Isle of Man: Forms of Company

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On this Page:

- Isle of Man 2006 Act Companies
- Isle of Man Private Company Limited by Shares
- Isle of Man Company Limited by Guarantee
- Isle of Man Public Company Limited by Shares
- Isle of Man Limited Liability Company
- Isle of Man Branch of Overseas Company
- Isle of Man General Partnership
- Isle of Man Limited Partnership
- Isle of Man International Limited Partnership
- Isle of Man Sole Proprietorship
- Isle of Man Trusts

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 new 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.

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.

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Isle of Man 2006 Act Companies

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.

The following types of company may be formed under the Companies Act 1931 to 2004:

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Isle of Man Private Company Limited by Shares

A private company limited by shares is required to have at least one member, who can be an individual or a company, and it must be stated in the Memorandum of Association that the company is private. Annual returns must be made to the Registrar, and details of the shareholders are held on the public files; but nominee shareholders can be used. A minimum of two directors are required, and they cannot be companies. An Isle of Man company can be incorporated within 7 working days and ready made companies are available for immediate use.

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Isle of Man Company Limited by Guarantee

The Company Limited by Guarantee, and its sibling, the Company Limited by Guarantee and having Shares, have existed since the earliest days of Company Law over 135 years ago. They are essentially mutual companies, and as such have historically been used essentially for charitable and non-profit purposes.

In the last thirty years, they have been increasingly used for private family foundations instead of discretionary trusts, since they are readily intelligible to persons from a non-equitable legal background, and avoid most of the problems associated with trusts. In addition, they have been used for proprietary and members' clubs in the international leisure and timeshare resort industry, where they meet all the requirements of modern EU (and Spanish) law, as well as for other social organisations. They have also been used for tax planning, making use of the extraordinary flexibility in relation to ownership and capital that such companies can provide. The Isle of Man is one of the leading jurisdictions for this form of company, not because it is unique to the Isle of Man, but because it was in the Isle of Man that all the development work has been done in the last three decades.

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Isle of Man Public Company Limited by Shares

A public company is defined by the Companies Acts as one which is not a private company and which has at the end of its name the words 'Public Limited Company' or 'P.L.C.'. A public company must have a minimum of two members.

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Isle of Man Limited Liability Company

Limited Liability Companies were introduced by the Limited Liability Companies Act 1996. A Limited Liability Company (LLC) must have at least two members whose liability is limited to the extent of the capital they contribute to the company. Profits are divided among the members and are taxed in their hands, as for a partnership. An LLC does not have directors or a secretary, but it must have a registered agent on the island. The life of an LLC is limited to thirty years. LLCs are governed by articles of organisation and not memorandum and articles of association.

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Isle of Man Branch of Overseas Company

If a foreign company intends to establish a branch or a permanent place of business in the Isle of Man, it is subject to Part XI of the Companies Act 1931, which provides for registration on the island. Within one month it must deposit with the Registrar a certified copy of its Memorandum and Articles of Association, a list and particulars of its directors and company secretary, and details of one or more resident individuals authorised to receive notices and communications. Once registered, the foreign company will be treated in the same way as a Manx company.

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Isle of Man General Partnership

Partnerships are governed by the Partnership Act 1909, which is based on the UK Partnership Act 1890 and the UK Limited Partnership Act 1907. Partners may be individuals or companies. In a general partnership, a partner's liability is unlimited. Under the Registration of Business Names Acts 1918 and 1954, partnership names must be registered if they differ from the surnames of the partners. Partnership agreements and financial accounts do not have to be filed at the general registry.

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Isle of Man Limited Partnership

Limited partnerships are also governed by the Partnership Act 1909. They must be registered as such, or they may be deemed to be general partnerships. Partners may be individuals or companies. A limited partnership consists of one or more general partners with unlimited liability, and one or more limited partners, who are liable only to the extent of their capital contributions. A limited partner does not take part in the management of the partnership and is not entitled to dissolve the partnership by notice. Limited partnerships may have up to twenty partners; but in banking only up to ten partners.

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Isle of Man International Limited Partnership

An International Limited Partnership (ILP) is similar in structure to a Limited Partnership and was introduced by the International Business Act 1994. The general partner must be a Manx-resident company and must comply with the requirements for a company to be an International Company (see above); the limited partners must either be non-resident or must be themselves International Companies. The status of International Limited Partnership has to be applied for each year, along with the payment of an annual fee, and the Assessor issues a certificate. On demand, an ILP must produce its accounting records to the Assessor. There is no limitation on the number of partners in an ILP, and this format is suitable for collective investment vehicles, among others.

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Isle of Man Sole Proprietorship

The business name of a sole trader, who has unlimited responsibility for his liabilities, must be registered at the General Registry if it is other than the name of the sole trader.

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Isle of Man Trusts

The law of trusts is based on the English law and is governed by the following acts: the Trustee Act 1961 as amended; the Variation of Trusts Act 1961; the Perpetuities and Accumulations Act 1961; the Trusts Act 1995; and the Purpose Trusts Act 1996. The Trusts Act 1995 establishes that both for Manx trusts and for foreign trusts migrating to the island, Manx law is conclusive and will overcome any forced heirship provisions emanating from civil law jurisdictions. The Isle of Man adopted the Hague Convention in the Recognition of Trusts Act 1988, albeit with some modifications.

Trust documents are in English, and there are no requirements for registration; there is no stamp duty. The normal perpetuity period of a Manx trust is 80 years. There are no restrictions on the accumulation of income during the perpetuity period.

Trusts used for Investment Funds (Unit Trusts) are governed by the Prevention of Fraud (Investments) Act 1968, which contains prudential rules among others.

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