Recommendations for a new UK corporate re-domiciliation regime

Does the Report propose an “inbound” only regime?

No – the Panel strongly supports the introduction of a regime which allows companies flexibility to re-domicile both into and out of the UK and believes this will increase the UK’s attractiveness as a destination of choice.

What types of overseas entities would be able to re-domicile into the UK?

The Panel believes inbound re-domiciliation should be available to bodies corporate registered outside the UK provided they are solvent and intend to carry on business following their re-domiciliation. So long as they meet the relevant requirements, they should have flexibility as to whether they become a private or public UK company. The Report also proposes that applicants should have flexibility to make changes to their form, constitution and other features as part of the application for re-domiciliation.

What principles would underpin a re-domiciliation into the UK?

The principles underpinning the Report’s proposals are (so far as possible) those that apply where a company is being incorporated in the UK for the first time. This approach is intended to ensure that there is comparable information available to the public and that the entity which is re-domiciling will meet substantially the same requirements as if it had originally been UK incorporated.

Following re-domiciliation, the Panel suggests that (again, so far as possible) the company should be treated in the same way as if it had originally been incorporated in the UK. That said, it is recognised there will be some differences in the way certain requirements apply to a re-domiciled company. As such, the Report recommends that such companies should be distinguished from companies originally incorporated in the UK so that persons transacting with them are put on notice.

How would the process for re-domiciling work?

The Panel believes that the regime for re-domiciling needs to be as clear and simple as possible in order to be attractive. Among other things the Report suggests an approach which:

• Reduces the need for discretion to be exercised by Companies House (so as to provide certainty).
• Ensures legal personality is preserved (such that the applicant will be re-registered in the new jurisdiction before it is de-registered in its existing jurisdiction) and aims to keep any period where there is registration in both jurisdictions as short as possible.

For an entity re-domiciling into the UK, the Panel believes that protection of stakeholders (members, creditors etc.) in its existing jurisdiction is properly a matter for the law of that jurisdiction. Protections for UK stakeholders will come from the information provided in the application for re-domiciliation and, once the overseas entity becomes a UK company, from the protections offered by UK company law.

For a company re-domiciling out of the UK, the Report suggests the protections that should be available to:

• Members who do not vote in favour of/consent to the re-domiciliation – including that they should have a specified period after the application to re-domicile is published in which to apply to the Court on grounds of unfair prejudice. The Panel also proposes that the process for re-domiciliation should include protections for cases where there are different classes of shares.
• Creditors – including that the company should have to provide a solvency statement as part of the re-domiciliation process and that any creditor who can show a real likelihood of material prejudice should be able to apply to the Court to object to the re-domiciliation.
• National security – including that outward re-domiciliation of a qualifying entity should be made a “trigger event” for the purposes of the National Security and Investment Act 2021 to prevent the structure being used as a loophole to avoid the requirements of the regime.

It also proposes additional requirements for certain information relating to the company to remain available in the UK for a period following re-domiciliation.

What are the next steps?

The Report recommends further consultation by the government once it has decided on its proposals.

It notes that Companies House will need to be closely involved with the design of the regime - including (in particular) the process for determining the date on which a re-domiciliation occurs - and recognises that other regulators (including the Takeover Panel, the FCA, the PRA and the Pensions Regulator) will need to consider whether changes would be required to their rules to accommodate any new regime.

Given their complexity, the Panel also suggests that further consultation is carried out on the accounting and audit-related aspects of the regime.

As such, there are a number of further steps (including legislative change) to be completed before any new regime can be put in place – however, the publication of the Report represents an important stage in this process.