US Company Follows Trend Of Moving Legal Domicile To Bermuda

by Mike Godfrey, Tax-news.com, New York

31 May 2001

Foster Wheeler Corporation (FWC), a New Jersey-based company providing design, engineering, construction, project development and management, plant operation, and environmental services to industries ranging from pharmaceuticals to petrochemicals to power generation, announced this week that it has completed the process of moving its legal domicile to Bermuda from New York State and, as part of this reorganisation plan, has changed its name to Foster Wheeler Ltd.

At the company's annual meeting on April 23, stockholders overwhelmingly voted in favour of the plan, which was first announced in November 2000 and made viable by a sharp drop in the company's share price, so few shareholders will end up with a tax liability. FWC is effectively moving its nominal headquarters to Bermuda while keeping its operational base in the US.

FWC is following in the footsteps of companies like Tyco International, the US manufacturing conglomerate, telecommunications giant Global Crossing and a whole raft of property and casualty insurers. Their moves have alarmed some members of the US Congress, who fear a loss in taxes.

Nonetheless, it hasn't stopped FWC from making the move to Bermuda. Richard J. Swift, the company's chairman, president and CEO, commented: 'We are grateful for the support we received from stockholders for this important change in our corporate structure. The change in our legal domicile is a natural progression in the development of the company as the majority of our business for some years now has been conducted outside the US. We see this trend continuing.'

He added: 'Most importantly, this change will now mean we will have the operational flexibility we need to compete more effectively in international markets, including improved worldwide cash management. In addition, we will have greater flexibility over the long term to improve our worldwide effective tax rate.'

In order to accomplish this change in legal domicile a new Bermuda-based holding company was formed - Foster Wheeler Ltd. As part of the plan of reorganisation, each outstanding share of Foster Wheeler Corporation common stock has been automatically converted into one share of Foster Wheeler Ltd common stock.

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