Many offshore jurisdictions allow foreign companies to change their jurisdiction of incorporation. The legislation usually permits the transfer of a company's "seat of incorporation" into or out of the jurisdiction - a. process known as redomiciliation. The alternative to redomiciliation is to liquidate the existing company and transfer the portfolio to an entity incorporated for the purpose in the new jurisdiction.
Redomiciliation To Gibraltar
Gibraltar's status within the European Union and its offshore capabilities make it an enticing location for companies permitted to redomicile by their country of incorporation.
Gibraltar enacted its own Companies (Redomiciliation) Regulations in March 1996 to improve opportunities for developing international insurance business. The territory's Financial Services Commission has been approved by the United Kingdom as a "competent authority" for supervising companies licensed to carry on insurance business in Gibraltar and intending to provide insurance services to branches in European Economic Area Member States on the European Union passporting principle.
Companies wishing to redomicile into Gibraltar must already be domiciled in a country recognised by Gibraltar for this purpose. The Regulations allow redomiciliation from within the EEA and British Commonwealth, as well as from most other offshore centres.
Any application to establish a domicile in Gibraltar must be made to the Registrar of Companies in Gibraltar. The application must be accompanied by the company's resolution to establish domicile in Gibraltar, which must be approved in the manner prescribed by the company's constitution. The resolution should specify:
the name of the company (and the name under which redomiciliation is sought, if different)
the place of incorporation of the company
the company's date of incorporation
the name and address of a competent authority in the original jurisdiction in respect of that incorporation
the proposed address of the registered office in Gibraltar
any amendments to the Memorandum and Articles of Association (or other instrument constituting or defining the constitution of the company) which will take effect on the registration of the company and
any other information required by the Regulations.
All the information and evidence must be in English (or accompanied by a certified translation). A Certificate of Good Standing (or similar) is also required, issued by the competent authority of the country of incorporation of the company.
Where the company carries on a business which the EU requires to be licensed by a competent authority in the jurisdiction of its incorporation, evidence of the consent of that authority to the redomiciliation is also required. The Registrar must also be satisfied that no proceedings for insolvency have been begun against the company in the jurisdiction where it was originally incorporated.
Once the company is redomiciled in Gibraltar, it is deemed to be a body corporate registered and incorporated under the Companies Ordinance of Gibraltar. The Ordinance recognises the continuity of the company's legal entity relating to its property, assets, contracts and business which continue to be vested in the company. Similarly, the company continues to be liable for all its debts, liabilities and obligations.
Redomiciliation To Other Territories
In April 1998, the Organization for Economic Co-operation and Development issued a report on harmful tax competition. Following publication of the report, a Forum on Harmful Tax Practices was established to consider how its recommendations could be implemented. The Forum invited a number of jurisdictions, including some British Overseas Territories, to provide details of their tax regimes. The Forum will assess whether those tax regimes match the OECD criteria for defining a tax haven. Jurisdictions which meet the OECD criteria will be included on an OECD list of tax havens. The list will guide OECD members' efforts to persuade tax haven jurisdictions to modify their fiscal regimes and increase their international co-operation on fiscal matters.
The G-7 trade group has also asked for a similar report on the banking industry and tax incentives. In a recent communiqué, the G7 urged the OECD to give particular attention to the development of a comprehensive programme to improve the availability of information to tax authorities to curb international tax evasion and avoidance through tax regimes and preferential regimes.
There is also internal pressure on the UK's Labour government to tackle what many see as offshore tax loopholes - not least because of the embarrassing disclosure that paymaster-general Geoffrey Robinson has a family trust established in Guernsey.
In March 1999, the UK issued a White Paper on the Offshore Industry in the British Dependent Territories (Anguilla, Bermuda, the British Virgin Islands, the Cayman Islands, Montserrat and Turks & Caicos).
It seems likely that a withholding tax will be introduced in the Territories and that the traditional right to confidentiality and privacy will be removed. There will also be regulations requiring the submission of corporate financial statements and records to the authorities.
The White Paper stated that there was growing international concern about the economic side-effects of harmful tax competition between states. It said: "Promoting economic stability and fairness, as well as improving the integrity and security of financial markets, are high priorities. Irrespective of size, all jurisdictions are potential beneficiaries from a healthier world economy. They have a responsibility to ensure that their regulatory regimes are effective, transparent and offer adequate accessibility for the legitimate investigation of criminal activity, including tax fraud and evasion. These initiatives have implications for some Overseas Territories. It is important, therefore, that Overseas Territory governments co-operate with them.
"In the EU Code of Conduct for business taxation agreed on 1 December 1997, member states committed themselves not to introduce harmful measures and to re-examine laws and practices with a view to eliminating existing harmful measures. Member states with associated or dependent territories are committed within the framework of the constitution arrangements, to ensuring the principles of the Code are adopted in those territories.
"The EU is also considering a draft directive which would require member states to operate a withholding...