Company redomiciliation is the process by which a company moves its “domicile” (place of incorporation) from one jurisdiction to another by changing the jurisdiction under laws of which it is registered, whilst maintaining the same legal identity. It is generally required to have “consent” from both the initial and target jurisdiction.
When it comes to the US, the rules regarding whether and under what conditions the domiciliation of a foreign company is permitted vary from state to state. Note that this may be referred to as "domestication", "conversion" or "continuation". This article will briefly outline rules of some of the US states.
Where company redomiciliation is allowed
Domestication (in relation to Non-US entities)
Continuance / Continuation (in relation to Non-US entities)
* – laws of these states do not specifically address the redomicilation of the non-US entities, but at the same time do not specifically limit that.
Overview of the requirements for domiciliation
Requirements and the process of the domiciliation in the US vary from state to state and may also depend on the type of entity being redomiciled.
Delaware, which has the most developed laws in this area, has the following rules for incorporation as a Delaware corporation.
Eligible entities: corporation, limited liability company, trust, other incorporated business or entity, such as partnership, initially formed in “any foreign country or other foreign jurisdiction (other than the United States, any state, the District of Columbia, or any possession or territory of the United States)”.
Process:
It is necessary to file the following:
1) Certificate of corporate domestication;
2) Certificate of incorporation;
3) Plan of domestication (optional, but may be necessary in certain cases).
The Certificate of corporate domestication shall certify the following:
1) Information about the entity prior to the domestication (name, date of formation, jurisdiction of formation).
2) New name.
3) That the domestication shall be approved prior to its effectiveness in accordance with the internal documents of the entity being domesticated and applicable non-US laws.
If the Plan of domestication is adopted, then all the provisions of this Plan shall be approved in the same manner that is required for the domestication itself.
As soon as the Certificate of incorporation comes to effect, the corporation is deemed domesticated in Delaware.
It is not mandatory to dissolve or liquidate the entity in the original jurisdiction, unless the laws of that jurisdiction so require. If the entity in the original jurisdiction is not dissolved, the United States entity that was formed is result of the domestication continues its existence in the original foreign jurisdiction. “New” and “original” entities are treated as one for the purposes of the laws of the State of Delaware.
Requirements in other states may include:
1) Obligation to dissolve the entity in the original jurisdiction following the domestication in the state in question;
2) Detailed mandatory plan of conversion;
3) Approval of all of the interest holders of the entity entitled to vote on or consent to any matter;
4) Obligation to provide documents proving certain claims;
5) Obligation to inform the original jurisdiction of the redomiciliation;
6) Other.
Instead of the conclusion
Redomicilation may be an appealing way to move the Company to a more favorable jurisdiction while avoiding usual transactional taxes. It is, however, a process that raises a lot of complex issues, which we cannot hope to resolve in this brief article. Talk to a good counsel before you start!
Authors:
Vadim Rybachuk
Associate – IT Launchpad
