The location of your company, investment fund, family office, or other entity, is extremely important, which can make choosing where to domicile a complex process. It's important to take into consideration everything from accessibility to certain markets and currencies to time zones and the languages spoken in that jurisdiction – a small thing can make a big difference.
However, business circumstances continue to change, as does legislation and various regulatory regimes. A regime which may have been beneficial or attractive at the time of establishing a fund may no longer be the case a few years or even months down the line.
But there are options available through a re-domiciliation process, where a company can move its domicile from one jurisdiction to another, changing the country under whose laws it is registered or incorporated, while, importantly, maintaining the same legal identity.
Re-domiciliation allows a company to move the jurisdiction it is registered in, in a way that does not interrupt its existence and does in no way operate to create a new legal entity, prejudice or affect the continuity of the company, contracts or its property.
For this reason, Gibraltar has seen an influx of interest in this process, as the jurisdiction has specific purpose-built regulations allowing for the re-domiciliation of companies into and out of Gibraltar, thereby enabling companies to move their domicile as their business demands may require.
This adds to Gibraltar's unique position as a gateway to UK market post-Brexit. This position has been bolstered by a statement on the 23rd of June, by UK Chancellor, Rishi Sunak reaffirming Gibraltar's post-Brexit status. Mr Sunak stated that the UK Government was committed to "long-term market access between the UK and Gibraltar for financial services firms based on shared, high standards; and simplified process which allows overseas investment funds to be sold in the UK."
While there are an increasing number of jurisdictions enacting similar legislation, there still remains a number which do not provide for re-domiciliation, which makes Gibraltar an appealing option. The regulations have been in place since 1996 and, from a fund's perspective, allowing funds to re-domicile into and out of Gibraltar offers a powerful overall package.
Without specific re-domiciliation legislation, a re-domiciliation would typically be affected by establishing a new fund structure, transferring the assets of the existing fund to the newly created fund and ultimately winding up the 'shell' of the original fund. While this does enable continuity, the new entity is effectively a new legal structure.
However, Gibraltar's re-domiciliation process enables funds that have a proven track record and established investors to move its domicile in a way that ensures its investors, contracts and potentially counterparties remain un-interrupted.
Gibraltar's funds regime also contains specific provisions that facilitate a seamless transition of funds into Gibraltar, such as:
- Gibraltar EIF Regulations include provisions within the definition of an "experienced investor" to allow for participants in funds that are re-domiciling to Gibraltar to automatically qualify, as "experienced investors" for the purposes of Gibraltar law. This is crucial as different jurisdictions have different criteria for determining what constitutes an "experienced investor" and this provision means that funds do not need compulsory redeem any investors due to a change in this criteria when re-domiciling into Gibraltar.
- Funds that have an administrator established and authorised in an EEA state or in a jurisdiction which the GFSC considers to be regulated to a similar regulatory and legislative standard to that in Gibraltar are not required to appoint a local administrator provided they obtain consent from the GFSC. The foreign administrator will however be required to appoint a local administrator to act as its agent.
Gibraltar's regulations facilitate the re-domiciliation into and out of Gibraltar from most international financial centres including the European Economic Area (EEA) member states, all UK Overseas Territories and Crown Dependencies, British Commonwealth member states, Singapore, Switzerland, Cyprus, Hong Kong, Malta and the US.
Ultimately, providing a mechanism through which funds can easily move their domicile to jurisdictions that offer the most competitive or beneficial regimes for their particular requirements as business demands require is extremely important as it avoids locking a fund into a jurisdiction which may no longer be appropriate down the line.
Link to GFIA Webinar here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.