26 septiembre, 2016 by Investa Trust News

International Transfer of the Legal Domicile of Companies/ International Re-domiciliation of Companies

The globalization phenomenon has propelled and generated change processes in the international corporate arena and business wise. This will bring about greater access, better financing sources and will add to the diversity of markets where to place goods or services. This has also generated reforms in legal norms in many jurisdictions to regulate the new ways the corporations may take advantage to restructure and insert themselves in the global competition. The example of those changes has been lead by the European Community.

This has caused the owners of companies and members of the board of directors to plan based on the insertion of their corporations in the international dynamics of commerce, to ponder and evaluate the corporate restructuring alternatives not only to enter into more competitive international markets but also and more relevantly, to remain in the competition.

The transfer/re-domiciliation or change of corporate domicile to another country, as well as international mergers are new trends which involve complex transactions and corporate reorganization that will cause deep changes.

Cross border restructuring will be always involve at least two legal systems, the jurisdiction of origin and the jurisdiction of destination.

The corporate domicile is relevant for various reasons, such as:

  • determination of the international judicial competence
  • determination of the place of service/notice of certain acts of procedural communication
  • determination of the law that will govern the company
  • determination of its nationality
  • diplomatic protection that a State may grant to its citizens
  • to invoke the benefits of the Agreements to Promote and Protect Foreign Investments, among other

The international transfer/re-domicile of the corporate domicile carries a transformation of the nationality, since the company no longer belongs to the incorporation country and becomes a company of another jurisdiction (once it is registered and admitted in the Mercantile Registry Office of the destination domicile and has cancelled its registration and recording in the Mercantile Registry Office of the origin domicile), as if it had been recorded and incorporated in the jurisdiction of destination. This new jurisdiction will govern everything related to its capacity, incorporation, organization, existence, representation, functioning, dissolution and liquidation of the collective entity.

We insist, that the transfer/re-domiciliation of the corporate domicile to another country, as well as the international merger, are typical transactions of international commerce; corporate transactions that are carried and framed within the processes of cross-border corporate restructuring, where there is a distributive application of at least two laws, the law of origin and the law of destination.

 

Image: Alexander Shustov – Unsplash

 

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