I. Introduction
The Isle of Man Government's desire to reinforce the Island's position as one of the world's most respected and competitive international business centres led to the development and introduction of the Companies Act 2006 of the Isle of Man (the "Act").
The Act provides for a new Manx corporate vehicle (the "NMV") to co-exist with present and future companies incorporated under the Companies Acts 1931 to 2004 and those formed under the Limited Liability Companies Act 1996. Off-Island experts have reviewed the Act from a practical company law perspective and in the context of the Island's current and likely future obligations in terms of international standards; it has also been benchmarked against the company law regimes in certain other jurisdictions.
Since the passing of the Act, the combination of the NMV with the Island's zero rate corporate tax regime has been acknowledged by the international business world as providing an attractive, legally robust yet flexible corporate vehicle for use in international business transactions and listings.
II. The New Manx Vehicle
Some of the key features of the Act and the NMV include:
(a) Types of companies possible
- companies limited by shares (which can become a protected cell company);
- companies limited by guarantee;
- companies limited by share and by guarantee;
- unlimited companies authorised to issue shares; and
- unlimited companies without shares.
(b) Share capital
There is no concept of authorised share capital, so shares may be issued with or without a par value.
(c) Dividends, redemptions and buy-backs of shares
Subject to the directors meeting a statutory solvency test, an NMV is permitted to declare and pay dividends or to purchase, redeem or otherwise acquire its own shares.
(d) Capacity and powers
An NMV has unlimited capacity to undertake any business or activity, but it is possible for such powers to be limited in an NMV's memorandum. However, a person who deals in good faith with an NMV is entitled to assume that the directors of the company are acting without limitation, irrespective of such limitation in the memorandum.
(e) Charges
It is not mandatory to register charges with the Isle of Man Registrar of Companies (the "Registrar"), but failure to do so may affect the priority of the charges created by the NMV. Additionally, failure to register a charge shall render such charge void against the liquidator and any creditor of the NMV. If a charge is not registered with the Registrar within one month of the date of the creation of the charge, an application to register the charge may be made at any time prior to the commencement of the winding up of the NMV.
(f) Other benefits
- no financial assistance prohibitions
- no capital duty payable on the allotment and issuing of new shares
- corporate directors permitted
- single members permitted
- no differentiation between public and private companies
- simplified offering document requirements
- ability to adopt pre-incorporation contracts
- reduced compulsory registry filings
- no annual general meeting requirement
- accounting requirements less prescriptive
- simplified transfer of domicile procedure
- simplified merger and consolidation procedures
(g) Constitutional Documents
An NMV's memorandum and articles of association can be tailored to provide for more traditional corporate concepts, such as introducing a par value for an NMV's shares.
III. Listings
Over the past few years, there has been an unprecedented growth in Isle of Man companies listing on AIM and other key capital markets (including the Main Market of the London Stock Exchange). According to research conducted by Hemscott Group Limited dated 20 September 2007, the Isle of Man leads the offshore world with 57 Isle of Man companies incorporated for non-UK AIM listings that together have a market capitalisation of £9.044 billion.
IV. The Benefits of Using an Isle of Man Corporate Vehicle
The reasons why the Isle of Man has become one of the favourite offshore jurisdictions from which to list on the world's major capital markets include:
The Island's first-class reputation as a well regulated international finance centre (reinforced by Moody's and Standard & Poor's "AAA" accreditation).
- The ability to list an Isle of Man company without the need for prior regulatory approval (on the basis that the Isle of Man company is a closed ended investment company).
- The Island's company law is derived from English company law; as such, investment banks, institutional investors and their advisers are comfortable dealing with Isle of Man companies.
- In the instances where the Island's company law differs from English company law, it is usually possible to tailor a company's articles of association to give the company a more "English" feel and, thus, meet the expectations of institutional investors.
- An Isle of Man company can be formed within 5 working days and there is no requirement to specify a company's objects in its memorandum of association.
- Most Isle of Man companies are able to take advantage of prospectus exemptions which facilitate the preparation and despatch of the admission document or listing particulars.
- Shares in Isle of Man companies are capable of being held in dematerialised form through CREST without the need to put in place complex depositary arrangements.
- An Isle of Man company can have shares denominated, and can prepare accounts, in any currency.
V. Tax
The Isle of Man offers a tax neutral base to facilitate efficient international tax planning.
- The Island has zero per cent tax rate for all companies other than in relation to certain banking income and income from Isle of Man land and property that is taxed at 10 per cent.
- There is no capital gains tax, inheritance tax, stamp duty, SDRT or capital duty charged on the allotment and issuing of shares in an NMV.
VI. Summary
As tax advisers and corporate strategists the world over become aware of the Isle of Man's unique combination of zero rate tax, a very flexible corporate entity and the highest levels of compliance and service, there is little to stop the Isle of Man from being the jurisdiction of choice for international business transactions.
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.
