Isle of Man Companies Act 2006

Companies created under the Isle of Man Companies Act 2006

Background

Historically, Isle of Man Companies were incorporated under the Isle of Man Companies Acts 1931 – 2004. These Acts feature some of the more traditional company legal requirements, having been founded mainly English Company Laws. These Acts remain in place and companies may still be formed and governed by those laws.

The Isle of Man Government introduced the ‘new’ Companies Act 2006 on 1st November. It allows for a more modern and cost effective vehicle, and whilst it follows familiar concepts, it removes a number of the more traditional company law formalities.

Types of 2006 Companies

• Limited by shares.
• Limited by guarantee.
• Limited by shares and guarantee.
• Unlimited company with shares.
• Unlimited company without shares.

Some of the Main Advantages of a 2006 Company

• The ability to have one director:
• The director(s) may be individual persons or corporate entities. Where using a corporate director, the company or its holding company must either hold an appropriate licence issued by the Isle of Man Financial Services Commission, or it must hold permission to act as a corporate director.

• There is no requirement to have a company secretary.
• The Act permits single member companies.
• Members Meetings:
• There is no requirement to hold an AGM. Members meeting can be held within or outside the island.

• Accounting requirements are far less rigid.
• There are reduced filing requirements, and, in particular, directors’ details do not need to be filed (although there is a requirement to list them in the annual return) and any alteration in share capital does not need to be filed.

Powers

Interestingly the doctrine of ultra vires does not apply to 2006 companies. The Act specifically states that, “notwithstanding any provision to the contrary included in its memorandum or articles of association, a company has (irrespective of corporate benefit and irrespective of whether or not it is in the best interests of the company to do so) unlimited capacity to carry on or undertake any business or activity, to do, or to be subject to, any act or to enter any transaction.

Added to this, the powers of directors to bind the company or to authorise others to do so are deemed to be free of limitations.

Directors are, of course, still subject to the duties imposed upon them by regulation and by common law, including the duty to act in good faith, for proper purposes and in the best interests of the company.

Shares

Shares may:

• have, but do not need to have, a par value; hence there is no concept of authorised share capital.
• be ordinary, common, or convertible.
• confer special rights to distributions.
• be redeemable at the option of the shareholder or the company.
• confer special rights, including voting rights.

Also, the company may issue nil or partly paid shares, shares in any currency and fractional shares.

Re-Registration of 1931 Company as a 2006 Company

A 1931 company can re-register as a 2006 company in a relatively simple procedure. An application approved by the members of the 1931 company is presented to the Registrar with the new memorandum and articles of association. The re-registration will not create a new entity nor will it prejudice or affect the continuity of the company.

Annual returns

The 2006 Act affords a more flexible regime for annual returns; the annual return takes the form of a “shuttle return”. The Registrar of Companies extracts the information relevant to the annual return from a company’s file and asks the registered agent to confirm, add to and/or correct the information and return it to the Registrar of Companies so that the company’s up to date and correct details as at the due date can be placed

General points regarding 2006 Companies

• On the company’s public record.
• Protected Cell companies are permissible.
• There is no preclusion of financial assistance.
• There are simple merger and consolidation procedures.
• Pre-incorporation contracts may be adopted.
• There are simple transfer of jurisdiction procedures.
• Corporate records are still kept at the registered office.

How can IFG help?

IFG has a significant presence in the Isle of Man and already has substantial experience in establishing and administering 2006 Companies.

Summary

The 2006 Act, coupled with the island’s zero rate tax strategy on company profits, and its sound professional infrastructure, places the Isle of Man at the forefront of international financial centres.

IFG does not provide taxation or legal advice. The information and expression of opinion expressed in this briefing note are not intended to be a comprehensive study or to provide taxation or legal advice. Specific advice concerning individual situations should be taken and IFG can provide introductions to advisers who specialise in this area.