Isle of Man: Developments In The Use Of Isle Of Man Special Purpose Vehicles

Last Updated: 14 January 2008
Article by Katherine Shea

The Isle of Man punches above its weight in terms of its international business offering, both in respect of its quality and its diversity.

In addition to the more familiar uses of Isle of Man companies and trusts for private wealth structuring and asset-holding, the Isle of Man is increasingly the jurisdiction of choice in which to incorporate a vehicle for listing on the global capital markets and in which to domicile and manage funds.

Latest figures released by research agency Hemscott1 show that, of the non-UK top 100 companies listed on the London Stock Exchange Alternative Investment Market (AIM), by far the greatest number are incorporated in the Isle of Man, equal to second-placed Bermuda, Canada and Guernsey combined. On the basis of market capitalisation2, the Isle of Man again leads the non-UK jurisdictions, with second-placed Canada having just over a third of the Isle of Man's total. The Isle of Man also occupies the top spots in the All-AIM tables having (jointly with Guernsey) the greatest number of companies and a clear lead on the basis of market capitalisation, followed by Canada then Guernsey. In particular, the BRIC economies (Brazil, Russia, India and China), together with an increasing number of Eastern European players, have seized the advantages offered by the Isle of Man (including tax neutrality, the absence of a need for regulatory pre-approval, plus its 'AAA' credit rated economy) to access London and other major exchanges.

One of the principal factors in the Isle of Man's success has been its ability to adapt its role in the global marketplace in response to the particular challenges and pressures facing an offshore financial centre (not least the misconception that all low-tax jurisdictions are equal in terms of their qualitative response to the threats of tax abuses and money-laundering). The Isle of Man has defined a role for itself as a global trading partner and facilitator adding value to the business of onshore jurisdictions. In assuming such role, the Isle of Man has recognised and committed to the principles of transparency and exchange of information, placing it on a distinctly different footing to the predatory "tax haven" which engages in non-transparent practices and attracts disreputable business to the detriment of onshore tax bases. The approach adopted by the Isle of Man is consistent with the role that international bodies such as the Organisation for Economic Co-operation and Development (the OECD) foresee for offshore financial centres, namely to become "service centres", as contrasted with "concealment centres". Concerns expressed post credit crunch by the international finance community about the lack of transparency in cross-border transactions are only likely to result in greater emphasis being placed on transparent practices and facilitating the exchange of information, with the inevitable result that unco-operative "tax havens" will be further marginalised.

As it has developed and matured as a jurisdiction, the Isle of Man has begun to engage directly with other governments and international bodies, rather than through the UK, which has historically handled all matters affecting the Isle of Man at an international level (see further below). The Isle of Man's assertion of its independence to negotiate and enter into international agreements has been demonstrated already in the conclusion of bilateral tax information exchange agreements (TIEAs) with the USA (2002) and the Netherlands (2005) and this process of engagement appears to be entering a more profound phase following developments in the last quarter of 2007. On 30 October 2007, the Isle of Man's Treasury Minister, Allan Bell MHK, signed on behalf of the Isle of Man a package of 28 taxation and economic co-operation agreements with seven members of the Nordic Council (Denmark, the Faroe Islands, Finland, Greenland, Iceland, Norway and Sweden) (the Nordics), comprising TIEAs, agreements in relation to shipping, aircraft and transfer pricing as well as engagements to explore double taxation agreements.

The signing of the agreements with the Nordics is significant on a number of levels. The Isle of Man is the first offshore financial centre to enter into such a comprehensive package of fiscal agreements with the Nordics, which is testament to the regard in which it is held. The fact that the Nordics are internationally recognised to be amongst the most transparent and best-governed nations with sophisticated welfare systems is a clear endorsement of the Isle of Man's established status as a reputable jurisdiction with which to do business. Moreover, given their scale and landmark significance, the Isle of Man-Nordic agreements are likely to have a major influence on the mode of global engagement between OECD and non-OECD countries going forwards.

Further developments in the Isle of Man's relations with the UK underline the strengthening of the Isle of Man's status as a participant in the international arena with its own identity and interests. On 1 May 2007, the Isle of Man and the UK signed an historic framework agreement which sets out agreed principles for developing the international identity of the Isle of Man. For instance, the UK has agreed that it will not act internationally on behalf of the Isle of Man without prior consultation and, where the interests of the Isle of Man differ from those of the UK, the UK will seek to represent any such differing interests when acting in an international capacity. Whilst the UK retains ultimate responsibility for the Isle of Man internationally, the agreement confirms that the role of the UK with respect to developing the Isle of Man's international identity is one of support and not interference. The UK also announced this summer that its treaty negotiating priorities in the short term include concluding a new TIEA with the Isle of Man.

The Isle of Man's success has also, to a considerable extent, been a result of various policy initiatives aimed at developing its profile as an international business centre and maintaining a leading competitive edge. To ensure that it remains an attractive jurisdiction to investors, the Isle of Man has enacted new companies legislation in the form of the Companies Act 2006 (the 2006 Act). The 2006 Act (which sits alongside the Isle of Man's existing Companies Acts 1931-2004) introduces an alternative, modern and flexible form of corporate vehicle, commonly referred to as the New Manx Vehicle or NMV for short. Although based on familiar concepts, the NMV dispenses with a number of the company law formalities applicable to a 'traditional' company, i.e. one incorporated under the Isle of Man Companies Act 1931 (a 1931 Act company). With an NMV there is no distinction between a private and a public company, no concept of authorised share capital, no capital maintenance requirements (subject to solvency), no prohibition on financial assistance, no requirement to have a company secretary or hold an annual general meeting and reduced compulsory filings.

The potential for the NMV so far looks very promising. It has been chosen as the issuing vehicle for admissions to both the London Stock Exchange Official List (the Official List) and AIM. In June 2007, China Central Properties Limited, a property investment company, became the first NMV to be admitted to trading on AIM. Subsequently in July, paper and packaging producer Kazakhstan Kagazy Plc became the first NMV to be admitted to the Official List, via a US$275 million initial public offering in the form of global depositary receipts. Such steps are evidence of the recognition and acceptance by the international finance community of the NMV as a flexible listing vehicle. They also reflect the Isle of Man's growing international reputation as a centre of excellence in corporate structuring.

Further legislative initiatives have been progressed in the Isle of Man's funds sector. Already a strong growth area of the Isle of Man's economy, it is expected to receive an additional boost with the launch on 1 November 2007 of a dynamic regime offering new and enhanced categories of funds. For example, the Specialist Fund, which is designed to appeal to institutional and high net worth individuals, offers increased flexibility on strategy and asset allocation, has a minimum initial subscription of US$100,000 and does not require any regulatory pre-approval to set-up. With a focus on encouraging the establishment of alternative funds and attracting global fund management and administration operations, the Isle of Man Government forecasts that funds under administration in the Isle of Man will double over the next 3 years.

The recent launch of the London Stock Exchange Specialist Fund Market (the SFM) creates additional opportunities for accessing the markets via Isle of Man investment vehicles and is likely to be of particular interest to managers of large hedge funds, private equity vehicles and specialist property funds. The SFM is open to both UK and non-UK domiciled funds and, consequently, sponsors and managers have the option to locate their investment entities in tax neutral and well-regulated jurisdictions such as the Isle of Man.

Aside from facilitative legislation, the Isle of Man benefits from political stability, a flexible regulatory environment and a progressive tax strategy. Since 5 April 2006, the standard rate of company taxation has been 0% (except for certain deposit-taking institutions and companies deriving income from Manx land) and there are no capital taxes or stamp duty applicable in the Isle of Man. Moreover, experienced professional advisers in the Isle of Man are well-placed to provide the necessary legal, accounting and corporate/fiduciary services that may be required in connection with the formation of investment vehicles. These factors, together with a legal system based on English common law, modern communications infrastructure and convenient location around an hour's flying time from London combine to make the Isle of Man's advantages comprehensive.

For a relatively small jurisdiction of approximately 80,000 inhabitants, the Isle of Man's economy has enjoyed impressive growth. Now in its 23rd year of unbroken growth, with low unemployment and average economic growth of more than 5% per year in real terms over the last 5 years (with just under 6% for 2005/20063 and anticipated growth of 8% for 2006/2007), it is regarded as one of the most successful economies in Europe. As mentioned above, the Isle of Man's position is not without its challenges and it must be careful not to rely on past achievements, but keep its finger on the pulse of global economic trends and adapt its products accordingly. Provided that it does so, there is every reason to be optimistic that the Isle of Man will continue to grow both its economy and its international stature.

Footnotes

1 21 September 2007

2 Based on closing prices for 20 September 2007, the combined market capital of Isle of Man AIM 100 companies was Ł6.2 billion.

3 Latest published national income figures

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.