Corporate Expatriation: A Case Analysis

Abstract

During the 1990s and early 2000s, several large U.S. companies reincorporated abroad. Corporate expatriations can take many different forms. One form is a stock inversion.
In an inversion, a U.S.-based multinational corporate group forms a foreign subsidiary, typically in a country that imposes little or no corporate income tax. Then the group reorganizes. The new foreign subsidiary becomes the parent of the group, and the existing U.S. parent becomes a subsidiary. As the term suggests, the corporate structure inverts. The parent’s place of incorporation changes to a foreign country.
An inversion involves only a change in the group’s legal structure. It has little or no effect on the company’s operations. The group does not need to move its headquarters or its other business operations.
This article describes a typical stock inversion, using the 2001 Ingersoll-Rand reorganization as a model. The article examines how, under the law at that time, the transaction saved substantial taxes, immediately and into the future.