Isle of Man: Law of Offshore
Table of Statutes
This is a non-exhaustive list of the main Isle of Man statutes affecting offshore and non-resident business. The statutes are listed in alphabetical order – click on the statute for a fuller description of the statute, the legal regime it forms part of, or in some cases the text of the law.
Advocates Act 1995
Banking Act 1998
Banking Business Regulations 1991
Banking (General Practice) Regulatory Code 2005
Collective Investment Schemes (Compensation) Regulations 1988
Collective Investment Schemes Act 2008
Companies Act 1931
Companies Act 2006
Companies (Amendment) Act 2009 (see below)
Companies, etc. (Amendment) Act 2003
Corporate Service Providers Act 2000
Employment Act 1991
Financial Supervision Act 1988
Financial Supervision (Restricted Schemes) Regulations 1990
Financial Services Act 2008
Income Tax (Exempt Companies) Act 1984
Income Tax (Instalment Payments) Act 1974
Income Tax Act 1970
Insurance (Limited Partnership) Regulations 2004
International Business Act 1994
Investment Business Act 1991
Investment Business Order 1991
Investment Business Order 2004
Limited Liability company Act 1996
Merchant Shipping (Registration) Act 1984
On-Line Gambling Regulation Act 2001
Partnership Act 1909
Partnership Act 1890 (UK)
Perpetuities and Accumulations Act 1968
Protected Cell Companies (Collective Investment Schemes) Regulations 2004
Purpose Trusts Act 1996
Recognition of Trusts Act 1988
Registration of Business Names Acts 1918 and 1954
Retirement Benefits Schemes Act 2000
Retirement Benefits Schemes (International Schemes) Regulations 2001
Trade Unions Act 1991
Trustee Act 1961
Trusts Act 1995
Variation of Trusts Act 1961
Developments in Company Law
Responsibility for the Companies Registry was transferred to the Financial Services Commission in 2000 as part of a package to reform corporate conduct. However, as a result of the recently reported re-organisation of Government Departments and associated functions, responsibility for the Companies Registry moved from the Financial Supervision Commission to the newly created Department of Economic development on the 1st April 2010.
In March 2010, the FSC expressed some doubts about this decision by the government, in particular "at the potentially serious effect which the lack of a formal regulatory connection with Companies Registry could have on the reputation of the Island as a respected and well regulated financial centre."
"Companies Registry was transferred to the Commission in the year 2000 expressly as part of a package to reform corporate conduct, and for all matters concerning the oversight of companies to come under the Commission. Companies continue to be perceived by international standard-setters and evaluators as vehicles which can present considerable reputational risks," the FSC stated, adding at the time that as an independent regulator, it proposes to continue its dialogue with Government on the matter.
The Companies, etc. (Amendment) Act 2003 came into partial effect in December, 2003, allowing unlisted companies 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 Act ushered in a number of other provisions 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 is also introduced.
Other provisions facilitate the electronic filing of documents following the introduction of the FSC’s Online Search Facility. In addition, holders of corporate service providers licenses and their key staff automatically qualify to act as secretaries of exempt companies and international companies. Other provisions correct anomalies and make minor amendments to the Companies Acts 1931 – 1993 and related legislation.
Also, with effect from April 1, 2004, no new bearer shares were allowed to be issued by Isle of Man companies and the rights relating to existing bearer shares could not be exercised until the shares were registered.
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.
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 has underlined that it currently has no intention to introduce treasury share regulations, it has asked that interested parties present their views on the matter. Should there be sufficient interest shown in this area, informed the Commission, consideration will be given to consulting further on whether to make treasury share regulations.
In fact, 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 is needed to introduce treasury shares, for a limited period.
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.
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.
Financial Services Legislation Consolidated
In June, 2004, the Isle of Man Treasury confirmed that changes would be made to the structure of the Island's Financial Supervisory Commission, including the replacement of a political figure as chairman of the FSC, which would bring the Isle of Man into line with other offshore jurisdictions and with the conclusions of the 1998 Edwards report on the British dependent territories.
In June, 2006, the FSC issued a second consultation paper outlining initial proposals for regulated activities, exclusions and exemptions which will come into force under proposed new financial services regulatory legislation.
According to John Aspden, Chief Executive of the IoM FSC, the consultation gave the jurisdiction's financial services community the opportunity to identify areas where further legislative amendments are necessary to improve the current framework.
"This consultation primarily consolidates the provisions contained in existing legislation," Mr Aspden explained.
"However, the Commission anticipates that licenceholders and their advisers, who have first-hand knowledge of the changes occurring in their sphere of expertise, may identify areas where further amendment would benefit the industry," he added.
The draft Regulated Activities Order consolidates the activities previously encompassed by the Banking Act 1998, Investment Business Acts 1991 - 93, Fiduciary Services Acts 2000 and 2005 and Building Societies Act 1986, as amended, as well as incorporating certain aspects of the Financial Services Act 1988 relating to the managers and trustees of collective investment schemes.
In addition, the Order included a number of exclusions (activities which fall outside the scope of the legislation) and definitions of specific terms used within the Order.
The draft Financial Services (Exemption) Regulations consolidated the existing exemptions granted under the Banking Act 1998, Investment Business Acts 1991 - 93 and Fiduciary Services Acts 2000 and 2005, with certain outdated exemptions being removed.
To assist licenceholders and other interested parties in reviewing this draft secondary legislation, the Commission prepared a RoadMap showing the destination of current provisions in the draft new legislation, detailing any changes which are proposed and providing a brief rationale for the change, and the impact to industry that is anticipated as a result of such change.
"This consultation provides an opportunity to embrace developments in the finance sector and to ensure that its needs are met," the FSC stated.
"Suggestions for the modernisation of the existing provisions or proposed new activities will be welcomed from industry to ensure that a meaningful and workable framework is developed," the regulator added.
Mr Aspden said that the proposals were to be developed both through the consultative process, and in dialogue with the Legislative Liaison Group.
This process has culminated in the Financial Services Act 2008, which received Royal Assent on August 1, 2008. This Act consolidated a number of separate pieces of financial services legislation, and the following Acts have been repealed in whole or in part: The Financial Supervision Act 1988; The Investment Business Acts 1991-1993; The Banking Act 1998; The Fiduciary Services Acts 2000 and 2005; and the regulations of the Industrial and Building Societies Acts 1892-1986.