The case for liberating registered offices

As background, companies are incorporated in the United Kingdom, but are registered in England and Wales or in Northern Ireland or in Scotland, because historically a separate register has been maintained in each jurisdiction. Once registered in one of the three, the company is attached permanently to that jurisdiction, and crucially its registered office is forever stuck there. That is the immobility rule.

In the early Victorian days when the system was devised, little thought was given to mobility. Today, we have a more sophisticated business world, and it is a burden.  If a company relocates, it is required by law to keep an address in its original jurisdiction. So, if a Scottish enterprise acquires a company registered in England and Wales, or vice versa, the group may not consolidate its administration in one office: the acquired company must maintain an address where it started. The only way round this at the moment is to dissolve and reincorporate, requiring a renegotiation of all contracts, finance, debts and a transfer of all assets and properties – not to be contemplated.

It is not that the problem of immobility amongst companies has never been discussed: in 2022 the Department for Business and Trade held a consultation, Corporate Re-domiciliation, which looked at allowing overseas companies to move their seat of registration into the United Kingdom.  It was well received.  Numerous respondents noted a contradiction though: the proposal would allow a Brazilian company to move to England, but a Scottish company would be forbidden that option. The consultation paper had mentioned breezily: “Firms cannot currently redomicile between nations while retaining their existing legal identity. The Government is not minded at present to change this.” Reading between the lines, that is “Looks complicated: can we talk about something else?”

Actually, it is not complicated at all, not does it require “re-domiciliation”: changing a single word in the Companies Act 2006 could do it; but more later.

This immobility may seem a small burden for companies with multiple locations, but it is a burden, and an unnecessary one, with potential for perilous consequences. Lest one think that a registered office is only brass-plate bureaucratic frippery, it is the address to which every official letter, every statutory demand, every legal claim is sent. I have seen companies wound up through failing to check the post received at a neglected office.

The issue can be resolved very simply, without a ‘re-domiciliation’ procedure: a company moving from Gloucester to Glasgow could still be registered in England and Wales, as long as the registered office can be moved to the new home. It would take a one-page Order under the Legislative and Regulatory Reform Act 2006, changing just a few words.

There is in fact nothing in the Companies Act saying where a registered office may be: simply Section 9(6) requires every company on incorporation to declare “whether the company’s registered office is to be situated in England and Wales (or in Wales), in Scotland or in Northern Ireland”. It does not say that the situation cannot be changed later, but this is an accepted implication.

To free companies to set their offices in any part of the country, we just need to change the words “the registered office of the company is to be situated” to “the intended address of the company’s registered office supplied under Subsection (5) is”.  Then fill the gap left by adding to Section 86(1) that the registered office must be in the United Kingdom.  Consideration could be given also to whether Welsh language versions (“Cyfyngedig” for “Limited”) are still to be restricted to companies based in Wales; but even with that, and all the topping and tailing, a Deregulation Order would only be a page long.

It makes you wonder why it has never been done.  I believe it is a form of inertia, or the Whitehall version of ‘Chesterton’s Fence’ – the idea that you should not change anything just in case there was once a reason for it. Perhaps the logic was that a company must be anchored to where it might be sued, but that no longer makes any sense when companies have suppliers and customers all across the nation, and the proceedings of any court can be served anywhere in the United Kingdom. There may still be bureaucrats convinced that if a company moves its offices to Belfast, it becomes unreachable, as if storms and sea monsters swallow every ship that dares to carry mail across the narrow channel, but I can assure them that there are no monsters, and neither do reivers still fall upon mail-coaches in Liddesdale. Commerce is nationwide.

The immobility rule is an unnecessary burden, disadvantaging enterprising companies while giving no benefit to anyone.  A short Deregulation Order would end it, so I would hope that the Secretary of State can be urged to do so.

This is a guest blog which contains the views of the author and does not necessarily represent the views of the IoD.