Time for a change? The trend for offshore migration of holding or investment vehicles

12 June 2020

The decision to domicile your offshore holding or investment vehicle in a particular jurisdiction should be made after a careful review of the options and after receiving appropriate advice.

Why migrate?
But what if things change after the vehicle has been established? The factors that were important to you at the time of establishment may no longer be important or relevant, and there may be new factors at play meaning that a different jurisdiction has become more suitable or preferable. Or maybe you have acquired a vehicle and would prefer that it was registered elsewhere.

When this happens, there are options available. There is a growing trend towards migrating vehicles from one offshore centre to another.

What are the types of migration?
For companies:

  • Statutory migration. This is where, through statutory mechanisms, a company incorporated under the laws of one jurisdiction ceases to be registered in that jurisdiction and becomes a company registered in another jurisdiction.
  • Board migration. This is where, by changing board composition or practices, the tax residency of a company is moved from its place of incorporation to the jurisdiction in which the management and control of the company takes place.

For limited partnerships:

  • Re-registration. This is where a partnership ceases to be registered in one jurisdiction and is instead registered in another jurisdiction. It often involves a change to the governing law of the limited partnership agreement.
  • GP migration. This will generally be either statutory or board migration (see above).

What are the reasons for migration?
Changes in circumstances. The circumstances of the jurisdiction, the vehicle or its investors might change such that the current place of domicile has become sub-optimal. Factors that may trigger a move between offshore jurisdictions and from onshore to offshore or vice versa may include:

  • Investor familiarity with a particular jurisdiction
  • Economic substance requirements and, where applicable, availability of infrastructure, making compliance straightforward and low-impact
  • Geographical proximity to, and strong transport links with, a particular onshore finance centre
  • Recognised adherence to the highest international tax compliance standards (including OECD/EU/US)
  • Professional infrastructure with excellent service quality and robustness (COVID-19 has been a test for some jurisdictions, whilst others have weathered it smoothly)
  • A reputation for high regulatory standards, particularly with regard to anti-money laundering
  • Stable government, modern legislation and a respected judicial system

Consolidation. Sometimes a migration is driven by the desire to simplify a group structure by moving all the offshore vehicles to a single jurisdiction, so that only one set of laws and regulations needs to be complied with, and perhaps to find economies of scale in relation to the cost of legal and administration services. If the vehicles are subject to economic substance legislation, it can often make sense to consolidate the substance in a single jurisdiction, which could again bring cost savings.

How can we help?
Bedell Cristin advises on BVI, Cayman, Guernsey and Jersey law and can provide a seamless migration service whether the direction of travel is from onshore to offshore (or vice versa) or from one offshore jurisdiction to another (whether from the Caribbean to the Channel Islands or vice versa).

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