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Companies, as creatures of statute, owe their existence to the laws of the jurisdiction in which they are incorporated. Many modern jurisdictions allow companies to enter and leave their jurisdiction from and to jurisdictions with equivalent laws on continuation of legal existence and of obligations.
The Isle of Man has two separate regimes under which companies can move to or from the Isle of Man.
Coming to the Isle of Man
Companies in the Isle of Man are usually incorporated either under the Companies Acts 1931-2004 or the Companies Act 2006, and similarly a company coming to the Isle of Man can register under either regime.
The Companies (Transfer of Domicile) Act 1998 provides a procedure for companies incorporated outside of the Isle of Man to re-register and continue under the Companies Acts 1931-2004. The Companies Act 2006 provides for a more streamlined process for companies to re-register under that Act, which reflects its slightly less onerous administrative regime and more relaxed approach to capital maintenance. In either case, the company ceases to be established in the foreign jurisdiction and continues in the Isle of Man as the same legal entity, so that it retains its property, liability for its obligations and any existing civil or criminal proceedings, rulings or convictions are unaffected.
Which companies can apply?
A solvent company incorporated in a jurisdiction which permits the company to be continued in the Isle of Man can usually apply. There are however some restrictions including where the laws of the company's country of incorporation for the time being do not permit it; the company is insolvent or in liquidation or subject to insolvency proceedings; a receiver/manager has been appointed in relation to any of its assets; or it has entered into an arrangement with creditors which has not been concluded.
Consequences of continuing in the Isle of Man
When a foreign company continues in the Isle of Man it is not deemed to create a new legal entity and it does not prejudice or affect the continuity of the company which was formerly a foreign company and becomes a continued company.
On the date of continuance the foreign company becomes a company to which the relevant Isle of Man Companies Act(s) apply as if it was incorporated under that Act and a certificate of continuance is issued. The company's annual return date will be the anniversary of its date of incorporation in its former country of incorporation.
On continuing:
- the property of the foreign company continues to be the property of the continued company;
- the continued company continues to be liable for the obligations of the foreign company;
- any existing cause of action, claim or liability to prosecution in respect of the foreign company is unaffected;
- any civil, criminal or administrative action or proceeding pending by or against the foreign company is unaffected; and
- any conviction against, or any ruling, order or judgment in favour of or against the foreign company may be enforced by or against the continued company.
Before applying
If the company undertakes an activity which is regulated in the Isle of Man it will have to ensure that it has all necessary licences or registrations from the Isle of Man authorities before continuing as an Isle of Man company.
Where the company has created certain security interests which remain outstanding it is necessary to obtain the prior written consent of the chargeholders to the application (and consent to the order of registration), and particulars of any charges created by the company which are registerable in the Isle of Man must be submitted as part of the application process.
Name approval may be sought from the Isle of Man Companies Registry prior to making application for continuation. Names can be reserved for a period of up to 12 weeks.
The company will be required to have a registered office address in the Isle of Man, this may be an address maintained by the company or may be provided by a licensed corporate service provider (CSP). A company incorporated under the Companies Act 2006 is required to have a registered agent, who must be a CSP. All companies are required under the Beneficial Ownership Act 2017 to have a nominated officer unless exempt. The nominated officer must be a natural person or a CSP.
Proof from the appropriate authorities of compliance with all provisions relating to the company leaving its jurisdiction of incorporation will need to be provided prior to the company being continued in the Isle of Man. It is important to liaise with the appropriate authorities at an early stage to ensure that this will be available, whilst maintaining careful control over timing to ensure that the company is not discontinued before being continued in the Isle of Man.
A memorandum and articles of association which comply with the relevant statute must be prepared unless, in the case of the articles, the unmodified statutory format is to be used.
When the completed application is made to the Isle of Man Companies Registry a New Entity Declaration form must be submitted in the appropriate form. Submitting all application compiled in the correct format to comply with the legislation will hasten the process of the Registry reviewing it.
Companies leaving the Isle of Man
When companies leave the Isle of Man, a different regime applies depending on whether they are incorporated under the Companies Acts 1931-2004 or the Companies Act 2006.
Which companies can apply?
A solvent company incorporated in the Isle of Man can usually apply. A company may not apply if it is in liquidation or subject to insolvency proceedings; a receiver/manager has been appointed in relation to any of its assets; or it has entered into an arrangement with creditors which has not been concluded.
Where can an Isle of Man company redomicile to?
An Isle of Man company can only transfer domicile to a country or territory whose laws allow for the following:
- The property of the company continues to be the property of the continued company;
- The continued company continues to be liable for the obligations of the company;
- Any existing cause of action, claim or liability to prosecution in respect of the company is unaffected;
- Any conviction against, or any ruling, order or judgment in favour of or against the company may be enforced by or against the continued company.
As a matter of Isle of Man law, transfer of domicile of an Isle of Man company is not deemed to create a new legal entity or prejudice or affect the continuity of the body corporate that was formerly an Isle of Man company.
Consideration should be given to whether the company would breach any restrictive covenant or warranty in any agreement by making an application, and where necessary consent should be sought.
Charges created by the Company
The written consent by the holders of all charges is required to be provided as part of the application process.
A Note of Caution
Whether the company is arriving on the Isle of Man register or departing from it, it is worth noting that the consent of the Isle of Man registrar to continue, either in the Isle of Man or abroad, expires after the statutory time period which is applied as a strict time limit over which the Department has no discretion once the certificate has been issued. Failure to meet the prescribed time limits will result in the need to reapply (and pay another application fee).
There is a possibility of legal uncertainty if the company is received in the new jurisdiction without discontinuing in the old one within the statutory period, so it is important to ensure that adequate preparations are in place to ensure that the process is completed on time.
Understanding the process and streamlining to ensure compliance with statute and applicable time limits is essential and we are happy to advise.
