Cross-border corporate re-domiciliation

Cross-border corporate re-domiciliation (known as "cross-border reincorporation") is an operation in which a company, domiciled in a certain country, voluntarily decides to change its registered office to another country, without first undergoing a liquidation process and without engaging in an international merger or spin-off operation. As a consequence of this operation, the company -without interruption of continuity- is subject to the legislation of the new country and ceases to be governed by the rules of the country of origin.

In order for this operation to be carried out, it is indispensable that the corporate rules of both jurisdictions allow it. This type of transaction has generated concern in some countries as it may lend itself to opportunistic regulatory arbitrage that undermines the rights of the various stakeholders.

This regulatory arbitrage could occur in matters that tend to protect corporate creditors and other third parties, such as the rules of conduct of directors in the period of suspicion prior to insolvency (or what Dr. Nicolás Polanía has called the "Twilight Zone"), the rules on majorities, the rules on minimum capital, the limits on the distribution of dividends, among others (C. Gerner-Beuerle et al).

This figure is widely known, authorized and used by jurisdictions such as Belgium, France, Greece, Luxembourg and Portugal. Other jurisdictions, such as Hungary, England, Croatia, Ireland, Lithuania, Poland and Romania, expressly prohibit it or impose requirements that in practice make it impossible. However, the European Court of Justice has developed a line of jurisprudence that, within the framework of the right to freedom of establishment, tends to "give effectiveness to the autonomy of the parties so that they can choose the rules of corporate law that will govern their operation" (Reyes Villamizar, Francisco).

Colombia, as a State party to the Andean Community of Nations and the Pacific Alliance, must adopt in its legislation the necessary mechanisms to guarantee corporate mobility and freedom of establishment in the countries that make up these treaties. Some progress was made at the time with the creation of the Andean Multinational Enterprises (EMA's) whose contributions could circulate freely throughout the region and which would not receive less favorable treatment than that granted to national companies.

Countries such as Ecuador, through the Superintendence of Companies, Securities and Insurance of such country, regulated the issue indicating that in case a foreign company formalizes its domiciliation in Ecuador, it will keep its legal personality for which it must adapt its corporate charter and bylaws to the type of company it adopts in such country and must demonstrate the extinction of the company in the country of origin within 30 days following the resolution approving the change of domicile. Colombia could take a first step by allowing the re-domiciliation of S.A.S.'s incorporated under the Model Law on Simplified Joint Stock Companies approved by the Organization of American States. In this way, there would be clarity in the corporate regimes of both the country of origin and the country of destination. Lessons could also be learned from the experience of the European Company ("Societas Europaea") as a vehicle for facilitating freedom of establishment in the countries of the region.