, internal and external, triggered lengthy discussions about the future of Hindawi. In late 2014 Ahmed Hindawi stepped down from his position as CEO of Hindawi so that he could focus on running a new digital education startup (https://www.nagwa.com/) as well as a non-profit foundation (https://www.hindawi.org/english/). Personally, I had also reached a point where it was difficult to maintain a strong leadership role at Hindawi, since I had been living in the UK for the previous two years and found that working remotely limited my ability to help shape the company’s development.

Alongside these internal changes were important external factors that made us feel that it was time to consider a significant shift in Hindawi’s development. By early 2015, it seemed clear to us that open access publishing was entering a new chapter in which independent OA publishers would face increasing competition from more traditional publishers who had begun to invest heavily in their OA publishing programs. As we had anticipated, this increased competition meant that independent OA publishers experienced virtually no growth in their publication output between 2014 and 2016, while open access output in both hybrid journals as well as fully OA-journals owned by traditionally subscription-based publishers roughly doubled during this period (as can be seen in this data from OASPA).

In spite of increased competition within the open access landscape, we believed that great opportunities existed for Hindawi to build upon the strong foundation of customer service, operational excellence, and open access leadership we had developed. We felt that by pursuing new opportunities within Open Science and partnering with other organizations who would complement our skills, we could begin an exciting new chapter in Hindawi’s growth. However, doing so would require us to bring on experienced staff in several key positions that would be very difficult to recruit in Cairo.

Another external factor that contributed to our interest in relocating the business to the UK was uncertainty related to the Egyptian political landscape following the country’s revolution in 2011. In spite of the relative stability in Egypt’s political leadership in recent years, we continue to have concerns about the impact that any political or economic turmoil may have on our ability to run the business in the years to come.

As a result of these factors, we decided in mid-2015 to relocate the company’s headquarters to London. In order to oversee this transition, I took over at Hindawi’s CEO in July 2015, at which point we ceased the development of the corporate training business that we had recently started. During the course of the following year, we began recruiting the initial core of Hindawi Limited’s leadership team, and at the same time, I started working with our advisors at PwC on the legal and financial aspects of moving Hindawi to the UK. After exploring several options we decided to keep Hindawi Limited as an independent legal entity, rather than creating a more complex structure combining both the UK and Egyptian companies since we preferred to keep the company’s ongoing corporate structure as straightforward as possible.

By the end of 2016, we had completed the early steps of the company’s reorganization. The first step was to bring on each of the shareholders from Hindawi Publishing Corporation (which included the company’s two co-founders, a number of their family members, and several long-serving members of the management team) as shareholders in Hindawi Limited. The second step was for Hindawi Limited to acquire the intellectual property assets of Hindawi Publishing Corporation, including software that had been internally developed as well as the title ownership of Hindawi’s scholarly journals. The third step was to put in place a service agreement (similar to the sort of contract we use with other third-party vendors) under which Hindawi Publishing Corporation would provide a range of publishing and technology-related services to Hindawi Limited on an ongoing basis. The final step in the restructuring process came in 2017 with the creation of an equity incentive program for Hindawi Limited’s staff.

As a result of this transition, since early 2017 all of the invoices that Hindawi issues to authors and institutions come from Hindawi Limited, and Hindawi is subject to all relevant UK taxes including corporation tax as well as VAT. We are currently in the process of finalizing our financial statements for 2017, but once they have been finalized and audited they will be submitted to Companies House and made publicly available. The holding company that we had previously established (Hindawi Holdings Limited) is in the process of being dissolved, and Hindawi’s only other legal presence is a subsidiary Limited Liability Company (Hindawi LLC) in the USA that Hindawi Limited uses to facilitate payment processing from certain credit card processors.

On a far more exciting note, Hindawi has made great progress over the past two years in building our team in the UK which currently includes 25 of the most passionate and talented people I have ever had the pleasure of working with. We continue to work closely with the amazing team at Hindawi Publishing Corporation, who have been the foundation of our success for the past 20 years.

If any readers have follow-up questions regarding Hindawi’s past or current legal structure, please write to me at paul.peters@hindawi.com.

Paul Peters
Chief Executive Officer