Isle of Man: International Tax and Business Guide 1999 - Business Entities - 7.Choice of Business Entity

Last Updated: 1 September 1999


The principal forms of business entity are:

  • Limited liability company (public or private)
  • Partnership
  • Branch of a foreign entity.

Of these, only the limited liability company has a separate legal existence.

No essential structural difference exists between a private and public limited liability company. A private company is one in which the number of shareholders (excluding employees) does not exceed 50, that restricts the right to transfer its shares, and that does not make a public issue of its shares or debentures (bonds). A public company, which corresponds broadly to a corporation in many other countries, is not subject to these restrictions. It must, however, end its name with the words "public limited company" or "plc".

In practice, the private limited liability company form is most commonly used by foreigners who set up business in the Island, although in some instances an Isle of Man branch of a foreign company may be used.


The statutory regulations governing the formation and operation of companies in the Island are the Companies Acts 1931-1993, which broadly follow the UK company law although with some significant differences. In particular, the disclosure requirements are generally less onerous under Manx law than under UK law.


The formation of a company is completed by filing the required documents with the Registrar of Companies and paying the appropriate fees. When he is satisfied that all formalities have been complied with, the Registrar issues a certificate of incorporation.

The main documents required for the formation of a company are the constitution documents, known as the memorandum and articles of association, which outline the objects and capital structure of the company and the rules governing its internal administration. These documents must comply with the provisions of the Companies Acts and are usually prepared by a lawyer, (known as an advocate in the Island). They must be signed by at least one founder-member (seven for a public company), who may be nominees of the true founders.

From August 1994, an Isle of Man company can be formed with a single member. Prior to this date a minimum of two members were required.

Particulars of the directors, of whom there must be at least two, and secretary (who may be one of the directors) together with their written consents to act must be provided, as must the address of the company's registered office (that is, its legal seat, to which notices or communications can be sent), which must be in the Island. A statutory declaration confirming that all the registration requirements have been complied with is also necessary.

The process of incorporation can be completed within two weeks of the approval of the proposed name, which can usually be obtained in one working day.

The approximate costs for the incorporation of a Manx company are:

Formation costs: £1,000

Registration fee: £160 up to £ 2,000 nominal share capital, and thereafter £14 for every

£1,000 or part of £1,000 up to a maximum fee of £5,000

Filing fees: £45


There is no minimum capital requirement for a limited liability company, although the Companies Acts do not allow for the issuance of shares with no nominal value. A company need not issue all its authorised share capital, and shares may be issued partly paid. Subscription for shares may be in cash or in the form of any other assets acceptable to the company; details must be submitted to the Registrar of Companies.

Shareholders may be individuals or corporate bodies, and shares may be held in trust or by nominees; details of the beneficial ownership of such shares do not have to be made public.

Until 1 December 1992, apart from redeemable preference shares, a limited company was not able to redeem its own shares. The 1992 Companies Act introduced a major change to Isle of Man company law by allowing companies to issue redeemable shares of any class. The Act also allows Isle of Man companies to purchase their own shares subject to compliance with the Act.

A company may be formed without a share capital. These companies, having no share capital, are established by the original members giving a guarantee up to a certain pecuniary amount and the liability of these companies is limited to this amount.


Day-to-day management of a company is usually delegated by the shareholders to a board of directors consisting of at least two individuals. There are no restrictions in the Companies Acts as to the nationality or residence status of directors. However, a director may be required to hold a work permit. No particular qualification is required in order to be a director.

The appointment and dismissal of directors is usually made by a decision of the shareholders in a general meeting. In certain circumstances, the Island's Attorney General (a government legal officer) may apply to the courts for an order disqualifying a person from being a director. In addition the Treasury may apply to the Chancery Court for a disqualification order against an individual from acting as a company director on the grounds that he is unfit.

Directors and managers who act within the limits of their responsibility as defined by the articles of association, or by the terms of their appointment, are not personally liable for their actions unless these are illegal.

Supervisory boards are not recognised in Manx company law, and employees have no statutory right of representation on boards of directors.


At least one shareholders' meeting must be held in each calendar year. Shareholders may vote in person at meetings or through proxies if so permitted by the articles of association; however, they may not vote by letter.

Shareholders' voting rights are determined by the articles of association, and differing rights may be attached to different classes of shares, including non-voting shares.


A file is maintained by the Registrar of Companies in Douglas for each company registered in the Island, which is open for inspection by members of the public on payment of a small fee. A company must lodge a copy of its memorandum and articles of association with the Registrar of Companies. Additionally, it must submit an annual return containing details of shares issued, directors, company secretary, and members. A public company must also file a copy of its annual audited financial statements with the return. There is no requirement for a private company to file a copy of its financial statements.


Re-domiciliation of certain kinds of insurance companies is permitted by the Insurance (Amendment) Act 1995. Consideration is being given to extending the proposed legislation to other corporate entities. The advantages of such proposals are avoidance of costs associated with winding-up and on set-up, emigration in times of emergency and tax planning.

The information given is not exhaustive and is based on conditions existing at 5 May 1999. Readers are advised to consult with professionals, such as independent accountants, legal counsel, and investment bankers, before taking any formal action. Deloitte & Touche would be pleased to discuss specific problems.

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