The introduction of the new Hong Kong re-domiciliation regime marks a significant development in the region’s corporate landscape. The regime allows eligible entities to transfer their place of incorporation to Hong Kong without the need to wind up or dissolve the original entity or pursue a more complicated, costly and time-consuming avenue such as a scheme of arrangement. While the new regime presents an opportunity for some companies, it is important to consider the enduring strengths of traditional jurisdictions such as the Cayman Islands (“Cayman”), British Virgin Islands (“BVI”) and Bermuda, which have long been used by parties conducting business in Hong Kong and globally.

Below we examine the benefits of remaining domiciled in Bermuda, BVI or Cayman, and outline how we can assist clients with their strategic decisions – whether that means staying domiciled in Bermuda, BVI or Cayman or re-domiciling to Hong Kong.

Hong Kong Re-domiciliation Regime

We are not Hong Kong lawyers, and anyone wishing to have detailed legal advice on this subject should approach their usual Hong Kong counsel. According to information issued by the Hong Kong government, the stated aim of Hong Kong’s re-domiciliation regime is to permit eligible companies incorporated outside Hong Kong to re-domicile to Hong Kong. The thinking seems to be to encourage companies incorporated outside of Hong Kong to align their domicile with their operational base in Hong Kong without the need to wind up or dissolve the original entity, preserving their legal personality, contracts, assets, liabilities and ongoing legal proceedings.

Key Benefits of Remaining in Cayman, BVI, and Bermuda

While Hong Kong’s regime offers a new option for existing non-Hong Kong incorporated companies, Cayman, BVI, and Bermuda continue to provide proven advantages for international businesses. In particular:

• Longstanding Stability and Reputation: Cayman, BVI, and Bermuda are recognised for their robust legal systems, political stability and established track records as international financial centres. Over 30,000 investment funds are registered in Cayman, whilst over 1,200 insurers are registered in Bermuda. Over 70% of the companies listed on the Hong Kong Stock Exchange are incorporated in one of Cayman, BVI or Bermuda.
• Business Flexibility: Offshore jurisdictions maintain flexible corporate governance structures and simplified compliance requirements, supporting efficient decision-making and cost-effectiveness.
• Tax Neutrality: These jurisdictions offer competitive tax frameworks, typically with no direct taxes on profits, income or capital gains at the entity level, providing certainty and predictability for cross-border operations.
• Dividends and Distributions: A Cayman company can pay dividends from profits (as defined by common law), the share premium account and capital (subject to satisfying a solvency test and its articles of association). A BVI company can make a distribution from any asset, including capital, provided solvency tests are met. A Bermuda company can pay dividends from profits (as defined by common law), the contributed surplus account, indirectly from share capital or (after relevant processes are followed) the share premium account (subject to solvency test and bye-laws).
• Confidentiality and Asset Protection: Offshore companies benefit from a high degree of privacy and legal mechanisms designed to protect assets and shareholder interests.
• Global Acceptance: Cayman, BVI, and Bermuda vehicles are widely recognised by investors, financial institutions and regulators, supporting their use for listings, fund formation, financing and investment holding activities worldwide.
• Efficient Dispute Resolution: The judicial systems in these jurisdictions are grounded in English common law, with courts recognised for their expertise in commercial matters. The ultimate right of appeal is to the Judicial Committee of the Privy Council in the United Kingdom.

Strategic Considerations for Re-domiciling to Hong Kong

Re-domiciling to Hong Kong may be suitable for certain companies, such as those with substantial operations, management or investor bases in the city, or for those seeking to qualify for specific local regulatory or business incentives. However, it is important for stakeholders to carefully assess:

• Regulatory and Tax Implications: Whether Hong Kong’s regulatory oversight and tax framework will be as favourable as their current Cayman, BVI or Bermuda regime.
• Operational Impact: Considerations include managing the transition process, ongoing compliance requirements and the potential impact on existing contractual relationships.
• Investor Expectations: Many international investors are accustomed to Cayman, BVI, or Bermuda structures, particularly for capital markets transactions, private equity, insurance and fund formation.
• Dividends and Distributions: Whether the processes, procedures and sources of funds available in Hong Kong are as beneficial as those in Cayman, BVI or Bermuda.
• In-ward Re-domicile Only: The regime is an inward only re-domiciliation framework, meaning it only permits non-Hong Kong incorporated companies to transfer their place of incorporation into Hong Kong. There is no legal mechanism under the current legislation for a Hong Kong-incorporated or re-domiciled company to transfer its domicile out of Hong Kong to another jurisdiction should it so wish in the future.

Conclusion

The Cayman Islands, BVI and Bermuda continue to offer compelling advantages as domiciles. Companies considering re-domiciling to Hong Kong are encouraged to undertake a thorough assessment of their long-term objectives, operational needs and investor requirements.

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