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

Last Updated: 1 September 1999

7.01 PRINCIPAL FORMS

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.

7.02 LIMITED LIABILITY COMPANIES

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.

7.03 FORMATION OF A LIMITED LIABILITY COMPANY

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

7.04 CAPITAL OF A LIMITED LIABILITY COMPANY

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.

7.05 MANAGEMENT OF A LIMITED LIABILITY COMPANY

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.

7.06 MEETINGS AND VOTES IN A LIMITED LIABILITY COMPANY

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.

7.07 PUBLICATION OF INFORMATION BY A LIMITED LIABILITY COMPANY

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.

7.08 RE-DOMICILIATION OF COMPANIES

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.

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.

 
In association with
Related Topics
 
Related Articles
 
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
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions