Independent experts support UK re-domiciliation regime

The UK Government has recently published a report by a panel of independent experts, on the introduction of a new UK corporate re-domiciliation regime. The Panel, was convened in December 2023 by the Department for Business and Trade, following a consultation on the subject, with the Government’s aim being to strengthen the UK’s position as a global business hub and bring the UK in line with its international peers.

What is re-domiciliation?

The Panel has confirmed its support for a two-way re-domiciliation regime, which would allow corporate entities registered outside the UK to become UK companies, and also allow UK companies to re-domicile outside the UK.  Crucially, this would allow companies incorporated in overseas jurisdictions to transfer to the UK while retaining the same legal personality, with the intention of establishing an easier and more cost-effective route to moving a business to the UK.

Re-domiciliation regimes already exist in many jurisdictions, but the absence of similar processes in the UK means that the inbound transfer of a non-UK business is typically undertaken by way of the incorporation of a new UK entity, followed by a cross-border transfer of trade and assets to that new UK entity.  The practical disadvantages of the current system can include increased cost and complexity.

Which types of overseas entities will be eligible for re-domiciliation in the UK?

The Panel’s recommendation is that given the wide variety of corporate forms existing outside the UK, the regime should be available to all forms, provided that the relevant entity is solvent and intending to carry on lawful business in the UK.  It has also recommended that as part of the application, the re-domiciling entity should be given the flexibility to make changes to its constitution and form (including the decision as to whether it will become a private or public UK company).

Whilst the Panel has not recommended that there should be a list of countries from which corporate entities can apply to re-domicile, it is recognised that any re-domiciliation must first be possible within the relevant non-UK jurisdiction.  The Panel has also suggested that there should be a reserve power for the Secretary of State to make regulations to prevent corporates applying from particular countries (for example if it wished to block corporates or individual shareholders that are subject to international sanctions).

Recommendations for the re-domiciliation process

The Report includes detailed suggestions for how the re-domiciliation process should operate, but in terms of key principles, the Panel has recommended an approach which, as far as possible:

• allows a newly re-domiciled UK company to be treated in the same way as a company originally incorporated in the UK;
• reduces any discretion in favour of Companies House (so as to provide certainty for the applicant entity); and
• ensures that the applicant’s legal personality is continuous and preserved, so that there is no ‘gap’ between registration in the two jurisdictions.  To deal with this point, the Panel has suggested that an applicant should be re-registered in the new jurisdiction before it is de-registered in its existing jurisdiction.

The report also includes recommendations for protections which should be made available to the applicant’s creditors and to any of its members who object to the re-domiciliation.

Next steps

A wide range of regulatory and tax changes would be required to accommodate the introduction of a UK re-domiciliation regime, and accordingly the Panel’s report recommends further consultation by the Government.  The report acknowledges that Companies House will need to be involved in designing the scheme, and also suggests that regulators such as the Takeover Panel, the FCA, the PRA and the Pensions Regulator are given the opportunity to advise on what changes to their rules may be required.

Whilst there is a considerable amount of work to be done in order for the Government to finalise its detailed proposal for a re-domiciliation regime, and implement any required legislative change, the Panel’s report indicates strong support for the proposal within the market and is a step towards a significant change to UK corporate law.