Company redomiciliation

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    Company redomiciliation, i.e. changing the company’s jurisdiction, involves changing the previous legal address to a new one in another jurisdiction. At the same time, the organizational and legal status of the company and its corporate structure are preserved. The reasons for such a decision may be different ranging from the search for more loyal tax legislation or escape from too strict regulatory norms to new capital markets access.

    The purpose of domicile changing (changing place of registration or legal address, procedure, features of the transfer of the company from one jurisdiction to another), identifying its advantages, as well as the potential costs, will be considered further.

    What is сompany redomiciliation

    Company redomiciliation
    According to redomiciliation meaning,the company is closing down as a legal entity in the jurisdiction of original registration and continues to operate in another country in accordance with the legislation of this new jurisdiction.

    Redomiciling a company gives the opportunity to continue operating in more attractive jurisdictions rather than close down because of fiscal reasons.

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    The process of re-registration of the company in another country is not always and not everywhere possible. Tax planning often involves the search for more respectable jurisdictions with optimal tax climate to move the already established company there.  Closure of the company and registering it from scratch in a new country is more troublesome than changing a legal address.

    Perhaps, the company has already gained a certain reputation in the market, has formed its own customer base, and wants to maintain existing business relationships with counterparties and partners. The liquidation of such an enterprise will negate all the developments. When redomiciling the company retains its primary name, client base, status, reputation, assets, and even bank accounts.

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    A number of reasons may lead to the need for redomiciliation of companies:

    • The legislation of the state where the company was initially registered has been amended unfavorably.
    • The cost of the company’s annual maintenance has increased.
    • The jurisdiction where the company is registered has been blacklisted.
    • There is a need to expand the coverage area planning company’s presence in the new markets.
    • The country of the enterprise’s initial registration is experiencing an economic or political crisis.
    • A more favorable tax condition is being sought.

    If the negative changes in the law of the jurisdiction of the initial registration are sharp and radical, then it is possible to initiate the process of emergency redomiciliation.

    Advantages of redomiciliation

    The pros of redomiciling are often quite individual. It’s necessary to compare the cost of redomiciling with the inconvenience caused by the current jurisdiction’s situation. For example, you are the owner of a company registered in Belize in 2010. The company has a valid bank account and contracts with suppliers. For certain reasons, you want to move the company from Belize to Cyprus.

    In the case of redomicile, you will have certain additional financial costs for this procedure. However, the benefits are multiple and they are set out below:

    • The company will continue unaltered from the date of incorporation, i.e. since 2010. This fact usually plays not the least role in negotiations with potential partners, investors, or for getting bank loans. You will be able to continue to highlight the fact that the company has 10 years of experience in the market.
    • You won’t have to renegotiate existing contracts, although you may need to notify counterparties of the change of jurisdiction.
    • The existed corporate bank account will also stay valid. However, depending on the bank, you may need up-to-date information about the company in the new jurisdiction. It is advisable to clarify this issue with the bank before redomiciling.
    • The company is able to continue its activities in a more respectable jurisdiction, as well as use the European VAT and benefits of double taxation agreements.
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    Alternatively, if you have a company registered in Belize but with neither opened bank account nor contracts concluded, then it is more appropriate not to redomicile the existing company. Better to register a new company (perhaps with the same name) in a new jurisdiction, and to liquidate the old one in Belize.

    Application for redomiciliation

    According to redomiciliation meaning, the company is closing down as a legal entity in the jurisdiction of original registration and continues to operate in another country in accordance with the legislation of this new jurisdiction. Moreover, in order to redomicile the company, both jurisdictions (where the company is now and where it plans to move) must allow this procedure.  Here’s what you need for redomiciliation.

    In the current jurisdiction:

    • A company planning a change of jurisdiction must be in good condition on the date of the redomicile (i.e. all necessary reports must be prepared and submitted, as well as taxes and duties paid).
    • The company should not be involved in any litigation.
    • All documents necessary for redomiciliation (e.g. resolutions, consent to redomicile, etc.) must be submitted to the local registrar.
    • Good Standing and Incumbency certificates must be obtained in each case.

    In the new jurisdiction:

    Typically, the requirements vary depending on the jurisdiction chosen. As a minimum, redomicile resolution and a Good Standing certificate may suffice. Other jurisdictions may require more detailed information about the company which is transferred, its financial statements, and a Certificate of Solvency. In general, Belize, the Marshall Islands, and Seychelles are considered to be the less demanding and least expensive jurisdictions, while Dubai, Ras Al Haim, Mauritius, and the British Virgin Islands are among the most expensive. The complete cost of the entire redomiciliation procedure can only be estimated when the company’s owner knows exactly the jurisdiction where the company is planning to move in.

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    Nevertheless, the question of what if the current jurisdiction or the new jurisdiction does not permit redomiciliation is actual. In this situation, each case should be considered individually. However, subject to the consent of all shareholders, the easiest option here would be to incorporate a new company in the chosen jurisdiction. Then the new company will acquire 100% of the shares of the existing company, and over time the existing company will transfer all assets to the new company, which in turn will also take over all existing business processes. After the appropriate paperwork and completion of the required procedures, the old company can be closed down.

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