Isle of Man: Types of Company
The Isle of Man Companies Registry has been in existence since 1865. Responsibility for the Companies Registry moved from the Financial Supervision Commission, where it had been since 2000, to the newly created Department of Economic Development on the 1st April 2010, as part of a re-organisation of Government Departments and associated functions.
The Companies Registry maintains the register and records of all companies and other business types incorporated in the Isle of Man, and provides a facility for the public to view documents which have been filed.
The Companies Registry consists of seven distinct registries, each with their own legislation, fees and statutory filing obligations. The Registry is currently responsible for registering and incorporating the following:
- Industrial societies under the Industrial & Building Societies Acts 1892 to 1979
- Limited partnerships under the Partnership Act 1909
- Business names under the Registration of Business Names Acts 1918 & 1954
- Companies in terms of the Companies Acts 1931 to 2004
- Foreign companies in terms of Part XI of the Companies Acts 1931
- LLCs in terms of the Limited Liability Companies Act 1996
- Companies under the Companies Act 2006.
Companies, etc. (Amendment) Act 2003
In September 2001 The Manx Financial Supervision Commission issued a Consultative Paper on a new Companies (Amendment) Bill designed to make some urgently needed changes to the Companies Acts 1931 – 1993 and other related legislation. Many of the proposals had been included at the request of representatives of the finance and commercial sectors, whilst others were aimed at adopting internationally accepted standards of best practice and corporate governance.
The Consultative Paper also included revised proposals in relation to the dissolution of companies, changes to the requirements for an overseas company to register as a foreign or "F" company in the Isle of Man to remove the confusion surrounding the definition of "place of business"; simplification of the system for registration of charges and the abolition of the requirement for all directors names to be shown on letterheads.
Proposals were also included to facilitate the introduction of a fully on-line company incorporation, filing and searching service at the Companies Registry by making necessary amendments to the legislation relating to company forms.
The Companies, etc. (Amendment) Act 2003 came into partial effect in December, 2003, meaning that unlisted companies are now permitted to re-domicile in and out of the Isle of Man. Whilst companies conducting licensable business, e.g. banking, investment, insurance or corporate service provider business, will be subject to additional regulatory approvals, they will also be able to re-domicile should they so wish.
In addition, the Amendment ushered in a number of other provisions contained in the Act including: registration of prospectuses; the obligation to display a company’s name outside its premises; and procedures relating to a company’s ability to dispense with compliance with certain provisions of the Companies Acts.
A right of appeal against a decision of the Commission to refuse to register documents under the Business Names, Industrial and Building Societies and Limited Liability Companies Acts was also introduced.
Other provisions facilitated the electronic filing of documents after March 1, 2004 following the introduction of the FSC’s Online Search Facility.
Furthermore, from March 1, 2004, holders of corporate service providers licenses and their key staff automatically qualified to act as secretaries of exempt companies and international companies. Other provisions corrected anomalies and made minor amendments to the Companies Acts 1931 – 1993 and related legislation.
Also, with effect from April 1, 2004, no new bearer shares could be issued by Isle of Man companies and the rights relating to existing bearer shares may not be exercised until the shares are registered.
2006 Company Law Reform
A further, and more comprehensive reform of Manx Company Law was put to consultation in May 2004. In addition to setting out the case for reform, the consultation document laid out a number of options for the scope of reform, ranging from the consolidation of all of the Companies Acts into a single Act, to the retention of the existing corporate law framework, coupled with the creation of a new 'international company' corporate entity.
In August, 2005, the government published draft legislation for the creation of a new type of business-friendly company. The new Manx corporate vehicle, or "NMV", is designed to be simple and inexpensive to administer and to meet the Island's obligations in terms of the commonly adopted benchmarks of international standards.
The concept, developed following a study of company law around the world, was originally scheduled for introduction early in 2006, to coincide with the Isle of Man's move to a zero rate of corporate tax, but came into force on November 1. The first New Manx Vehicles, or '2006 Act companies' as they became known, were incorporated on the same day. Each 2006 Act company is allocated a number followed by the suffix “V” to distinguish the new-style companies from the more traditional companies, which may still be incorporated under the Companies Acts 1931-2004.
"This new NMV corporate vehicle is designed to be both competitive and reputable," observed Treasury Minister Allan Bell. "Combined with the zero rate corporate tax regime the aim is to give the Isle of Man an unbeatable package to attract international business," he added.
Online Company Searches Available
In August, 2004, the Financial Supervision Commission launched an online company search facility of the Island's Companies Registry allowing easier access for the public to search and view information about registered firms.
According to the FSC, the service provides details of all Isle of Man Companies, Overseas Companies registered in the Isle of Man, LLCs and Business Names. Users can also purchase company documents, check the availability of company names and submit an application to reserve a company name.
The launch of the system forms part of an ongoing programme to enhance the services provided by Companies Registry for both local and international users of the Isle of Man as a business centre.
Welcoming the new system, FSC Chief Executive, John Aspden observed: "Companies Registry has benefited from a significant investment in technology over the last three years enabling it to manage more efficiently the large volume of documents it receives each year. We are delighted to now offer access to company information and documents via the internet and believe the service will be more convenient and cost effective for users".
Revised General Licensing Policy
In May 2007 the Isle of Man Financial Supervision Commission (FSC) published a revised version of its General Licensing Policy for those seeking a banking, investment business or fiduciary services licence.
The revisions affect licensees in three areas: 2006 Act companies, sole traders and partnerships, and custodians of collective investment schemes.
The FSC said that companies registered under the Companies Act 2006 may be licensed as investment businesses or fiduciaries, subject to specified requirements to ensure an appropriate level of transparency and corporate governance, which would be applied through binding licence conditions.
2006 Act companies may not hold banking licences however, because such companies can reduce their share capital without the need to apply to the Courts.
The Insurance and Pensions Authority is also examining the possible uses of 2006 Act companies for businesses authorised or registered by the Authority with a view to permitting their use in certain circumstances and with appropriate safeguards in place to ensure comparable levels of transparency and corporate governance.
These restrictions on 2006 Act companies will apply only to licence applicants and licence holders, and not to other 2006 Act companies.
Existing sole trader and partnership licence holders could continue to operate. However, the Commission decided to cease to license new sole traders or partnerships (except for a restricted category of fiduciary licence that is designed for natural persons only).
Custodians of certain types of collective investment scheme may now operate under a category 3 group (b) or a category 5 investment business licence.
The Commission has consulted the fund management industry in relation to the use of 2006 Act companies as vehicles for the operation of collective investment schemes.
Anti-Money Laundering Rules Tightened
Businesses in the Isle of Man which accept cash payments worth EUR15,000 or more have to comply with anti-money laundering legislation in place in the jurisdiction. The Criminal Justice (Money Laundering) Code 2007 (the ML Code) came into effect on September 1, 2007. The ML Code replaced the previous Anti-Money Laundering Code 1998, and brought in changes to anti-money laundering and counter terrorist financing requirements. In addition, where previous legislation had focused on the financial services sector, the ML Code brought additional businesses within its remit, ensuring that the Isle of Man complies with international standards. It was subsequently replaced by the Criminal Justice (Money Laundering) Code 2008 (“the 2008 Code”) which came into effect on the December 18, 2008. On September 1, 2010 this was superseded by the Proceeds of Crime (Money Laundering) Code 2010, which was supplemented by the Prevention of Terrorist Financing Code 2011 and came into effect on September 1, 2011. Under the Money Laundering and Terrorist Financing Code 2013, "every licenseholder must conduct Customer Due Diligence (CDD) on a risk based approach. In addition, every licenseholder must have a Money Laundering Reporting Officer. Adequate records must be maintained, as must a business relationship with the customer." The Code requires that "all staff are trained adequately and that appropriate procedures are in place to deal with Politically Exposed Persons." The Code applies to all financial services providers as well as estate agents, casinos, bookmakers and local authorities. A full list of business affected can be found in Schedule 4 of the Proceeds of Crime Act 2008.
Companies (Amendment) Act 2009
Further amendments to companies legislation entered into force on September 1, 2009, with the Companies (Amendment) Act 2009.
This law ushered in the following changes:
- Company prospectuses - The information contained in a prospectus (for a company incorporated under the Companies Act 1931) must include all matters that intended recipients could reasonably expect to find, instead of the previous specific list of information required under Schedule 4 to the Companies Act 1931 (which has now been repealed). A signed copy of the prospectus must be delivered to the Companies Registry for registration prior to its issue. Where the Companies Registry becomes aware of false or misleading claims in the prospectus, it has the power to make a direction to amend the prospectus. This direction will be placed on the company’s public file.
- Registration of charges - Companies will be permitted to file a certified copy of the charge instrument or the original document. This will remove conflicts that existed between the Companies Registry and Land Registry requirements.
- Changes to accounting provisions - The requirements under the Companies Act 1931 are clarified to require (for newly-incorporated companies) that the first financial statements must be prepared for a period of no longer than 18 months from the date of incorporation. The financial statements of a company must be laid at least once in every calendar year before the members in general meeting within 6 months of the financial year-end for a public company, and 9 months for a private company. This represents a reduction in the current time limit. Accounting provisions under the Companies Act 2006 permit accounting records to be held at a place other than the Registered Agent’s office, provided the Registered Agent is kept informed of where the records are held and further, that copies are remitted to the Registered Agent on demand but at least annually. The latest act, in addition to the aforesaid, empowers any member or director of the company to require financial statements to be prepared. Where the company fails to accede to the request, a member will have the right to have sight of the underlying accounting records. Also, the definition of who may audit an Isle of Man company has been expanded.
- Limited Liability Companies Act 1996 - Changes to the Limited Liability Companies Act 1996 remove the provision that provides for the automatic winding up of the company within 60 days for failing to file a notice in the prescribed form on the death, dissolution, resignation etc of a member.
- Treasury shares - The Act has added a new section 25A of the Companies Act 1992 and section 58A of the Companies Act 2006. These sections give the Commission powers to make regulations that could allow a company to create treasury shares. While the Commission underlined at this time that it had no intention to introduce treasury share regulations, it has asked that interested parties present their views on the matter. Indeed, a consultation on whether treasury shares should be permitted was launched in 2009 (see below).
Treasury Shares Considered
In February 2010, the FSC consulted on plans to allow companies whose shares are traded on a market to hold up to 10% of shares in treasury, to help companies manage their share capital more efficiently.
Section 25A of the Companies (Amendment) Act 2009, gave the Commission the power to make regulations to introduce treasury shares under the Companies Acts 1992.
The Commission started consulting on whether to allow treasury shares in July 2009. Interested parties were asked to give details of the motivation and rationale for introducing treasury shares.
Respondents indicated that treasury shares are vital in ensuring that the Isle of Man remains able to compete as a premier offshore financial centre. The responses also suggested a need for prompt action. In acknowledging this commercial need the Commission released draft legislation early in 2010, which was needed to introduce treasury shares, for a limited period.
The regulation came into effect on May 1, 2010 and was welcomed by Alan Bell MHK, Minister for Economic Development. Mr. Bell commented: "These regulations illustrate the ways in which the Isle of Man Government is developing its regulations to enable businesses to conduct their affairs in a more efficient and competitive manner. The change will help to make publicly traded companies on the Island more competitive which we welcome.”
Company Fees Rise In 2010
The Isle of Man government's February 2010 budget included a number of changes to company registration rules.
The changes affect every Isle of Man incorporated and registered company, business name and limited partnership. They also affect those who conduct searches or request information from the Companies Registry.
Company registry fees were increased in the budget, as part of the Isle of Man’s biennial review. The government increased the fees to ensure they maintain their value against changes in the annual rate of inflation, and also to provide the Isle of Man government with much needed revenues.
The change took effect on April 6, 2010 and included:
- The incorporation fee for a company incorporated under the 1931 or the 2006 Companies Act was increased from GBP190 to GBP195.
- The annual return fee for companies other than an excepted company, a qualifying members’ club or a dormant company increased from GBP320 to GBP360.
- The annual return fee for a dormant company or a qualifying members’ club from April 6, 2008, increased from GBP75 to GBP85. Late filing fees will apply if the annual return form is not delivered within the prescribed filing period.
- There is no annual return fee for a charity or a property management company but they will be subject to late filing fees if they do not deliver their annual return within the prescribed filing period.
- From January 1, 2009, every business that has registered a business name is required to file an annual declaration in the Companies Registry confirming they continue to trade and that there have been no changes to the particulars required to be delivered to the Companies Registry. The declaration should be filed each year on the anniversary of the name being registered. There is no registration fee.
Company Law Modified
In October 2010, the Isle of Man parliament approved two separate sets of regulations modernizing the island’s company law.
Firstly, the company law was amended to change the obligation on private companies to hold annual general meetings; and to change the types of business that can be conducted by Protected Cell Companies (PCCs).
The first regulations adopted, the Companies Act 1931 (Dispensation for Private Companies) (Annual General Meeting) Regulations 2010, allow the members of private companies to make an election to dispense with the requirement to hold annual general meetings, which may not always be necessary in the case of small companies for example. This provision does not apply to charities however.
The Protected Cell Companies (Eligibility) Regulations 2010 allow PCCs incorporated under the Companies Act 1931 to 1993 to conduct any class of business, the same as PCCs incorporated under the Companies Act 2006. The former category of PCC was previously restricted to insurance and collective investment business.
The changes, which were both the subject of consultations earlier in the year, were tabled by Treasury Minister Anne Craine, who commented on their adoption: “These are small but significant steps forward which are further examples of the government and private sector working together to enhance the island’s attractions as a business-friendly jurisdiction.”
Both regulations came into force on November 1, 2010.