Where a vehicle sits is the set of moves it can still make in year five.

The domicile question is usually answered by habit. The manager's last fund sat in one centre; counsel knows it; the administrator is there; the register has seen the documents before; the bank account can be opened in a month rather than a quarter. The answer may be right, and often is. It is right for reasons that have nothing to do with habit, and a structure should be able to state them, because the domicile is the one decision in a fund's life that every later decision inherits. The tier is chosen within the domicile's regime. The legal form is constituted under the domicile's statute. The holding chain claims positions that depend on the domicile's treaties and substance rules. The placements into every onshore state are read for the domicile. And the moves the vehicle will want to make in its fifth year are open or closed by the domicile's law, which nobody reads for year five at formation because year five is a long way off.

This note sets out what a domicile fixes, how the two centres resemble and differ from each other, the year-five test and the six moves it reads, how onshore regimes see each centre, what a move later costs, a comparison, a worked choice as a type, cases, what each party holds, the sequence, questions, terms and what to read.

What a domicile fixes

The law that constitutes the vehicle and the court that reads it. Both centres have a complete legal system of their own, with statutes on companies, partnerships, contracts, security, insolvency and trusts, standing beside the onshore law of the United Arab Emirates rather than inside it. Each has a court of first instance and an appellate court, with published judgments and rules of procedure a holder's counsel can read in advance. A dispute between a holder and the manager is heard in that court, on that procedure, at that speed, and a judgment is executed onshore through the arrangements each centre has made with the onshore courts.

The regulator and the tier system, and therefore the register. Each centre's funds regime has three tiers with its own investor tests, minimums, holder caps and duties. The regulator licenses the manager, receives the notification, reviews the file and examines substance. A vehicle's register is whatever its centre's tiers admit, and its manager's permission is whatever its centre's regulator granted.

The treaty and substance position. A holding chain beneath the vehicle claims treaty benefits in the states its assets sit in, and the claim depends on the vehicle and its holding companies being resident, substantive and purposeful in the domicile. The United Arab Emirates' treaty network applies to entities in both centres on the terms each treaty sets, and the source states test residence and beneficial ownership against facts the domicile's substance rules also require.

The list of states into which the vehicle can be marketed on known terms. Every onshore regime has its own view of funds from each centre. A distributor in the Kingdom, a licensed person in Kuwait and a bank in Qatar each run diligence on the fund's home regime as part of their own, and a manager in a centre the intermediary knows clears that diligence faster.

The providers available. Administrators, custodians, auditors and law firms in each centre, with the cost and the familiarity each brings.

The two centres, alike and unlike

The centres were built on the same model and differ in detail that a manager meets in practice. Their statutes were drafted at different times by different hands, and a form that exists in one exists in the other under a different name with different mechanics. Their funds rules define the tiers alike in substance and differently in the numbers, the notification periods, the reporting forms and the treatment of property funds. Their regulators run different review programmes and publish different guidance. Their courts have different records: each has decided cases the other has not, and a holder's counsel reads the record of the court that will hear it. Their substance requirements are differently expressed. Their costs differ, and so do their providers. A manager who has run funds in one and forms a fund in the other with the same documents has formed a fund whose documents are wrong in the details the other centre reads.

The year-five test

The way to read a domicile is to list the moves the vehicle might have to make in its fifth year and ask, for each, whether the domicile leaves it open, on what consents, and at what cost.

A continuation vehicle. Does the centre's regime permit the transfer of a portfolio from one fund to another under the same manager; does it prescribe a process for the rolling holders' decision as a related-party matter; does it require the regulator's approval or only notification; does it treat the new vehicle as a new fund with a new tier and a new register.

A redomiciliation. Can the vehicle leave the centre, and can it arrive elsewhere as the same legal person, continuing its contracts, its security and its register, or does it have to be wound up and re-formed in front of every holder and every lender. Both centres permit migration in; the list of jurisdictions that permit migration out to them, and the list they permit migration out to, are each read from the statute.

A change of manager. What the regulator requires when the permission that runs the fund changes hands: approval, notification, a new permission for the incoming manager, the holders' consent as a regulatory requirement as well as a constitutional one.

A distribution in kind. Can the register receive the assets, in the states they sit in, and does the centre's regime permit the distribution on the tier the vehicle sits at, with the valuation and the disclosure the rules require.

A secondary sale or a change of control at the top. What the centre's regime says about a change in the ownership of the fund's units above a threshold, what the manager must notify, and whether the buyer's standing is tested by the regulator.

An admission to trading. Whether the centre's exchange, or an onshore one, would admit the vehicle or a successor, and on what conditions the public tier imposes.

A move that is closed is a move the vehicle cannot make, whatever its constitution says. A domicile with two closed moves out of six is a domicile chosen for the first four years of a ten-year life.

The six readings of a seat

Because the domicile is a seat, it is read in full, and the reading has six parts that this site takes one room each for the two centres.

The centre itself: its constitutional position beside the onshore law, its legal system, its registrar and the forms it constitutes.

The regulator: its permissions, its rulebooks, its review programme, its enforcement record and its published guidance.

The statute: the financial services law that defines the regulated activities, the definition of a collective investment fund, the promotion rules and the perimeter.

Conduct and classification: the conduct rulebook's categories, criteria, notices and the schedule of duties each category switches on.

The funds regime: the three tiers, their tests, caps and duties, the property fund rules, the notification and registration procedures and the ongoing requirements.

The courts: the court structure, the rules of procedure, the published record and the onshore execution arrangements.

A domicile chosen on the fifth reading alone, the tier, has been chosen on a sixth of what binds. The parts that seem irrelevant at formation, the court's rules of procedure, the regulator's review programme, the promotion rules, the substance requirements, are the parts that bind in year four, and a manager who read only the tier has a seat it does not understand.

Onshore domiciles, briefly

A fund may also be formed onshore in a Gulf state, under that state's own funds law: the Kingdom's investment funds regulations for a Saudi private fund, Qatar's funds law for an onshore fund with the central bank's authorisation and the Minister's approval, Kuwait's module for a licensed scheme. Each is a seat in its own right, read in full, with its own regulator, its own forms, its own tiers and its own register, and each is chosen where the assets or the holders require a domestic vehicle: a Saudi private real estate fund as the permitted holder of Saudi land, a Kuwaiti licensed scheme as the permitted holder of Kuwaiti land. The comparison between a centre and an onshore seat is a comparison between two full readings, not between a seat and an interface, and a manager who forms onshore because the assets require it still reads the centre for the platform above.

How the onshore regimes see each centre

The Kingdom's distributor runs diligence on a foreign fund and its manager, and files the results with the regulator; a manager regulated in a centre the distributor has dealt with before has a diligence file the distributor can complete. Kuwait's licensed person applies for a permit with documents about the scheme's home regime, and the regulator's ten working days run from a complete application that describes a regime the regulator recognises. Qatar's bank requires the foreign institution to be licensed at home to manage investments and establish funds, and the bank's compliance function reads the home licence. Neither centre is a passport into any of the three states, and the diligence is done for every fund, but a centre whose regime the intermediary has read before shortens the intermediary's own clock.

The strategy against the centre's rules

A domicile is read against the strategy as closely as against the register. Each centre's funds rules treat real property funds specially: closed-ended below the public tier, a listed trust with a distribution requirement and a development cap at the public tier, with independent valuation requirements and custody arrangements the rules prescribe. A development strategy reads those rules for the development cap and the valuation of assets under construction. A credit strategy reads each centre's rules on lending by a fund, on the classification of loans as assets, and on leverage. A fund of positions in private companies reads the rules on unlisted holdings, on valuation frequency and on the treatment of co-investment. A strategy that needs a feature one centre's rules withhold has chosen the other centre by that fact, and the reading is done before the habit is followed.

Substance in the domicile

Each centre requires the entities it licenses and the funds it records to have adequate presence and management there, and each examines it. For the fund, substance is the board or general partner deciding in the centre, the administrator and the registered office there, and the records kept there. For the manager, it is the staff, the office and the capital the permission requires. For the holding companies formed in the centre beneath the fund, it is resident directors, meetings, papers and minutes. A domicile chosen for a treaty position is a domicile whose substance rules must be met for the position to hold, and a manager who cannot staff substance in the centre has chosen a position it cannot keep.

The court's record

A holder's counsel reads the court that will hear a dispute with the manager before the holder subscribes, and reads it in the court's own published record: how it has construed fund constitutions, what it has said about managers' duties, how it has treated limited partners' claims, how long a matter takes from filing to judgment, what it costs, and how its judgments are executed onshore. The two centres' courts have different records because they have heard different cases. A manager who can point a prospective holder's counsel to a record that supports the constitution's terms has a domicile that helps the placement; one whose court has never construed a provision like the one the holder is worried about has a domicile the holder's counsel reads as untested.

The cost of a domicile over ten years

A domicile costs what its providers charge for ten years: the administrator's annual charge, the auditor's, the registered office, the regulator's annual charges for the fund and the manager, the corporate services for each holding company, the legal cost of each filing and each amendment, and the cost of substance. The two centres are not priced alike, and the difference over ten years on a fund with several holding companies is a number a manager should know before choosing. The structure paper carries the ten-year cost of each centre for this vehicle, beside the year-five moves each permits, and the choice is made on both.

Where it surfaces

At the first close, when a holder's counsel asks why the fund sits where it sits and the answer is habit.

At the first onshore placement, when the intermediary's diligence on the home regime takes a quarter because it has not seen the centre's documents before.

In year four, when a treaty position is denied for want of substance the domicile required and nobody staffed.

In year six, when the continuation the manager wants has no prescribed process in the centre and is invented.

In year eight, when the distribution in kind the policy contemplated is not permitted on the tier in that centre.

In each case the domicile was chosen for the first four years, and the vehicle lived ten.

Reading the domicile with the lender

A fund-level lender reads the domicile for three things before it prices a facility: the law under which its security will be granted and the registry in which it will be perfected; the court that will enforce it and that court's record on enforcement; and the insolvency regime that will apply if the fund fails, which decides what the lender's security is worth against other creditors. Both centres have their own security registries, their own insolvency statutes and their own enforcement records, and a lender's counsel in the centre reads all three. A domicile whose insolvency regime the lender's counsel has not seen operate is a domicile the lender prices with a margin for the unknown. A manager who intends a capital-call facility reads the domicile with the lender's questions in hand, and a manager who intends asset-level financing only reads the asset states instead, because the domicile of the fund is irrelevant to a lender at the asset.

Reading the domicile with the register's own regulators

Some holders are themselves regulated, and their regulators have views about where the funds they hold may sit. A pension institution's rules may list the jurisdictions whose funds it may hold; a sovereign's investment policy may require a seat with a court of a particular standing; a bank's capital rules may treat a holding in one centre's fund differently from the other's. The register written first carries each holder's own regulatory constraints on domicile, and a domicile that fails one holder's rule is a domicile that has lost that holder before the first approach.

Moving later

Moving a vehicle after formation is the domicile decision taken again, with every party that relied on the first answer now in the room. Lenders whose security was perfected under one law and in one registry hold a change-of-law clause. Holders whose tax position was opined under one treaty need a new opinion. Counterparties whose contracts name one court hold a consent or a renegotiation. The regulator of the old centre must release and the regulator of the new must admit, each on its own process. The administrator, the custodian and the auditor are re-engaged or replaced. Each holds a consent, and each prices it, and the price is paid at once rather than over the life of the vehicle. The worked structure on a redomiciliation reads what that costs when it is forced.

By move · by reading	What the domicile must permit	Who consents	What it costs if closed
Continuation	Transfer of the portfolio to a new vehicle under a prescribed process	The committee or the holders; the regulator where required	A sale to a new fund with a full re-papering
Redomiciliation	Migration out as the same legal person	Lenders, holders, counterparties, both regulators	Winding up and re-formation
Change of manager	Transfer of the permission with the regulator's process	The regulator; the holders	A stalled fund with a manager that cannot leave
Distribution in kind	The distribution on the tier, and the holders' capacity to receive	The holders; the asset states' registries	A forced sale of the last asset
Change of control at the top	Notification or approval above a threshold	The regulator; the lender	A secondary sale that cannot complete
Admission to trading	The public tier's conditions on the day	The exchange; the regulator	An exit the policy promised and cannot deliver

A choice, as a type

A manager forming a real-assets vehicle for a Gulf register lists the year-five moves: a continuation in year six is likely; a distribution in kind at the end is possible; an admission to trading is contemplated; a redomiciliation is not. It reads both centres' regimes for the three moves that matter, reads both centres' property fund rules for the strategy, reads the onshore intermediaries' familiarity with each, and reads the providers' costs. It chooses the centre whose continuation process is prescribed, whose property fund rules fit the strategy and whose intermediaries have dealt with its kind of fund, and writes the reasons into the structure paper. The habit, in this case, is followed on purpose, and a holder who asks why the fund sits where it sits receives a page.

A decision record, as a type

The structure paper's domicile page is a single sheet. At the top, the six year-five moves with a column for each centre: permitted, the process, the consents, the cost. Beneath, the strategy's requirements against each centre's funds rules. Beneath that, the register's own constraints, holder by holder. Then the lender's three questions for a fund-level facility. Then the ten-year cost. Then the onshore intermediaries' familiarity. At the bottom, the decision and the reasons in three sentences. The sheet is what the manager hands to a holder's counsel who asks why, to a lender's counsel who asks what law, and to its own successor who asks, in year six, what the vehicle may do. It takes a week to prepare at formation and cannot be prepared afterwards, because afterwards the reasons are reconstructed from the habit.

Four cases, as types

A manager habitually seated in one centre forms a fund there whose register will include a holder that, under that centre's tier rules, cannot be admitted at the tier the strategy needs. The holder is admitted through a feeder in the other centre, and the structure now has two domiciles, two regulators, two sets of providers and two constitutions, for one holder.

A fund seated in a centre whose regime does not prescribe a process for the continuation transaction the manager proposes in year six. The continuation is done as a sale to a new fund with a full re-papering, the rolling holders' process is invented rather than prescribed, and the holders who wanted a prescribed process take their counsel's view of the invented one.

A fund whose lender's facility carries a change-of-law clause and whose manager proposes a redomiciliation for a treaty position in year four. The lender prices its consent at a repricing of the facility; the treaty position, on the new opinion, is smaller than the repricing; the move is abandoned after the cost of the opinion.

A fund whose domicile was chosen with the year-five list in hand. The continuation in year six runs on the centre's prescribed process; the distribution in kind in year eight is permitted on the tier and the holders' capacity was tested at admission; the admission to trading is open on the day the policy contemplated it.

What each party holds

The manager holds the decision and its written reasons, and the list of year-five moves it was read against.

Counsel in the centre holds the reading of the regime for each move and the drafting of the constitution to permit each.

The tax adviser holds the treaty and substance position for the domicile and the chain beneath it.

The lender holds the change-of-law clause and the security perfected under the domicile's law.

The onshore intermediaries hold their diligence on the domicile's regime.

The holders hold the court, the tier and the protections the domicile gives them.

The sequence

1. The year-five moves are listed before the domicile is chosen.
2. Both centres' regimes are read for each move, with the consents and the costs.
3. The strategy is read against each centre's funds rules, including the property fund rules where they apply.
4. The register is read against each centre's tiers.
5. The onshore intermediaries' familiarity with each centre is read for the placement clocks.
6. The domicile is chosen and the reasons written into the structure paper.
7. The constitution is drafted to permit each of the moves the list contemplated.

Questions a manager asks

Is one centre better than the other. Neither is better. Each is a complete legal system with a regulator, three tiers and a court that publishes, and each differs from the other in details that matter for particular strategies, registers and moves. The question is which fits this vehicle's list.

Can the domicile be changed if the choice turns out wrong. It can, by migration where both regimes permit it, at the cost of every consent the first domicile distributed, which is the largest single cost a manager can incur in the middle of a fund's life.

Does the domicile affect the Gulf placements. Each onshore regime reads the fund's home regime in its own diligence, and a familiar regime shortens the intermediary's clock; none of them treats either centre as a passport.

Does the domicile decide the holding chain. It decides the starting point of the chain's treaty and substance position, and the chain is designed from it.

What about an onshore domicile for the fund itself. A fund formed under an onshore funds law is a different structure with a different regulator, different tiers and different holders, and it is read as a seat in its own right rather than as a variant of the centres.

Does the register care where the fund sits. Institutional holders read the court, the tier and the protections, and some have policies that prefer one centre or exclude the other; a register written first tells the manager which, and a holder lost to the domicile is lost before the first approach rather than at the close.

Terms used

Domicile: the jurisdiction whose law constitutes the vehicle and whose regulator and court govern it.

Seat: a domicile read in full, as opposed to an interface read for four questions.

Migration: the transfer of a vehicle from one jurisdiction to another as the same legal person.

Continuation vehicle: a new fund under the same manager to which a portfolio is transferred.

Change-of-law clause: a facility term permitting the lender to act if the borrower's governing law or domicile changes.

Year-five test: the reading of a domicile against the moves a vehicle may need to make in its middle years.

What to read

The centre's funds regime and its provisions on continuation, migration, change of manager, distributions and changes of control; the centre's partnership, companies and security statutes; the centre's court rules and published record; the onshore regimes' treatment of funds from that centre. On this site, the Jurisdictions door, the ADGM and DIFC rooms, and the worked structure on a redomiciliation.