COMPANIES IN THE ISLE OF MAN Introduction 1 Incorporation 2 Process 2 Filing Requirements 7 applebyglobal.com
ISLE OF MAN As a British Crown Dependency, Isle of Man has a stable and reliable legal system. The Isle of Man is an internationally recognised leading business centre known for its innovation, business-friendly climate and positive engagement with international standards of regulation, compliance and transparency. The Isle of Man s agile and pro-business government, low tax regime and compliance with international standards of regulation and transparency provide a secure and competitive choice for [Companies / Partnerships / Trusts]. INTRODUCTION The Isle of Man has two separate company law regimes: one establishing companies governed by the Companies Acts 1931-2004 (1931 Act) and the other the Companies Act 2006 (2006 Act) (together, Manx Companies). The 1931 Act is based on a traditional company law regime familiar to English company lawyers. The 2006 Act follows the international business company model which is available in a number of offshore jurisdictions which is less formal and devolves a number of matters to a registered agent rather than a public registrar. This publication was last updated in January 2017. It is routinely reviewed by Appleby and updated when changes to the law require it. It is for general guidance only and does not constitute definitive advice. Please contact one of our lawyers if you require more detailed information. Further publications are available from applebyglobal.com Contacts Faye Moffett Managing Partner, Isle of Man Group Head, Isle of Man Corporate Kyle Sutherland Partner Corporate Contact details are at the end of this guide (click here). Both regimes allow for several types of companies: A company limited by shares; A company limited by guarantee; A company limited by shares and guarantee; or Unlimited companies. Appleby (Isle of Man) LLC is a limited liability company with company number 000944L incorporated in the Isle of Man with its registered office at 33-37 Athol Street Douglas Isle of Man IM1 1LB where a list of its members is available for inspection. applebyglobal.com 1
INCORPORATION Names The names of Manx Companies are subject to approval by the Companies Registry (the Registry). The Registry can refuse to register a name which is, in its opinion, undesirable, or which contains words which are subject to restriction, e.g. words implying pre-eminence, status or that a comply is undertaking licensable activity. It is therefore advisable to seek the prior approval of the Registry for the chosen name. PROCESS 2006 Act Only licensed Isle of Man Registered Agents (RAs) can incorporate a 2006 Act company. This is done by submitting the proposed memorandum and (if they are to differ from the prescribed model articles) articles of association of the company. Upon receipt by the Registry the documents are registered, a company registration number allocated and certificate of incorporation issued. 1931 Act In order to incorporate a 1931 Act company, the following documents need to be submitted to the Registry: Form 1: sets out the name of the company, the intended registered office, the names of first directors and the secretary of the company. It must be signed by the subscribers to the company s memorandum and by each officer of the company evidencing their consent to act; and Memorandum and articles of association: upon receipt of the incorporation papers the Registry allots a unique registration number to the company and issues a certificate of incorporation. In addition, the Form 1 and Memorandum and articles are registered and are then a matter of public record. Once incorporated a Manx Company has separate legal personality and may continue in existence indefinitely. Generally, the members of a company will have no liability (except if it is an unlimited company) as a member for the company s liabilities itself. Members will only be liable to pay the amount (if any) unpaid on their shares. Timeframe Standard incorporation of Manx Companies occurs within 48 hours of receipt of the incorporation documents. Two hour incorporations and a 'while you wait' service are also available at an additional cost. applebyglobal.com 2
Local requirements All Manx Companies must have an Isle of Man registered office and any change in a registered office must be notified to the Registry. In addition, a 2006 Act company must have an appropriately licensed RA at all times. Every 1931 Act company must have a company secretary which, in the case of a private company, can be a corporate secretary. If it is a public company, it must be an individual who in the opinion of the directors has adequate knowledge and experience of the duties and responsibilities of a company secretary and who is a member of either the Institute of Chartered Secretaries and Administrators, Institute of Management Accountants, a person qualified to be an auditor of an Isle of Man company, or an Isle of Man Advocate or a solicitor or barrister of England or Scotland. There is no requirement to disclose beneficial ownership to the Registry. However, every 1931 Act company that is not the client company of a corporate service provider or covered by an exemption is required to appoint a 'nominated officer' who is a resident of the Isle of Man. The nominated officer must be told the name, residential address, nationality and date of birth if the beneficial owner is an individual. If not, the nominated officer must be provided with the name, jurisdiction of incorporation, registered address and type of entity. For 2006 Act companies, all corporate service providers have an existing obligation to identify and hold information on the beneficial owners of companies under the anti-money laundering laws of the Isle of Man. Constitutional documents A Manx Company s constitutional documents, being the memorandum and articles of association (M&As), regulate the internal affairs and management of the company. These may be in the prescribed model form appropriate for the type of company, in the prescribed model form amended to suit the particular company or it may have bespoke M&As. Any changes to the M&As of a Manx Company must be notified to the Registry within one month of the change: this is a matter of public record. Power and capacity The doctrine of ultra vires does not apply to Manx Companies unless in the case of 1931 Act companies they were incorporated before 1 January 1987 and have not adopted the modern form of M&As under the Companies (Memorandum and Articles of Association) Regulations 1988. A company has unlimited capacity to carry on or undertake any business or activity, to do, or to be subject to, any act or to enter into any transaction. In addition, in favour of any person dealing with the company in good faith, the power of the directors to bind the company or to authorise others to do so is deemed to be free of limitations. applebyglobal.com 3
Notwithstanding these provisions, directors of Manx Companies are still subject to the various duties imposed upon directors by common law and statute as well as fiduciary duties, including the duties to act bona fide in the best interests of the company and for proper purposes. Share capital and shares Every 1931 Act Company having a share capital must have an authorised share capital and every share issued must have a nominal or par value. If permitted by its articles a 1931 company may increase, consolidate and divide, convert or subdivide its authorised share capital or cancel unissued shares. Any such alteration to a company s share capital gives rise to a filing requirement at the Registry. If permitted by its articles, a 1931 Act Company can issue shares of different classes with different rights as to dividends, voting and capital. In particular it is possible to issue redeemable preference shares and redeemable shares. It may also buy back its own shares subject to compliance with certain statutory procedures. The 1931 Act does not provide for any statutory pre-emption rights on the issue of shares. Accordingly if a 1931 Act Company requires pre-emption rights to apply, they must be expressly written into the company s articles. The provisions relating to shares and share capital in the 2006 Act are more relaxed than the equivalent provisions applying to 1931 Act companies. There is no concept of authorised capital for 2006 Act companies and therefore no provisions for increasing capital however, as with 1931 Act companies, if it has shares with par value, it may consolidate and divide, redenominate or subdivide shares provided there is no contrary provisions in its M&As. Shares in a 2006 Act company may be convertible, common or ordinary, be redeemable at the option of the shareholder and/or the company, confer preferential rights to distributions, confer special, limited or conditional rights, including voting rights, or entitle participation only in certain assets. In addition, subject to any contrary provisions in a company s M&As, a 2006 Act company can issue bonus shares and nil or partly paid shares, shares with or without a par value, shares in any currency (if the shares have a par value), shares numbered or unnumbered and/or issue fractional shares. Unlike the more relaxed regime for 2006 Act companies where any reduction in its share capital is permitted subject to satisfying a solvency test, 1931 Act companies must seek sanction of the Courts to reduce its share capital. Subject to any restrictions within a Manx Companies M&As, shares are transferable by written instrument. Bearer shares are prohibited for all Manx Companies. applebyglobal.com 4
Directors 1931 Act companies must have at least 2 individual directors. Corporate directors are not permitted. 2006 Act companies on the other hand are permitted to have a single director which may be a body corporate. However, a body corporate is only eligible to act as a corporate director if it, or its parent, is appropriately licensed by the FSA. The management of the company is usually vested in the board of directors collectively and proceedings at board meetings and the passing of board resolutions are governed by the company s articles. Ordinarily, the directors of Manx Companies exercise their powers by resolutions passed at a board meeting or passed as written resolutions. Resolutions passed at board meetings require the approval of the majority of the directors present (subject to any contrary provision in the M&As). Written resolutions must be in writing and must ordinarily be signed by every director entitled to receive notice of a meeting of directors. The memorandum or articles of a 2006 Act company may also however allow for the passing of written resolutions by a majority (greater than 50%) of directors. Shareholders and shareholder meetings All 2006 Act companies and 1931 Act private companies limited by shares and private companies limited by guarantee can have a single member. All other types of 1931 Act company must have at least two members. There is no requirement for 2006 Act companies to hold annual general meetings (AGM). The absolute requirement to hold an AGM every calendar year has now been modified for 1931 Act private companies. The members of 1931 Act private companies may now elect to waive the requirement to hold AGMs. Any such election is revocable by any member at any time.. The 1931 Act provides that certain decisions can only be taken by the company s members (as opposed to the directors) e.g. alteration of a company s memorandum or articles, alteration of a company s share capital. There is no requirement that a Manx Company must hold its members meetings in the Isle of Man, although a company is free to include provisions in its articles specifying where members meetings are to be held. For 1931 Act companies, the normal rule is that decisions of members will be made by resolutions of the members passed by a simple majority of the votes cast on the resolution unless it is a special or extraordinary resolution. In addition, it is usual for a company s articles to permit members written resolutions to be passed without the need for a meeting. Such resolutions must be signed by all of the members of the company entitled to vote on the resolution. applebyglobal.com 5
The 2006 Act contains very few prescriptive requirements for members meetings, however, if necessary, requirements relating to members meetings could be written into a 2006 Act company s articles. Unlike for 1931 Act companies, the concept of ordinary, special and extraordinary resolutions is not recognised under the 2006 Act and resolutions passed at a members meeting only require the approval of a member or members holding in excess of 50% of the voting rights exercised in relation thereto (subject to any contrary provision in the Act or in the company s M&As). Members written resolutions require the agreement of all of the members entitled to vote or of a member or members holding such percentage of the voting rights as is specified in the memorandum or articles (subject to any requirement in the Act for any resolution to be passed by a particular majority). Accounts and auditors The accounting requirements imposed on 2006 Act Companies are less prescriptive than those imposed on 1931 Act Companies. The 2006 Act simply requires a company to keep reliable accounting records which correctly explain the transactions of the company, enable the financial position of the company to be determined with reasonable accuracy at any time, and allow financial statements to be prepared. Such accounting records can be kept either at the office of the company s registered agent or at such other place as the directors of the company think fit. If the records are not kept at the office of the company s registered agent, copies of the records must be provided to the registered agent at intervals not exceeding 12 months. The registered agent must be provided with a written record of the place at which the original records are kept. Every 1931 Act Company is required to produce annual accounts (including a balance sheet, profit and loss account and directors report) in accordance with the requirements set out in the 1931 Act. Unless a company is audit exempt (only a private company can elect to be audit exempt), such accounts must also be audited by a qualifying auditor. Public 1931 Act companies and their subsidiaries are required to file their accounts at the Registry but no such filing requirement is imposed upon private companies. Only a 2006 Act Company whose securities are listed or admitted to trade on a securities market or exchange is required to appoint an auditor, although any 2006 Act Company is free to appoint an auditor if it wants to do so. Any auditor appointed by a Manx Company will need to be appropriately qualified. Statutory books The following statutory books and documents (originals or copies as appropriate) are required to be kept by Manx Companies: applebyglobal.com 6
for 2006 Act companies, the M&As signed by each subscriber and in the case of 1931 Act, a copy of those submitted to the Registry on incorporation; the register of members; the register of directors; the register of charges; copies of all notices and other documents filed with the Registry in the previous six years (2006 Act company); annual returns (1931 Act company); accounting records or copies of such records; the originals of any financial statements prepared; minute books of all meetings and resolutions of the directors and shareholders; and an imprint of the common seal (if any) (2006 Act company). FILING REQUIREMENTS Manx Companies are required to file the following with the Registry: M&As and any amendment made thereto; any change of name; any change of registered office address; any change of registered agent (2006 Act company); annual returns; any charges created (including any subsequent variation or release of such charges); any late registration of a charge; any applications and filings in connection with its dissolution, restoration or winding up; and any applications and filings in connection with any re-registration, scheme of merger, consolidation or arrangement, transfer of domicile or conversion into a protected cell company. In addition, 1931 Act companies must file any change in its directors or secretary. There is no requirement for a 2006 Act Company to file details of any change in its directors as they occur (although these details are required to be disclosed on a company s annual return), any increase or reduction in its share capital, any alteration to its share capital, any allotment of shares or any members special resolutions (other than as required by a particular section of the 2006 Act). A 1931 Act company must do so. applebyglobal.com 7
A 2006 Act Company can voluntarily elect to file a copy of its register of directors and/or register of members. If a company makes such an election it must notify the Registry of any changes to those details. In addition, a 2006 Act Company can voluntarily file any offering document with the Registry, but it is not required to do so. Cell companies Cellular companies have become popular with the investment fund industry and with the insurance industry, particularly captive insurers. The name of a protected cell company (PCC) must end with the words Protected Cell Company or PCC and the name of an incorporated cell company (ICC) must end with the words Incorporated Cell Company or ICC. PCCs A PCC is a company which allows for the creation of cells in which assets and liabilities are statutorily segregated. A PCC is a single legal entity that attributes its assets and liabilities either to the protected cell company itself (core) or to the individual cells it creates. The assets and liabilities of the protected cell company and those attributed to each cell are ring-fenced from each other. This means that the creditors of a cell are unable to seek recourse from the assets of any of the other cells or of the core. The directors of a PCC must (i) keep the assets and liabilities of the cells (cellular assets) separate and separately identifiable from the assets and liabilities of the core; and (ii) the assets and liabilities of each cell separate and separately identifiable from the assets and liabilities of each of the other cells. The cells of a PCC do not have separate legal personality. ICCs Only companies limited by shares may be ICCs. Currently only companies which are authorised to carry on insurance business can be ICCs. Each cell of an ICC is itself an individual incorporated company which can hold assets and incur liabilities in its own name without contamination of or by the assets and liabilities of another cell. The chief difference between an ICC and a PCC is that each cell of an ICC has separate legal personality. The rights of the shareholders in the cells of an ICC are fettered in that directors of the ICC must also be the directors of any cell. This means that the cells, although individual companies, cannot act independently of the incorporated cell company that created them. It is possible for a cell to convert to a standalone company. applebyglobal.com 8
For more specific advice on companies in the Isle of Man, we invite you to contact one of the following: View Profile Isle of Man Faye Moffett Managing Partner, Isle of Man Group Head, Isle of Man Corporate +44 (0)1624 647 631 fmoffett@applebyglobal.com View Profile Kyle Sutherland Partner Corporate +44 (0)1624 647 653 ksutherland@applebyglobal.com For the convenience of clients in other time zones, a list of contacts available in each of our jurisdictions may be found here. Appleby Global Group Services Limited 2016 Bermuda British Virgin Islands Cayman Islands Guernsey Hong Kong Isle of Man Jersey Mauritius Seychelles Shanghai applebyglobal.com 9