The final report of the Department of Trade and Industry's Company Law Review contains proposals to enable companies to migrate from one jurisdiction to another, without the need for a take over or acquisition of assets by a company already registered in the chosen country.
The basis for the recommendations is that companies should have the commercial freedom to choose where they are registered, while recognizing that other interested parties need to be protected. Although there is concern that migration out of the UK would give rise to a loss of business activity within the country, it is envisaged that this will be balanced by an increase in migration into the UK.
The report includes proposals for facilitating the migration of a UK company both to and from jurisdictions outside the UK, and between England, and Wales and Scotland.
While migration to any EU or EEA jurisdiction will be permitted (subject to procedural requirements), non-EU or non-EEA countries will require individual approval. The criteria will cover such issues as creditor protection, enforcement of civil judgements, risks of money laundering and tax evasion and the ability for companies to migrate out of such country.
The procedure for migration out of the UK will involve the publication of a transfer proposal and a special resolution of the members. Minority shareholders will be able to apply to court for relief if their interests will be harmed. The directors will be required to make a solvency statement and the Registrar of Companies will need to be given the company's contact details in the new jurisdiction. If the Registrar is satisfied that there is no impediment to the migration, he will issue a certificate to this effect.
For a company to migrate into the UK, it must be permitted to do so under the law of its existing registration, and must provide the Registrar with documents similar to those required for re-registration within the UK.
Less onerous requirements will be necessary for migration within the UK. However, as England, Wales and Scotland have different laws in such areas as property and insolvency, a similar process, including an abridged transfer proposal, will be required for creditor protection.
Some of the recommendations contained in the report were inspired by the draft (as it was then) EU Regulation for a Company Statute. The Regulation provides for the creation of a European public company limited by shares (a Societas Europaea, or SE), and includes articles dealing with the migration of SE companies to other member states.
The Regulation was subsequently adopted on October 9 2001, although it does not come into force until 8 October 2004. It is not yet clear when legislation will be drafted to implement the company law review proposals. It may be some time therefore before companies are able to migrate as outlined above.
Mark Poczman and Olivia Patterson