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Leading financial institutions face a complex legal obstacle course as they plan for the upheaval that could follow a Yes vote in Scotland next week.
Royal Bank of Scotland and Lloyds Banking Group have confirmed they would relocate to London if the Yes camp wins the independence referendum. They are by no means alone in contemplating uprooting themselves, with some companies planning to shift operations even if there is a No vote on September 18.
Moving could trigger a legal process that takes well over a year to navigate and leads to the courts being clogged with applications, creating uncertainty for customers, experts say.
As a result, banks are lobbying for legislation to speed up the process of moving their domicile south of the border.
Edward Chan, a partner at law firm Linklaters, said: “The scale and complexity of a number of financial firms attempting to move south of the border after a Yes vote but before independence happened would be unprecedented.
“In the event of a Yes vote, we believe there is a compelling case for such a procedure to be introduced into UK law to facilitate the movement of firms across the border in both directions.”
In the absence of any new law, financial institutions may have to transfer assets and liabilities from a regulated Scottish legal entity to an English entity using an existing statutory scheme.
Mr Chan said this would require a court application and hearing, and a judge would have to decide that customers were not adversely affected.
The process could take 12-18 months, but it could be longer if several financial institutions all tried to move south of the border at once, bankers say.
Even if the government legislates to smooth the path of banks moving south of the border, it will be a costly and time-consuming operation. “Every contract has to be redone and for a bank that is a big deal,” said Chirantan Barua, banking analyst at Bernstein Research, who estimated it would cost between £500m and £1bn for a bank to move its domicile out of Scotland.
Rob Moulton, a partner at City law firm Ashurst, said: “After a Yes vote people would need to start planning straight away – 18 months is a tearing hurry if you are undertaking a major restructuring and potentially relocating your firm.”
The issue will not only be relevant if there is a split in the UK. Several companies are considering operating from the new legal entities they have set up south of the border to serve customers in the rest of the UK – even if Scotland stays in the union.
They hope this would minimise the disruption that protracted constitutional uncertainty could entail following a close No vote.
All this will only heighten concerns that Scotland’s financial services industry, which employs 100,000 people and manages more than £800bn worth of funds, will be scaled back irrespective of which side wins the referendum.
An executive at one large Scottish financial services company, said: “It will be nothing like the scale of what happens if it is Yes, but it’s not as if it is No nothing will change.”