Understanding re-domiciliation

Introduction :

Much in the way that a company can change its registered office/registered agent within the same jurisdiction, it can also “move” to a new jurisdiction.  Corporate re-domiciliation is the process by which a company moves its ‘domicile’ (or place of incorporation) from one jurisdiction to another by changing the country under whose laws it is registered or incorporated, whilst maintaining the same legal identity. The ease with which re-domiciliation may take place has increased in recent years.  

Further, not all countries allow re-domiciliation.  Those that do, tend to be Commonwealth “common Law” (as opposed to Civil law jurisdictions).  Notable exceptions are Cyprus, Austria, Hungary, Latvia, Luxembourg,  Liechtenstein, Mauritius, BVI, Delaware & Ireland   which are civil law but do permit re-domiciliation and conversely UK, Singapore, Hong Kong which are common law but do not generally allow re-domiciliation in or out. Notably, the Indian corporate laws currently do not permit either inbound or outbound re-domiciliation.

Advantages of re-domiciliation

Once a company is re-domiciled, it will be subject to all laws and regulations of the new jurisdiction and also avail benefits and advantages offered by such  jurisdiction. In short the company would be regarded as a company registered/ incorporated in that jurisdictions, without going through the tedious process of liquidation and incorporation.  Also, company is being allowed to retain their legal identity, registered name, employees, contract, bank accounts etc.

The advantages are subjective and often involve the balancing of the additional costs of re-domiciling against the inconvenience (and costs) of not doing so.

As an example Mr. X formed a Gibraltar company in 2004. He has established bank accounts for this company and the company has a number of commercial contracts.  For various reasons Mr. X wishes to re-domicile the company to the Seychelles.   If he re-domiciles, he will pay certain costs, but:

The company continues its legal existence with effect from the original incorporation date – 2004 in this example. … It can quite properly continue to state “in business/incorporated for over 10 years” for example.

Websites can remain “as is” with only minor changes to privacy policies and T&C.

All of the company’s legal contracts remain valid; although notification of the change of jurisdiction may be required to counter-parties.

Bank accounts may remain in place, as it is still the same company.  However, please note that banks will almost certainly require a full set of documents pertaining to the incoming jurisdiction. Some banks are easier to deal with than others – it is therefore wise to ask the bank informally before proceeding with re-domiciliation.

By contrast, Mr. Y also has a company registered in Gibraltar and wishes to transfer/continue his business in Belize.   He has no contracts and his bank accounts are (relatively) easily replaced.  In such a case he might be better advised to register a company (perhaps with the same name) in Belize, establish new banking relationships, and simply arrange for the Gibraltar Company to be struck off.

Further,  re-domiciliation   may not qualify as transfer in most of the countries who allowed re-domiciliation. Also few countries like Singapore give incentive for inbound re-domiciliation.