The Isle of Man is an OECD whitelisted offshore jurisdiction with an excellent track record of providing effective, efficient, and above all, compliant corporate structures. One such vehicle, that provides both flexibility and tax efficiency when used for structuring, is an Isle of Man Company.
The requirements and formation of an Isle of Man Company are governed by either the Companies Act 1931 (CA 1931) or the Companies Act 2006 (CA 2006) – the merits of which are not considered here. Within both Acts there are stipulations pertaining to Registered Offices and in the Companies Act 2006, Registered Agents.
In this brief article, we will discuss the following subjects, to help illustrate the rules and obligations in relation to these requirements and how Dixcart can help:
- Why incorporate on the Isle of Man?
- What is an Isle of Man Registered Office?
- What is an Isle of Man Registered Agent?
- Pitfalls to be aware of: incorporating and administering an Isle of Man Company
- Working with Dixcart
Why Incorporate on the Isle of Man?
The Isle of Man is rated Aa3 stable and is an independent Crown Dependency. Among other things, Manx registered companies benefit from the business-friendly Government and locally set tax regime.
In addition to offering efficiency for the management of wealth, the Island also provides a great deal of privacy to inbound investors, whilst still meeting global compliance standards; earning it a place on the OECD whitelist, which means that it is not considered a tax haven.
Headline rates of taxation include:
- 0% Corporate Tax
- 0% Capital Gains Tax
- 0% Inheritance Tax
- 0% Withholding Tax on Dividends
Isle of Man companies are also able to register for VAT, and businesses in the Isle of Man fall under the UK's VAT regime.
What is an Isle of Man Registered Office?
In the Isle of Man, as with other Common Law jurisdictions – such as the UK, a Registered Office is the official address where all statutory correspondence and formal notices are delivered. This address can be separate from the company's place of business and is very often the address of an appropriately licensed third-party agent; usually a legal firm, accountants or Corporate Service Provider (CSP) such as Dixcart.
Requirements of a Registered Office on the Isle of Man
Whether incorporated under the CA 1931 or CA 2006, the Isle of Man company must have a physical Registered Office address on the Island, and an official record of the address must be provided in the company's incorporating documents filed with the Isle of Man Companies Registry.
In addition to providing a physical Isle of Man address where notices can be served and received, the Registered Office must also be the location where certain company records are properly maintained. These include the following:
- Memorandum & Articles of Association
- Accounting Records
- Register of Directors
- Register of Members
- Copies of Minute Books
- Register of Charges
Dependent on whether it is a CA 1931 or CA 2006 Company, there are certain administrative duties that are the responsibility of the Directors or Registered Agent. For example, where there is a change of Registered Office on a CA 1931 Company, the Directors must file a form 4 with the Registry, within a month of change to avoid a penalty; whereas under a CA 2006 Company, this notice must be submitted by the Registered Agent.
What is an Isle of Man Registered Agent?
The CA 2006 introduced the role of the Registered Agent into Manx legislation. Companies formed under that Act are commonly referred to as New Manx Vehicles (NMVs).
A Registered Agent is appointed to ensure proper recording and upkeep of company information to comply with regulatory obligations; including activities such as filing and maintaining statutory documentation. The Registered Agent is a key fiduciary, but is not an officer of the Company.
The person appointed must be permitted to act as Registered Agent, possessing the appropriate license granted by the Isle of Man Financial Services Authority (IOM FSA), under the Isle of Man Financial Services Act 2008.
Unlike a CA 1931 company, which requires the appointment of two Directors and a Company Secretary, CA 2006 companies only require a single Director and do not require a Company Secretary. However, a Registered Agent must be appointed at all times.
Both a Registered Office and a Registered Agent are requirements for a CA 2006 company; more often than not, the two functions are carried out by the same licensed third-party provider, such as Dixcart.
The Registered Agent needs to be aware and understand the company's activities at all times; therefore systems and procedures will be put in place to manage the flow of information on the company that services are being provided to.
When expressed in basic terms, it can be easy to think that the Registered Office and Registered Agent functions are simple and straightforward. However, there are many pitfalls that can result in penalties, or even worse, the company being struck off the register.
Pitfalls to be aware of: Incorporating and Administering an Isle of Man Company
As with many things in life, there is not an insignificant degree of nuance involved in establishing and administering a corporate structure; it can be easy to find yourself open to a myriad of potential risks if you do not know what you are doing.
When establishing an Isle of Man Company
Note the requirement for the Memorandum of Association, filed on incorporation, to include the details of the Isle of Man Registered Office, and for a CA 2006 company, the Registered Agent. From the outset, these are absolute conditions for the establishment of the company; meaning you need a service provider with a Class 4 license issued by the IOM FSA to setup. In the case of a Registered Agent, this person will actually submit the documentation to the Registrar.
There are many online service providers that claim to offer Isle of Man incorporation, however many of these do not have a real Isle of Man address etc. and as such, do not meet the statutory requirements of an Isle of Man company Registered Office. It is best practice to ensure you deal directly with an Isle of Man service provider, which will give assurance of both compliance and value for money.
Before incorporating, you need to make sure that the structure is set up and operates in a way that is best suited to your personal and financial objectives. It is recommended that you seek professional advice so that you are aware of the legal obligations associated with the chosen structure.
Seeking appropriate advice is also of particular importance, if the proposed company activity is impacted by the Substance Requirements legislation brought into effect in 2019. Companies engaging in a relevant sector activity are required to demonstrate that they have adequate substance on the island. Failure to comply can result in significant penalties and, if persistent, can lead to the company being stuck-off the Register.
Dixcart are well placed to provide guidance on all corporate services and structuring matters, and can work alongside your chosen personal advisers.
On-going statutory requirements for an Isle of Man Company
Statutory and procedural knowledge is essential for traversing the requirements and obligations related to a well-run and compliant Company. For example, if reporting obligations are missed, such as the filing of returns with the Isle of Man Companies Registry, there can be penalties.
There is a perpetual need for a Registered Office, and Registered Agent if required, to be in place 'at all times'. The legislation makes it clear that it is an offence to have a company without meeting these commitments.
If a Registered Agent chooses to remove services, it must give 8 weeks' formal notice of its resignation. Within one week of serving notice, the Registered Agent must file a copy with the Registrar. After the 8-week period, if no replacement is found, the Isle of Man Companies Registry may begin proceedings for non-compliance with the Act.
When statutory obligations are not met, such breaches may signal to the Isle of Man Companies Registry that the company may no longer be in operation. In such instances, or where a serious breach occurs, action may be taken to strike the company from the Register, which could result in the company being dissolved when still holding assets.
Working with Dixcart
At Dixcart, we have been providing Corporate Services and guidance for over 45 years; assisting clients with the effective structuring and efficient administration of companies tailored to their individual objectives.
Our in-house experts and senior employees are professionally qualified, with a wealth of experience; this means we are well placed to support and take responsibility for different roles, including acting as executive director, non-executive director and providing specialist consultancy services where appropriate. If required, our qualified professionals can also assist entities with any substance issues.
We have developed an extensive range of offerings, which includes the provision of Registered Office and Registered Agent services to Isle of Man companies. From pre-incorporation planning and advice to the day-to-day management of the company and troubleshooting issues, we can support your goals at every stage.
Originally Published 31 March, 2021
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.