IN168 - Migration of Companies and Foundations to Nevis

The attractiveness of a jurisdiction as a domicile for international business is not indefinite and can be affected by economic and social change. These changes may take place within the jurisdiction itself, for example the recent involuntary disclosure of customer information involving Liechtenstein. Alternatively the changes may be caused by external factors, such as the European Union Directive on the taxation of bank interest.

In certain situations it may become beneficial, or even essential, to consider relocating all or part of an international structure or foundation to an alternative jurisdiction.

Migration to new locations has been an intrinsic element within trust structures for many years. Recently this has been extended by numerous jurisdictions, to also enable companies and foundations to relocate under re-domiciliation provisions.

Companies

Companies are well recognised entities across the world and legislation now often provides for their re-domiciliation.

Foundations

Foundations are usually regarded as corporate entities and thus subject to the same considerations as companies, when considering migration. Foundations often perform functions and have objectives similar to those of the Anglo-Saxon Trust, but have a different legal status. Preserving continuity becomes of greater significance to those involved with foundations than it may be to those involved with more commercially orientated corporate entities.

What are the Options?

If a location becomes unattractive, there are two main options for transferring a business or foundation from that jurisdiction to another:

1. Incorporate an entirely new company or foundation in an alternative jurisdiction; transfer the assets from the old entity to the new entity and then dissolve or allow the original entity to be struck off.

2. As long as the laws of the current jurisdiction allow; apply to migrate the domicile of the existing entity to a new jurisdiction, thereby retaining the history and continuity of the structure.

Migration Issues to Consider

• Cost
  The cost of a migrating an entity to a new jurisdiction, whilst not prohibitive, is almost certain to be greater than the cost of forming a new entity. The underlying cost of transferring assets from an old to a new entity must, however, also be considered. Where the only assets are liquid and easily transferred, migration may lose some of its appeal but where substantial tax and transfer costs can be avoided migration may well be advantageous.
  
  
• Legislation
  The jurisdiction from which a company or foundation is being transferred must itself have legislation providing for the re-domiciliation of companies and foundations. Legislation is increasingly being introduced to enable international mergers between companies incorporated in different jurisdictions, and this can offer taxation advantages in some circumstances.

The Benefits of Migration

• A major benefit of migration is that of continuity. This can be particularly relevant to foundations where the sense of “permanence” is highly valued.
  
  
• The retention of activities and the history of an existing company may be particularly important to an owner who established the company many years previously and might view the move to a new company as the end of an era.
  
  
• Goodwill within an existing entity may be an important factor.
  
  
• If an existing company or foundation has assets that are expensive or difficult to transfer into a new entity (such as real estate or intellectual property) the establishment of a new entity may be impractical. The cost issue can be avoided by moving the existing ownership structure to a new place of registration; avoiding the need to transfer any of the assets.
  
  
• Where an entity is a party to a contract or other agreement that could prove costly or difficult to renegotiate, the need for a new agreement may be avoided by migration.

Nevis - a Destination to be Considered

Nevis, as part of St Kitts and Nevis, is an independent country and is therefore outside potential control issues relating to either the EU or the USA.

Nevis has a Confidentiality Ordinance whereby no information can be divulged by the Registered Agents without a Court Order from the Nevis Court. The provisions of the legislation in Nevis provide for simple and cost effective management of entities and Foundations with minimal intervention by the Government.

The Nevis Business Corporation Ordinance (NBCO) 1984 and the Nevis Multiform Foundation Ordinance (NMFO) 2004 contain sections allowing for the transfer of domicile both into and out of Nevis. In fact the NMFO also allows for the transfer of other entities (Limited Companies, LLC’s, Limited Partnerships, Trusts) directly into Nevis as a Multiform Foundation.

The Advantages of Nevis as a Destination to Relocate a Foundation

• The Nevis Multiform Foundation Ordinance 2004 contains specific sections that allow for the transfer of domicile both into and out of Nevis.
  
  
• Foundations domiciled in Nevis pay no tax in Nevis. Foundations can elect to establish tax residence, and pay 1% Corporation Tax, if this is beneficial to the overall structure.
  
  
• Nevis Multiform Foundation Law is designed to offer a strong, yet flexible, system to allow a full range of legitimate activities to be undertaken.
  
  
• Nevis remains a comparatively inexpensive jurisdiction, with the re-domiciliation of a Foundation costing US$1,500 and with an annual renewal fee of US$650. Please note that additional costs may be incurred in the jurisdiction of origin, for example, to obtain proof of corporate existence and good standing, and to de-register the company in that jurisdiction once migration has been completed.

Procedures for the Transfer of Domicile to Nevis

Dixcart can provide all of the documents and assist with the procedures to complete the necessary filings in Nevis to affect a transfer of domicile.

A Certificate of Discontinuance from the overseas jurisdiction and a revised Memorandum of Establishment will be required.

When applying for transfer of domicile the Nevis authorities require confirmation that the transfer will not hinder, delay or defraud existing shareholders, creditors, claimants or other interested parties. Nevis Law also expressly states that a transfer of domicile will not affect any liabilities or obligations incurred prior to the transfer.

Summary

The permanent or temporary migration of a company or foundation to Nevis may be an effective means of restructuring all or part of an international business, whilst retaining the continuity of an existing entity.

It may also provide sanctuary from turmoil or unrest in an existing jurisdiction.

For further information, or to arrange for a transfer application to be made to Nevis, please speak to John Terry at our office in Nevis or contact us.