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What is Domestication?

Domestication is a legal process by which a company moves its domicile from one jurisdiction to another by changing the country under whose laws it is registered or incorporated. It allows the company to maintain its legal identity and history while accepting the jurisdiction of its new location.

Understanding the Concept of Corporate Domestication

Domestication is the process of re-registering a company in a new legal jurisdiction, usually to access more favorable laws, regulations and taxation policies. It entails changing the jurisdiction of incorporation of a company by relocating it from its existing home country or state to a new location. Depending on the target jurisdiction, it can also involve changing the corporate governance model to better fit the local laws and regulations.

How Domestication Works in Different Jurisdictions

The process of relocating a company through domestication begins by researching and applying for legal recognition in the target jurisdiction. A qualified lawyer can assess the target jurisdiction’s corporate laws to understand what local compliance requires, ensuring that the company qualifies for registration. The incorporation paperwork must then be filed along with evidence that the company has been properly dissolved in its original jurisdiction. Once complete, the company will be able to take advantage of the new jurisdiction’s corporate governance regime and taxation policies.

Implications of Domestication for a Business

The implications of domestication are vast and can have a significant impact on a business. Before the process is undertaken, it is important for businesses to understand how relocating the company to a different jurisdiction could affect its affairs. Depending on the destination, the company might have access to more desirable labour laws and regulations, a friendly taxation regime, better terms from potential investors, and the opportunity to gain global recognition and new customers. However, it could also face less favourable regulations or become liable to an entirely different set of laws.

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