US Investors May Block Company's Bermudian Reincorporation

by Leroy Baker, Tax-News.com, New York

19 March 2002

Following the announcement that a second piece of legislation designed to prevent US companies which reincorporate offshore from enjoying lower taxes has been proposed, a group of US labour union investors has announced plans to prevent Nabors Industries, a global land drilling contractor, from performing a 'corporate inversion'.

Speaking to the Bermuda Royal Gazette, the coalition of investors in the company said that they intended to 'examine closely and, if necessary, vote against, the proposal by Nabors Industries.'

The move towards offshore reincorporation has the blessing of the Nabors board of directors, and the company has made initial filings with the SEC.

However, in the light of the recent Enron debacle, the Amalgamated Bank, the AFL-CIO, the Central Labourers' Pension Fund, and the Labourers' International Union of North America have all expressed concerns over accountability limitations on company directors and officers which would result from a move to Bermuda.

The group of investors revealed that although Nabors Industries has stressed the economic benefits of the move to Bermuda, it has not explained in sufficient detail the exact tax implications for the company and its shareholders.

The coalition also expressed concerns that if the proposed legislation - which suggests taxing companies reincorporated in offshore jurisdictions as domestic companies for tax purposes - is approved in the US, any tax advantages may be cancelled out.

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