Isle of Man: Types of Company
2006 Companies Act
Five types of company are available under the Companies Act 2006:
- Limited by Shares. The nominal capital of the company is not required to be stated for incorporation purposes, only that listed within section 5 of the Act is required.
- Limited by Guarantee. Members' liability is limited to the amount they have agreed to contribute to the company's assets if it is wound up. Essentially used as a mutual company for charitable, quasi-charitable, non profit or social purposes, this form of company can be utilised to great effect for tax planning purposes by means of pledged payment to the collateral of the company.
- Limited by Shares and by Guarantee. This type of company is commonly known as a "Hybrid company", combining the features of both companies limited by shares and companies limited by guarantee. Members consist of those whose liability is limited to the amount unpaid on shares which they hold, and those whose liability is limited to the amount they have agreed to contribute to the company's assets if it is wound up. The flexibility provided by this form of company structure has led to its increasing use as a 'Foundation', a popular alternative to the discretionary trust and for proprietary purposes.
- Unlimited with or without Shares. Such companies are not dissimilar to civil law partnerships and their use is now usually limited to complex situations where extreme flexibility of capital structuring is required or where corporate personality only is needed.
An application for the incorporation of a company may be filed only by the person named in the memorandum as the first registered agent. A registered agent must hold a Class 4 licence issued by the Financial Supervision Commission under the Financial Services Act 2008.
Company names need prior approval from the Companies Registry, which generally takes three months. Ready-made companies are available.
The following details must be set out in the Memorandum of Association of a 2006 Act Company:
- The company name;
- The address of the first registered office of the company;
- The name of the first registered agent of the company;
- The full name and residential or business address of each subscriber;
- The number of shares that the subscriber agrees to take;
- The amount that the subscriber agrees to pay for each share that the subscriber is specified as having agreed to take;
- In the case of a company limited by shares and an unlimited company with shares, the agreement of each subscriber to take one or more shares on the incorporation of the company;
- In the case of a company limited by guarantee, a company limited by shares and by guarantee and an unlimited company without shares, the agreement of each subscriber to become a member on the incorporation of the company;
- In the case of a company limited by shares and by guarantee where a subscriber intends to take shares, the agreement of each such subscriber to take one or more shares on the incorporation of the company;
- In the case of a company limited by guarantee and a company limited by shares and by guarantee, the where a company is to be limited by guarantee, the memorandum must state that each member undertakes to contribute such amount as may be required to the assets of the company in the event of it being wound up.
2006 Act Companies must also satisfy the following general requirements:
- The company must have one director appointed within one month of incorporation. This director can be a corporate body;
- The company must have a single member (individual or corporate) stated on the Memorandum;
- The company must have a Registered Agent as defined by section 74(3) of the Act.
The cost of incorporation is GBP195.
Following incorporation, the company director(s) must convene a first meeting of the Board of Directors to confirm the appointment of the registered agent and the situation of the company’s registered office. A Seal may be adopted, although there is no obligation for a company to have a Seal. Day-to-day management powers of the company are vested in the directors to the extent that such powers are not reserved by the Articles of Association or the Companies Acts to General Meetings of the Members. The Articles of Association will determine how the directors meet and carry on their business.
Provision should also be made for the election and powers of the Chairman of the Board, Alternate Directors, Committees of Directors, meeting by electronic communications, voting rights, rotation of directors, power to fill a casual vacancy, disqualification of directors and conflicts of interest, etc.