Isle of Man: Isle Of Man Company Execution Of Documents - Does The Mercury Case Have Any Relevance In The Isle Of Man?

Last Updated: 5 February 2019
Article by James Lowery

The Mercury case (R (on the application of Mercury Tax Group and another) v HMRC [2008] EWHC 2721) provided obiter English Law comments in relation to the closing or completion of matters where some of the parties are not able to be present in a completion meeting.

The High Court visited the issue of recycled signature pages in the Mercury case. In this case, Mercury Tax Group Limited had set up a tax reduction scheme for its clients. HMRC obtained warrants to search the premise of Mercury Tax Group Limited and seize certain documents relating to the tax scheme. When applying for the warrant, one of the arguments that HMRC submitted was that the signature pages to the documents had been recycled by Mercury Tax Group Limited from earlier drafts, thereby making the arrangements invalid.

The court held that signature pages should form part of the same physical document for a deed to be valid. This means, for example, that it is not possible for signature pages from older versions of documents to be recycled by reattaching them to a final version of a deed.

Since this case, various guidelines and signing formulas ("Mercury procedure")have been used where completion documents are being e-mailed to parties not present at a completion meeting. In summary the procedure is as follows:

  1. The final execution versions of the documents are emailed by the co-ordinating lawyers to all those who are executing the documents remotely (and/or their lawyers).
  2. Each signatory prints off and signs the execution page of each document.
  3. Each signatory sends one email back to the coordinating lawyers attaching:

    1. the final execution version of each document (in word/pdf) and
    2. the signed execution page for each document.
  4. The co-ordinating lawyers distribute as soon as possible after closing a final version of each document containing all the execution pages.

There are a number of different company types and corporate structures available in Isle of Man Company Law. At Simcocks we are often instructed to advise in relation to Company, Banking and Finance Documents. The two most popular types of companies are 1931 Act Companies and 2006 Act Companies.

In general, the 2006 Act Company has much more flexibility in relation to how documents can be executed, as all that is required is an authorised signatory, which is generally one director or a person authorised by a board resolution or power of attorney. This type of company could also have a seal but this is rare. This company can execute both a contract and a deed in this manner.

A 1931 Act Company usually in practice signs with either two directors or one director and company secretary, although a company seal can also be used. A contract can be executed by an authorised signatory but a deed specifically requires the seal or two directors or a director/secretary combination.

2006 Companies with a director who is unavailable to sign can authorise someone else to sign who could be present at the completion meeting if necessary and they also have the power to appoint an alternate director if necessary. 2006 Companies in the Isle of Man also often have a corporate director and as these need to be an Isle of Man regulated entity or the subsiduary of the same, then it is likely this director will be based in the Isle of Man, should completion of the matter be on the island.

1931 Companies cannot have a corporate director so potentially a Mercury procedure may need to be used, especially if the document is a deed. However, in reality the application of a MMercury procedure is not as widely used for deeds. Also, for filing purposes, original documents, which are in the nature of a charge on the assets of the company, are needed for 1931 companies. Appointment of an alternate director is also possible, although there is a requirement to file the appointment.

Generally when final documents are being prepared it is vital to establish who is going to execute the documents. It is important to note that the identity of the directors for a 2006 Company is not a matter of public record that can be relied upon, as the only company obligation is to update these on an annual basis.

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.

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