Bermuda’s decision to introduce a corporate income tax is one of the cited reasons a Bermuda-domiciled biopharmaceutical company has proposed to change its place of incorporation.

The House of Assembly passed the Corporate Income Tax Act 2023 in December.

The legislation, which largely comes into effect on January 1, 2025, will apply to Bermuda businesses that are part of multinational enterprise groups with an annual revenue of €750 million (about $800 million) or more.

A number of companies have already indicated their intention to stay on-island by claiming tax credits under the legislation in their latest financial reporting.

But Kiniksa Pharmaceuticals Ltd said it was “focused on developing and commercialising therapies for patients with devastating diseases and unmet medical needs”.

It has written to shareholders to explain a proposed scheme of arrangement under which the company would redomicile to the United Kingdom and the judicial processes required to effect this under Bermuda law.

The letter, filed with the US Securities Exchange Commission, said: “Kiniksa has decided that Bermuda is no longer the most desirable jurisdiction for our principal holding company’s place of incorporation for several reasons.

“Global tax initiatives of the Organisation for Economic Co-Operation and Development and recent tax law changes in Bermuda have the potential to materially adversely affect our company.

“Additionally, legislative and regulatory proposals in jurisdictions in which Kiniksa operates could be detrimental to companies that are domiciled in Bermuda. If ultimately enacted, these proposals could have a material and adverse impact on the company and our shareholders.”

The company, which is led by chairman and chief executive Sanj Patel, added: “Kiniksa has reviewed a number of alternative jurisdictions with our board of directors and outside advisers, including the US, where our parent company has never been incorporated or a tax resident.

“A move to the US was rejected because it would significantly increase the company’s global effective tax rate, resulting in significant declines in future earnings. Such a move would also incur an adverse tax impact on our shareholders.

“Kiniksa determined instead that moving the principal holding company of the group from Bermuda to a country with a more expansive tax treaty with the US would be in the best interests of shareholders, employees and other stakeholders. Kiniksa believes that moving the place of incorporation and tax residence of the group’s principal holding company to the UK in this manner is the best available option.”

The company said that in reaching its decision, Kiniksa considered the following additional factors:

• Kiniksa has maintained operations in the UK to varying degrees since 2018 and is comfortable doing business in the UK

• Effectively changing the place of incorporation (and tax residence, by extension) of the group’s principal holding company to the UK will improve our position with respect to various OECD withholding and other tax proposals that could adversely affect companies incorporated in jurisdictions like Bermuda

• KNSA Bermuda currently has a UK subsidiary that employs a number of its key employees

• The UK possesses robust legal, accounting and financial industries

• The UK, like Bermuda, is a common law jurisdiction, which Kiniksa considers to be less prescriptive than many civil-law jurisdictions. As a result, Kiniksa believes the UK’s legal system to be more flexible, predictable, familiar and similar to KNSA Bermuda than a civil-law system

• Changing the place of incorporation of the group’s principal holding company to the UK will provide a continuity of legal rights for our shareholders on substantially the same grounds as they enjoy in Bermuda.”

A hearing was scheduled in the Supreme Court of Bermuda at which time the court will be asked to give directions regarding the convening of a meeting of shareholders of the company that are eligible to vote on the scheme of arrangement.

The proposed scheme of arrangement under the Bermuda Companies Act 1981 is subject to the approval of the company’s shareholders as well as the Supreme Court.