As you approach using an offshore company in your business, you may realize that a better option as to your particular case is not available to you because of substantial set-up and maintenance costs. A solution might be to incorporate your first company in a cheaper jurisdiction with fewer benefits and later switch to a better option when it becomes worth of it economically. How can you legally change your offshore company’s domicile to another jurisdiction?
When you are ready to move your offshore legal entity to another jurisdiction, you may apply to redomiciliation. Redomiciliation is an instrument of transferring a company to another country as if it has been incorporated under the laws of that country. For example, a foreign company incorporated under the laws of any country other than Malaysia may apply to be registered as being continued in Labuan.
Many low-tax jurisdictions provide for redomiciliation both in and from the jurisdiction. Generally, companies wishing to change their domicile are to get approval from the company’s directors and shareholders and from the authorities of both jurisdictions. The latter is normally easy if the company paid its fees due to the register and the registered agent and keeps in good legal standing.
Some countries, e.g. Panama, allow for redomiciliation of foreign corporations regardless of provisions in this respect in the country of origin. However, if you plan to move your company to another jurisdiction, make sure in advance that laws of both jurisdictions provide for redomiciliation, or that your new jurisdiction of choice accepts foreign companies unilaterally.
Mergers and Acquisitions
Another way is to incorporate a new legal entity in a desired jurisdiction and then apply to arrangement and reconstructions instruments, such as:
- A merger or consolidation of both offshore companies with the new company surviving or the consolidated company remaining under the new jurisdiction;
- A separation of two or more businesses carried on by the first company;
- Other ways of reorganization and reconstruction of business through mergers and acquisitions, or a combination of those specified above.
Besides, you can undertake a simple sale of business to a new offshore company where possible, and after that the first company can be dissolved, voluntarily or administratively at your choice.
Before the transfer of assets and rights is finalized, make sure to keep both companies in good legal status all the time. This advice might seem unnecessary, but from our experience, it’s never extra. Many clients get too relaxed dealing with tax haven companies not subject to any financial reporting and simply forget to pay annual renewal fees in time.