May 2024 –The Astana International Finance Centre("AIFC") continues to be a destination point for foreign companies seeking growth and stability in their operations. In addition to the traditional incorporation of companies, the AIFC enables the registration of foreign companies under the "Transfer of incorporation" scheme, i.e., through redomiciliation.
It has been five years since the first successful case of "Transfer of incorporation" by Kazakhstan Energy Reinsurance Company Ltd. ("KERC") from Bermuda to the AIFC. Kinstellar acted on this first-of-its-kind redomiciliation project, which set a precedent for the transfer of other foreign operations and capital from overseas to the AIFC. Thus, considering the growing interest in the procedure, this brief note is intended to revisit and clarify the main aspects of redomiciliation. Our note is intended to be a helpful guide – it is not comprehensive and does not constitute legal advice.
Definition of redomiciliation
"Transfer of incorporation", also known as redomiciliation, refers to a process by which a company relocates from one jurisdiction, where it was originally incorporated, to another. This involves changing the country of registration. Redomiciliation, as prescribed by the AIFC laws, allows for the transfer of jurisdiction of a foreign company to the AIFC its jurisdiction as well as the transfer from the AIFC. The AIFC laws ensure that companies maintain their legal identity and retain their respective rights and obligations. It allows for the uninterrupted operation of a company without going through liquidation or reformation.
Benefits of redomiciliation in the AIFC
Through redomiciliation foreign companies:
- avoid an unnecessary liquidation process;
- retain all their rights and assets as well as continue to be subject to prior liabilities and participate in the same capacity in any legal proceedings;
- are enabled to utilise their time and resources efficiently;
- become an AIFC participant with a range of privileges under its jurisdiction, including efficient tax incentives and a special dispute resolution mechanisms, if agreed to.
Procedure overview
Below is a brief overview of the main steps in the redomiciliation process (but depending on the original jurisdiction, there may be additional steps, for example, in Cyprus it is necessary to obtain a tax clearance).
- Preliminary step: Pre-application stage (only for applicants with a Russian nexus)
- Step 1: Transfer process in the country of origin (decision of the shareholder(s) / board of directors to transfer the company to the AIFC, performing certain actions and statements before a notary, mandatory notifications, publications in mass media, waiting a certain period after notifying creditors).
- Step 2: Obtain a legal opinion from a law firm in the country of original jurisdiction confirming that the company has completed all the statutory requirements to transfer to the AIFC.
- Step 3: Submit the application for continuation to the AIFC Registrar with amendments made to the original articles of association.
- Step 4: Coordinate with the AIFC Registrar the date of continuation in the AIFC so that the discontinuation date in the original jurisdiction coincides with the date of continuation in the AIFC. This is done to ensure that the company continues to exist as a going concern in the new jurisdiction without any gaps.
- Step 5: Once the continuation date is coordinated with the AIFC Registrar, submit the application for discontinuation in the original jurisdiction.
- Step 6: Obtain the certificate of continuation in the AIFC jurisdiction.
Why a redomiciliation boom?
The transfer of incorporation to the AIFC provides companies with significant benefits, including a stable legal framework, tax incentives, and strategic market access. Guided by the AIFC Companies Regulations, the process ensures that companies are able to transfer their legal domicile with minimal operational disruption. What is also important is that redomiciliation is not a capital gain from a tax point of view, and therefore does not trigger any tax consequences for the company's shareholders.
We continue to see great interest in redomiciliation in the AIFC. Over the past five years, around a dozen companies from various foreign jurisdictions have moved to the AIFC through redomiciliation.
Various quasi-government companies that were previously set up offshore are now trying to move to the AIFC as well. For example, last year we helped another quasi-government company to move from the British Virgin Islands to the AIFC. Redomiciliation is ideal for both private companies and funds that are currently incorporated in offshore tax zones that are trying to become more transparent. Overall, we expect that the option of redomiciliation will continue to grow.
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.