Corporate Inversion

Inversions involves the creation of new holding company in a new jurisdiction – most of the cases a tax haven- like Singapore or Delaware, then transferring all your existing assets, patents and employees to that company.

It starts with the setting up of your company in the new jurisdiction followed by swapping the shares of existing company for the same number of shares in the new company. The new overseas holding company becomes the owner your existing company.

Most common jurisdictions – Singapore

Singapore is a world leader in infrastructure and has a dynamic startup ecosystem. It also has favourable intellectual property regime, relaxed & efficient taxation, friendly capital regulations, an active venture capital market, and the ability to take business proceeds out of the country.

Singapore is a preferred jurisdiction for investors as well – thanks to the relaxed capital gain norms.

Singapore is also blessed with cryptocurrency – Blockchain friendly regulations and a regulatory sandbox, which allows Fintech companies to experiment with real-time data in association with government.

Most common jurisdictions – Delaware, USA

Singapore is a great destination have a holding company in but if you want to capture the efficiencies of great financial and venture capital base, US is the best choice. You would be in the same jurisdiction as Wall Street and Silicon Valley investors.

Common Pitfalls:

Legal and regulatory advice should be availed while flipping a business. Because share transfer and share issue are taken as 2 different activities in many countries. Likewise, normal government stamping, approvals, and registrations are required such share transfers like any other share transfer.

Any such transfer before the flip need to approved by creditors and investors. Because such action changes the control of the business, it's liquidity, financing which affects the execution of commercial, credit, lease contracts, and docs.

Company's constitution and existing share option plan need to be redrafted. Convertible securities issued to founders or investors and creditors need to be reissued in the name of the new holding company.

Finally, look for any foreign investment restriction the limit full transfer of shares to the holding company.