Multinational companies and international investors regularly opt to re-domicile a company from one jurisdiction to another, particularly to take advantage of a more favourable regulatory, tax, and business environment. Re-domiciliation allows a company to move from one jurisdiction to another and continue its business activities without interruption. However, companies wishing to re-domicile need to be aware that re-domiciliation is not always a permissible option of relocation. In cases where a re-domiciliation is possible, a rather complex administrative process needs to be followed in both the jurisdiction of origin and the new jurisdiction. This briefing gives an overview on aspects to be considered when re-domiciling a company to a Dubai based free zone.
1. What is re-domiciliation?
Re-domiciliation refers to the process by which a company moves its legal domicile from one jurisdiction to another without losing its legal identity or being liquidated. The company remains a legal entity and is not re-established whilst being re-domiciled. The advantage of this process is that the company continues to exist in its previous form under the same shareholding and management, including all assets, liabilities, contracts and legal obligations. However, in relation to contracts, a company would have to carefully assess whether it can continue to carry out its contractual obligations set out in existing contracts following re-domiciliation.
2. What are the reasons to re-domicile a company?
The main reason for investors and international companies relocating to an other jurisdiction is that other jurisdictions may offer more favourable investment conditions. These may include tax incentives, a more attractive regulatory environment and easier access to certain markets.
Through re-domiciliation, a company retains the same legal personality which allows the company to continue its operations without interruption. The history or reputation of a company can be kept from its incorporation date and can be transferred to the new jurisdiction and an isolated transfer of individual rights is not necessary. Therefore, re-domiciliation by way of relocating the registered office from one jurisdiction to another is usually much more cost- and time-efficient than winding up the company in the jurisdiction of origin and re-establishing the company in the new jurisdiction.
3. From where to where is re-domiciliation possible?
However, re-domiciliation is not always permissible. Re-domiciliation is only available where both the jurisdiction of origin and the jurisdiction of destination legally permit this type of company relocation.
Over the past decades, the Emirate of Dubai has established itself as a leading investment hub due to its business friendly environment. Many foreign investors have set up a corporate vehicle in Dubai. Whilst some foreign investors opt to establish their business in mainland Dubai, others decide to set up their company in one of the numerous Dubai based free zones which offer several incentives to investors. Amongst these incentives are the option of 100% foreign ownership of free zone entities, no currency and capital repatriation restrictions, no import or re-export duties as well as corporate tax incentives under certain condi tions. Additionally, many free zones offer corporate environments specialised to certain areas of business and tailored to the needs of specific industries. Amongst the Dubai based free zones, various free zones allow for the re-domiciliation of companies. These are in particular
- Dubai International Financial Centre (DIFC).
- Dubai Multi Commodities Centre (DMCC).
- Jebel Ali Free Zone (JAFZA).
- Dubai Development Authority (DDA), which regulates the follow ing free zones: Dubai Internet City, Dubai Outsource City, Dubai Media City, Dubai Studio City, Dubai Production City, Dubai Knowledge Park, Dubai International Academic City, Dubai Science Park, and Dubai Design District.
- Dubai Integrated Economic Free Zones Authority (DIEZA), which regulates the following free zones: Dubai Airport Free Zone (DAFZ), Dubai Silicon Oasis (DSO), and Dubai CommerCity (DCC).
It is important to note that re-domiciliation is generally not only possible from a foreign jurisdiction to one of the aforementioned free zones (inwards re-domiciliation), but also from one free zone to another free zone. For further information, please refer to our legal briefing on Free Zone Company Relocation in the United Arab Emirates.
4. What are the necessary steps to re domicile a company?
The process of re-domiciliation of a company differs from jurisdiction to jurisdiction and needs to be carefully checked for each individual case. However, the process can broadly be divided into two main phases.
As a first step, companies wishing to re domicile must take all necessary steps to legally leave their jurisdiction of origin and move to the new jurisdiction. Obtaining prior confirmation from the commercial register in the jurisdiction of origin is critical in this regard as some countries only allow the transfer of a registered office within the own country, but do not allow for a re-domiciliation abroad.
As a second step, the company wishing to re-domicile must be properly registered in the new jurisdiction. Whilst the documents required and the exact re-domiciliation process vary depending on the free zone concerned, the process can generally be summarized as follows:
- Compilation, notarization and attestation of all documents required for re-domiciliation. This regularly includes
- Consent of the competent authority in the jurisdiction of origin
- Profile or description of the company’s business activities
- Founding documents of the company
- Passports of the shareholders and managing directors, and
- A shareholder resolution on re domiciliation
- Obtaining preliminary approval from the respective free zone and submitting the documents
- Signing of the Articles of Continuation. These are new Articles of Association that comply with the regulations of the respective free zone.
- Other requirements as for the formation of a company:
- Applying for the required business license
- Renting office space
- Payment of fees
- Registration of re-domiciliation in the new jurisdiction and issuance of a Certificate of Continuance.
- Issuance of the new business license.
- Possible further steps to fully deregister the company in the jurisdiction of origin.
The actual duration of the re-domiciliation process depends on various factors, such as the shareholder structure, the business model, the size of the company and the necessary procedures in the jurisdiction of origin. Should the company employ employees, the requirements for legally moving them to the UAE need to be considered, including the requirement to apply for residency visas and work permits.
5. Conclusion & Outlook
Re-domiciliation is an efficient way of relocating a company from one jurisdiction to another. In addition to the potential cost and time savings compared to winding up and re-establishing a company, there are numerous operational advantages.
However, re-domiciliation requires careful planning also because the requirements of two jurisdictions need to be considered simultaneously. It is recommended to liaise with the competent authorities in both jurisdictions at an early stage to get a proper understanding of the permissibility and exact legal requirements. Companies should also consider seeking advice in both jurisdictions concerned prior to initiating any steps regarding the re-domiciliation of a company. Whilst this includes, amongst others, legal and tax advice, attention should also be given to more practical aspects, such as the opening of bank accounts in the new jurisdiction which regularly requires extensive KYC-checks including information on ultimate beneficial owners. Respective checks might take longer than usual in case of company re-domiciliation given that company relocation is not as common as setting up a company from scratch. Consideration will also need to be given as to how existing financing agreements and other contracts require notification or consent in case of re-domiciliation.
Dr. Constantin Frank-Fahle, LL.M.
Founding Partner
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