Redomiciliations

The Companies Ordinance (S. 205) effectively allows companies to be continued into TCI as exempted companies providing the laws of the jurisdiction of incorporation are reciprocal (most countries). Companies continued into the jurisdiction are treated as though they had been incorporated under the laws of TCI when continued. It should be noted that this does not have the effect of creating a new legal entity.

Why Continue a Company into TCI?

Companies (both public and private) carrying on with international business (not including TCI) should consider whether the following features of TCI exempted companies would be beneficial to their businesses:

• Automatic exemption from any direct taxation in the form of income, capital gains, dividends, inheritance or gift tax in TCI for 20 years from the date of its incorporation.  Meaning that TCI taxation will not have to be considered after continuation for as long as the exemption lasts allowing management to concentrate on more important issues;
   

• TCI companies are not required to have their mind and management resident in TCI. This makes TCI attractive for companies with operations in different jurisdictions (e.g. software companies; oil and gas exploration companies; etc.) which require the oversight of the directors - allowing such companies to select the most qualified persons as directors irrespective of their place of residence;
   

• In jurisdictions with tax systems based on residency continuing a company into TCI will often have the effect of making the company non-resident for tax purposes which may in some instances result in favorable tax treatment;
   

• Requirements such as where, when and how a company must call and hold its annual general meetings and extraordinary general meetings are not fixed by statute and are a matter for internal regulation (typically set out in the articles of association). Contrary requirements imposed by the legislation of many jurisdictions relating matters such as notice, quorums, which types of decisions require special resolutions, etc. can involve companies in inordinate expense over time, which can be avoided by making the company subject to the laws of the TCI.
   

• The articles of association of TCI companies may allow for the staggered appointment of directors

Recurring Tax Considerations:

Many high tax (and regulatory) jurisdictions have some form of corporate emigration rules which apply to companies moving their operations to another jurisdictional base such as TCI.

[An example of this would be Canada, where a company being continued to TCI would in the ordinary course be deemed to have had a taxation year ended immediately prior to being continued and each asset would be deemed to have been disposed of by it for proceeds of disposition equal to that property's fair market value - any gains or losses in this respect would be taken into account when determining the taxable income for the fiscal period ending immediately prior to continuation and would be subject to tax in the ordinary way.]

Companies anticipating that the market value of certain of their assets will appreciate in value dramatically should consult their resident tax advisers in advance to establish whether they could benefit by continuing the company into TCI before such appreciation in value occurs.

From a share holder's perspective a continuation of a company into TCI should not constitute a taxable event where properly structured meaning that shareholders will continue to hold their shares at the same cost adjusted base as before the continuance. However, dividends paid to members/shareholders in high tax jurisdictions after continuance to TCI may no longer attract dividend tax credits (or deductions in the case of corporate members). The situation would also have to be considered from the perspective of shareholders tax-advantaged retirement savings plans.

Corporation Services in conjunction with its associated law offices have advised and assisted in relation to the continuation of both public and private companies into (and out of) TCI, are conversant with many of the considerations that arise and are well placed to work with clients' on-shore legal and tax advisers to ensure that objectives are met.

Registering Foreign Companies to do Business in TCI

Foreign Companies wishing to do business in TCI and not wishing to set up a subsidiary for the purpose, are required by the Companies Ordinance to apply to the Registrar of Companies in TCI to be registered as a foreign company and maintain a registered office within the jurisdiction for the purpose. Such companies are not in the ordinary course permitted to hold land, but can lease properties and hold registerable charges/mortgages over properties in the islands. We will be happy to assist and advise in this respect.

Such companies will also have to obtain a Business License in the appropriate category, will need to consider immigration requirements for non-Belonger employees/management and their status and obligations as employers under the National Insurance Ordinance and subsidiary regulations.