Government contemplates re-domiciliation regime

The purpose of the regime? To support foreign-incorporated companies seeking to relocate to the UK by enabling them to effectively change their place of incorporation to the UK whilst maintaining the same legal identity. It would allow a company to maximise continuity over its business operations despite shifting its place of incorporation; its corporate history, management structure, assets, intellectual and other property rights, contracts, and regulatory approvals would generally remain intact. There are, of course, questions around eligibility criteria and tax implications and these are amongst the key areas on which responses are being sought through the consultation.

A re-domiciliation regime is nothing new- they are common globally and it is hoped that its introduction here would help the UK to remain in line with its peers. Countries and jurisdictions that already permit re-domiciliation include Canada, New Zealand, Singapore (on an inward-only basis), several US states, Cyprus, Malta, Belgium, Luxembourg, and (solely for investment funds) Ireland, as well as a number of offshore financial centres. Hong Kong is  currently in the process of establishing an inward-only system for investment funds. It is worth mentioning here that there are no plans for any new regime to allow firms to re-domicile between England and Wales, Scotland and Northern Ireland, each of which is governed by three separate Registrars of Companies House in the UK.

The Government isn't quite sold yet on whether to accept "outward" re-domiciliation as well as the inward regime under contemplation. Whilst not ruling it out, it notes that although many international regimes do offer two-way re-domiciliation, the more recent joiners (such as Singapore, Ireland and if as expected, Hong Kong) are inwards-only. However, it might be considered that offering outward re-domiciliation could ultimately attract more companies in the first place since re-domiciling to the UK would be seen as less "final" for those tempted.

With the UK looking to continue to promote itself as a leading destination for investment and business as well as being home to one of the world's leading financial centres post-Brexit, it is clear that the Government hopes the regime will strengthen the UK's position as a global business hub and boost its reputation as hosting an open, competitive, free market economy.

Were the inwards re-domiciliation regime to be implemented, possible benefits for foreign companies contemplating listing on the London Stock Exchange (where it would be a sole listing, rather than a dual listing) are:

• avoiding the need to incorporate a UK plc as the holding "Topco", together with the associated costs and process of share-for-share exchanges and related capital reorganisation steps; and
• allowing the UK re-domiciled foreign company to have its shares settled electronically directly in CREST, supporting the UK investor base without having to consider alternative settlement arrangements (such as DIs or GDRs), as well as the ongoing expense and process involved.

Responses on the consultation (available here) are invited by 7 January 2022.