Corporate Re-domiciliation in the UK: A new framework for business mobility

In a significant step forward, the Independent Expert Panel (the "Panel") recently published detailed proposals for a transformative corporate re-domiciliation regime in the UK.

Building on a Government-led consultation from 2021, the Panel has expanded the scope of the previous re-domiciliation proposal, and now recommends a two-way system that would enable UK companies to re-domicile to foreign jurisdictions and also allow companies incorporated overseas to transfer their domicile to the UK. This new dual framework is proposed to enhance the UK's position as a global business hub while maintaining high standards of transparency and stakeholder protection.

Current Status

At present, there is no mechanism under UK law for corporate re-domiciliation either into or out of the UK. Generally, businesses wishing to relocate to the UK must first incorporate a new UK entity and then transfer the assets and operations from the foreign entity. This approach can be burdensome, often requiring separate procedural steps for transferring assets like property, securities, and IP. Additionally, the newly incorporated UK entity, being a distinct legal person, is often required to obtain fresh regulatory approvals to operate.

The proposed regime would vastly simplify this framework, bringing the UK in line with jurisdictions such as the EU, Canada, Australia, and several US states which already have well established corporate re-domiciliation frameworks.

Key Features of the Proposed Regime

Inward Re-domiciliation

• Eligibility: Any solvent foreign-incorporated entity will be able to re-domicile to the UK, but the entity will be required to become either a private company (limited by shares or unlimited), or a public company in the UK (Companies limited by guarantee are excluded from the proposed regime).

• No "Good Faith" Requirement: The Panel advises against a "good faith" assessment, as verifying motivations for re-domiciliation, such as avoiding creditors, would be challenging for Companies House to assess objectively.

• Compliance with UK Accounting Standards: Re-domiciled companies will have to prepare accounts under IFRS or UK GAAP. The Panel acknowledges the burden of converting accounting frameworks and recommends allowing listed companies using GAAP equivalent to UK standards to file these accounts with Companies House for a transitional period of four years from the date of re-domiciliation.

• Alignment with UK Law: Upon re-domiciliation, entities will be required to conform to UK laws. This includes assigning a nominal value to shares if none exist prior to re-domiciliation and determining distributable profits for dividend payments.

• Maintaining Legal Existence: To avoid the risk of de-registration in the departing jurisdiction before registration in the UK, the Panel recommends a period of overlap where the entity exists in both jurisdictions. The Panel notes that it sees merit in the process used in Singapore where a re-domiciled company must submit evidence of it being deregistered in its place of origin within 60 days of the date of its re-domiciliation registration in Singapore.

Outward Re-domiciliation

• Stakeholder Protections: Companies seeking to re-domicile out of the UK will need to obtain stakeholder approval via a special resolution and provide a solvency statement dated no more than 15 days before the resolution is due to be voted on. Stakeholders, such as creditors, will have a period of 21 days after the resolution passes to raise any objections.

• Ongoing Transparency: Companies re-domiciling abroad will be required to maintain an authorised representative in the UK to receive correspondence for 10 years after relocating.

• Scope Limitations: Outward re-domiciliation will be limited to companies and will exclude entities such as limited liability partnerships. Entities subject to UK or international sanctions or who propose to relocate to sanctioned jurisdictions will also be ineligible.

• National Security: The Panel proposes making outward re-domiciliation a "trigger event" for qualifying entities under the National Security and Investment Act 2021 to prevent abuse of the process to evade oversight.

Transparency and Data Integrity

The proposed re-domiciliation regime is intended to closely align with reforms under the Economic Crime and Corporate Transparency Act 2023 (ECCTA), which aims to improve the integrity of the UK's corporate register. Key measures include:

• Verification of Beneficial Ownership: Re-domiciled companies will need to disclose persons with significant control (PSCs) to ensure transparency around ultimate ownership. These disclosures will soon require the submission of personal identification information by PSCs.

• Enhanced Governance: Re-domiciled companies will not only have to meet the UK transparency and filing standard required for newly incorporated UK companies but will also provide additional information in recognition of the fact that they may have existing obligations and assets that the public should be aware of.

• National Security and Lawful Activity: Applicants will need to confirm lawful intent upon re-domiciliation, with annual confirmations required post-move in line with ECCTA requirements for all UK companies.

Looking Ahead

Further consultation will follow as the Government finalises the framework. Implementing the regime will require significant legislative changes, including updates to the Companies Act 2006 and secondary legislation.

We will continue to monitor the situation and provide updates as further details emerge. In the meantime, for more information please contact one of the authors or your usual Brodies contact.