Aligning structure with strategy

Walkers explores the drivers, practical steps and key considerations for corporate migration between the Cayman Islands, BVI, ADGM and DIFC, as the Middle East market dynamics rapidly evolve.

A migration (also known as a re-domiciliation or continuation) is the process by which a company changes its place of incorporation from one jurisdiction to another without interrupting its legal existence. Instead of winding up the existing company in its current jurisdiction and incorporating a new company in another, the company effectively “shifts” its domicile, retaining its corporate identity while becoming subject to the laws and regulations of the new jurisdiction. This process is recognised under the laws of the Cayman Islands, the British Virgin Islands (“BVI“), the Abu Dhabi Global Market (“ADGM“) and the Dubai International Financial Centre (“DIFC“), each of which permits companies to migrate into or out of its jurisdiction.

RECENT TRENDS

Corporate migration has become an increasingly prominent feature of the Middle East market, with companies re-evaluating where they are domiciled and how best to position themselves for the future. Whilst forming entities in the Cayman Islands and BVI has long been the preferred approach for international businesses and investment funds, more companies are now redomiciling into the United Arab Emirates (“UAE“), particularly into the ADGM and the DIFC.

The reasons for the uptide in migrations are varied. Market buoyancy in the Middle East and a desire for proximity to regional operations have clearly played a role. At the same time, global regulatory changes, such as the introduction of economic substance requirements and, in certain cases, new tax considerations, have prompted businesses to reassess the most appropriate place of domicile. For clients with genuine operational or management presence in the region, migration into the ADGM or the DIFC can be a natural outcome of aligning structure with substance. In particular, factors that may give rise to migration include: (i) tax considerations, such as the recent introduction of corporate income tax in the UAE, which has in some cases led to migrations to the Cayman Islands and the BVI where a tax-neutral environment remains available; (ii) compliance with regulatory obligations, such as responding to the evolving treatment of economic substance requirements in different jurisdictions such as the abolition of the UAE’s economic substance regime, which has encouraged some businesses (particularly those holding intellectual property) to migrate from the Cayman Islands or the BVI; (iii) political considerations, with sovereign and quasi-sovereign entities seeking to support the development of regional financial centres by migrating entities to the ADGM and the DIFC; and (iv) unique tax, regulatory or legal drivers, including a preference to continue an existing legal entity rather than liquidating and incorporating a new entity, in order, for example, to avoid adverse capital gains tax consequences.

It is important to note, however, that the movement is not solely in one direction. The Cayman Islands and the BVI remain highly regarded and continue to be the jurisdictions of choice for many international investors. Their widespread recognition, particularly in the context of private equity, venture capital and hedge funds, makes them indispensable for fundraising that targets investors in North America, Europe, and Asia. We have also seen examples of companies incorporated in the ADGM or the DIFC subsequently migrating into the Cayman Islands or the BVI in order to meet the expectations of a more global investor base and to benefit from the flexibility and efficiency that these jurisdictions provide.

What emerges from these developments is a more strategic landscape for companies in the Middle East. Corporate migration is increasingly being used as a tool: some companies move closer to home markets and operations for the advantages that can be derived from the same; others position themselves in established offshore jurisdictions to access international capital. In many cases, businesses are choosing to maintain structures featuring entities across both the UAE and offshore jurisdictions, balancing regional presence with global reach.

Looking ahead, this dynamic is likely to continue. The ADGM and DIFC are developing rapidly and will no doubt play an increasingly important role in the Middle East and international corporate ecosystem. The Cayman Islands and the BVI, meanwhile, retain their established standing in global capital markets and remain central to cross-border structuring. There is no single “right” jurisdiction – the key lies in selecting the one jurisdiction, or combination of jurisdictions, that best aligns with a company’s strategic objectives, and having regard to the unique fact pattern applicable to that company.

For clients considering whether migration might be the right step, understanding the practicalities is essential. The relevant process in each of the Cayman Islands, the BVI, the ADGM and the DIFC is well-established, but there are key requirements, timelines and considerations that should be kept in mind at the outset.

PROCESS

The specific process will vary for each jurisdiction. However, generally speaking the process across the Cayman Islands, the BVI, the ADGM and the DIFC follows a broadly similar framework. A company seeking to migrate must first obtain approval from the relevant authorities in the new jurisdiction to confirm that the migration is permitted. This typically requires evidence that the company’s existing jurisdiction permits the company to continue out of that jurisdiction. Once pre-approvals are secured, the company can apply for discontinuance in the exiting jurisdiction and continuance in the new jurisdiction. This application is supported by certain documents, which typically include the amended constitutional documents (complying with the laws of the new jurisdiction), declarations, notices and resolutions of the directors (or members, depending on the local laws and the company’s memorandum and articles of association) approving the migration, authorising the form of notices to be published (and advertisements, if any), and providing for the filing of the migration documents (as needed) with the relevant authorities. In this regard, there must be a certain degree of compatibility between the respective legal frameworks of the two jurisdictions, and in some circumstances, it will not be possible to migrate.

LEGAL EFFECT OF MIGRATION

The migration of a company does not extinguish any existing liabilities, obligations, or proceedings, all of which remain fully enforceable by and against the company notwithstanding the migration.

Upon issuance of a de-registration (or similar) certificate in the existing jurisdiction, a company typically ceases to be incorporated in that jurisdiction as of the date stated on that certificate. From that point, it is regarded as incorporated in the new jurisdiction, subject to the requirements of the laws in the new jurisdiction. Care must be taken to confirm the precise date of deregistration in the outgoing jurisdiction, to avoid any interim period in which the company is not incorporated anywhere, as such a gap could put the company at risk of breaching various of its contractual obligations to which it is a party.

TIMEFRAME

The typical timeframe to complete a company migration is around one to two months. As noted above, before a company can be de-registered in its existing jurisdiction, it is usually necessary to obtain pre-approvals from the relevant authorities in the new jurisdiction confirming that the migration is permitted. The overall timing will depend on several factors, including the specific registration requirements of each jurisdiction and the speed within which the relevant internal and external approvals are obtained.

 PRACTICAL CONSIDERATIONS

The specific requirements for a company migration will depend on the company itself and the jurisdictions involved, but there are some common considerations to address in advance.

The company’s constitutional documents, such as its memorandum and articles of association, should be reviewed alongside the laws of the relevant jurisdiction to confirm what threshold of board and/or shareholder approval is required to authorise the migration. It is also important to establish whether the company has any creditors, outstanding charges, or ongoing litigation, as these may restrict its ability to migrate. Where the company has granted security or is party to financing arrangements, the consent of securityholders to the migration will typically be required. Finally, existing contractual commitments (including shareholders agreements and relevant financing arrangements) should be carefully considered to ensure that the proposed migration would not trigger any breach or default.

As migration trends continue to evolve, companies in the Middle East are increasingly analysing the advantages of both offshore and regional jurisdictions. The ADGM and the DIFC have become important financial hubs for regional businesses, while the Cayman Islands and the BVI remain leading offshore financial centres, with well-established migration regimes that offer both flexibility and continuity. For businesses and investors alike, understanding how and when to use migration as a strategic tool is key to ensuring that corporate structures remain aligned with long-term objectives.

Text by:

• Tom Cochrane, partner, Walkers (Middle East)
• Reghard Smith, partner, Walkers (Middle East)
• Tania Diab, associate, Walkers (Middle East)