The proposed UK-EU agreement has been rejected for a third time by the Members of Parliament in UK. Consequently, uncertainty persists due to no deal and therefore the following concerns arise: whether a deal will happen at all, what the terms of that deal might be and whether there will be a second referendum.
Inevitably, Brexit will affect the UK Businesses and especially those who have trading relations with EU. It is worth to be noted that each business has different commercial needs and objectives. Therefore, the planning for no deal Brexit is difficult and businesses have to take a flexible approach. For example, UK businesses may consider the relocation of their offices in any other EU Member States. In the following paragraphs we analyse the procedure of relocation for UK businesses in other jurisdictions. In that way the UK businesses may eliminate the substantial risk to their ongoing operations.
Relocation of UK businesses to other EU Member States.
According to UK companies law the company which was incorporated in UK or Scotland cannot be re-domiciled to any other jurisdiction. In other words, the UK companies cannot be re-registered in other countries.
However, there is an alternative procedure for achieving re-domiciliation of UK companies to different jurisdictions. The relocation of UK company to any EU Member State pursuant to what is permitted under the laws of each EU Member State, through corporate inversion (takeover), where a new incorporated holding company in any EU Member State acquires the shares of the existing UK company.
Under an incoming corporate inversion (takeover), a typical scheme might be applied where the existing ordinary shares of the current UK company (Oldco) are cancelled and the resulting reserve arising from such cancellation is applied in issuing new ordinary shares to a new holding company incorporated in EU Member State (Newco). In consideration for the issue of the shares, Newco allots and issues ordinary shares to the former shareholders of Oldco.
So, corporate inversions of private companies are typically affected by way of share for share exchange (usually with 90% shareholder approval), whereby new company in EU Member State acquires Oldco's issued share capital in exchange for issuing shares in Newco (in the same proportions) to the shareholders of Oldco. After the completion of takeover of Oldco by Newco we can proceed with the dissolution of Oldco by either strike off the Oldco from the Companies House in UK.
Why Cyprus and Malta?
Cyprus and Malta are two of the best alternative jurisdictions for relocation of the UK businesses. Both countries have narrow ties with UK on trading, historical, political, business and in many other sectors. The legal system in Cyprus heavily based on English common Law system and English language is predominately used by people in business sector. Malta is the only EU country other than Ireland, that the English is an official language. The following reasons constitute Cyprus and Malta as the most preferable jurisdictions for relocation of UK businesses:
- EU Member States;
- Low corporate and individuals tax rates;
- Double tax treaties;
- Legal systems based on English common law;
- Members of Commonwealth;
- High Quality of services in business sector;
- Low cost for running business;
- Low cost for receiving professional and regulatory services;
- Residency and Citizenship available to non- EU citizens;
- Good Geostrategic and geographical location;
- Stable political, economic and social environment;
- Excellent flight connections to London and other major European cities.
Therefore,UK businesses with considerable operations in EU are being forced to think about their post Brexit future. They will need to either work out what they need to do to trade in Europe post Brexit or look to trade in alternative markets.
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.