CORPORATE TRANSACTIONS & COMPLIANCE BLOG

Transferring Domicile from One Country to Another

By: Teri Mayor, COGENCY GLOBAL INC. on Mon, Feb 02, 2015

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Re-domiciliation (sometimes known as domestication, re-domestication, transfer, continuance or company migration) is a process by which a company transfers its domicile from one country to another, while continuing the existence of the company. For example, a Delaware company may become a Cayman Islands company through the process of re-domiciliation without having to dissolve the Delaware entity and incorporate a new Cayman entity.

A company may choose to change domicile for a variety of reasons. According to Mondaq.com, …the laws of another jurisdiction might be better suited for the objectives of the company; might give it more flexibility or better tax treatment than the laws of its current domicile or it may be a combination of these factors. 

For a company to re-domicile, it must be permitted in both in its originating jurisdiction and in the destination jurisdiction. Re-domiciliation is commonly allowed in offshore financial centers, such as the British Virgin Islands and the Cayman Islands, and is also permitted by Delaware law.

Non-U.S. Company Domesticating Into Delaware

Section 388 of the Delaware General Corporation Law and Section 18-212 of the Delaware Limited Liability Company Act address companies originally located outside the United States that wish to re-domicile or domesticate into Delaware. Non-U.S. entities looking to relocate to Delaware should file a Certificate of Domestication, accompanied by a Certificate of Incorporation or Formation, with the Delaware Secretary of State. The domestication should first be approved in the manner provided by the governing document of the entity and by any applicable laws. According to Delaware General Corporation Law §388(i), domestication “shall constitute a continuation of the existence of the domesticating non-United States entity in the form of a corporation of this State.” The Certificate of Domestication is quite simple, laying out the original name of the company and what the name of the company will be following the domestication (as written in the accompanying Certificate of Incorporation or Formation), the date of formation, place of domicile immediately prior to the filing the Certificate of Domestication, a future effective date (if any) and the manner of approval.

Delaware Company Domesticating Into Another Country

Section 390 of the Delaware General Corporation Law and Section 18-213 of the Delaware Limited Liability Act address Delaware entities that wish to re-domicile from Delaware to another foreign jurisdiction.  This is accomplished by filing either a Certificate of Transfer or a Certificate of Transfer and Domestic Continuance. Again, the appropriate approval of such action is required. A Certificate of Transfer, in addition to listing the name of the company, the date of filing the Certificate of Incorporation or Formation, the foreign jurisdiction to which it is transferring and the name of the company after the transfer, must also appoint the Delaware Secretary of State as its agent to accept service of process and the address to which the Delaware Secretary of State should forward such process.   After filing a Certificate of Transfer, the entity ceases to exist in Delaware; its existence is transferred to the foreign jurisdiction.

A Certificate of Transfer and Domestic Continuance must state that the company will continue to exist as a corporation or limited liability company in Delaware. The idea of transfer and continuance, such that a company will exist both as a Delaware entity and as an entity domiciled in another country, is quite unusual. It is not allowed by many of the common jurisdictions that allow company re-domiciliation. 

The basic requirements for re-domiciliation/continuation in the British Virgin Islands and the Cayman Islands are outlined below.

British Virgin Islands (BVI): Continuation

Sections 180–184 of the British Virgin Islands Company Act 2004.
  • Foreign companies who wish to continue into the BVI must file:
    • Certified copy of the Certificate of Incorporation.
    • Memorandum and Articles that include all that is required by Section 9 of the Act and the name under which the company was originally formed, the name under which it is to be continued and the jurisdiction of formation.
    • Legal opinion or certificate issued by the foreign country that indicates the company is duly formed, existing and in good standing, that the laws of the foreign company allow the company to continue in the BVI, that the company has complied with all requirements of the foreign country to continue and that a search of the public records shows that the company is not subject to any insolvency proceedings.
    • An affidavit from a director verifying that the company is not subject to any insolvency proceedings and that it has not entered into any uncompleted arrangement with creditors.
    • Effect of Continuation.
      • Company is capable of exercising all powers of a BVI company.
      • Company is no longer treated as a company incorporated outside the British Virgin Islands.

Cayman Islands: Continuation

Part XII of the Companies Law (2013).
  • Foreign companies who wish to continue into the Cayman Islands must file:
    • Certified copy of the Certificate of Incorporation.
    • Certificate of Good Standing.
    • Certified copy of the entity’s governing documents, such as by-laws.
    • Notice of the Registered Agent in the Cayman Islands.
    • Declaration that it is not subject to any insolvency proceedings.
    • Other declarations that it is not attempting to defraud existing creditors and has given them notice of the continuation.
    • Declaration that the transfer is permitted under the laws of the relevant jurisdiction and that it will cease to exist under those laws following the registration of the continuance.
    • Effect of Continuation.
      • Company shall continue for all purposes as if it incorporated as an exempted company under the Companies Law.
Many jurisdictions, especially the offshore financial centers, allow an entity to transfer from one jurisdiction to another. This is also fairly common in the United States, where companies can often file Certificates of Conversion to become domestic to another state. The process is less common in Europe and many countries such as the U.K. do not allow entities to re-domesticate.  Delaware’s law, allowing transfer and continuance, where the entity can then be domestic to two different jurisdictions is very unusual and it remains to be seen if this will become more commonplace in the future. When considering re-domestication, the most important first step is to ensure that it is allowed in both the current jurisdiction and the desired one. If not, the process will need to be handled in a different way.
 

This article is provided for informational purposes only and should not be considered, or relied upon, as legal advice.

Topics: International Corporate Services