The 2006 Act represents the gold-standard for international special purpose vehicles, and whilst based on familiar concepts, it sweeps away some of the more traditional company law requirements which continue to apply to companies incorporated under the Isle of Man Companies Acts 1931-2004. Over the past 12 months, the following benefits offered by 2006 Act companies have become evident:
- 2006 Act companies can have sole directors and corporate directors and are not required to have company secretaries;
- the 2006 Act contains few prescriptive rules relating to members meetings—AGMs are not required and members meetings can be held at such times and in such places within or outside the Isle of Man as appropriate;
- all types of 2006 Act companies can be single member companies;
- the 2006 Act enables a lot of decisions which are traditionally reserved for members of a company to be taken by the directors e.g. payment of dividends, alteration or reduction of share capital;
- the doctrine of ultra vires does not apply to 2006 Act companies and 2006 Act companies have unlimited capacity to carry on or undertake any business or activity;
- electronic and telephonic board meetings are expressly permitted;
- the 2006 Act contains no prohibition upon the provision of financial assistance.
Ability To Return Capital To Members
- the 2006 Act replaces traditional capital maintenance requirements with a statutory solvency test;
- a 2006 Act company is able to distribute its assets to its members provided that the directors are satisfied that the company will, immediately after the distribution, satisfy the solvency test;
- the 2006 Act enables a company to declare and pay dividends, reduce share capital and purchase redeem or otherwise acquire its own shares by means of a directors resolution, subject to satisfaction of the solvency test;
- the solvency test does not require the directors to swear and file any formal declaration of solvency at the Companies Registry or require any formal report from the company's accountants—although the directors of a company may choose to take advice from the company's accountants.
Flexibility In Relation To Share Capital
- shares issued by a 2006 Act company can, but need not have, a par value and, accordingly, there is no concept of "authorised share capital" in the 2006 Act;
- the 2006 Act provides a lot of flexibility as to what rights can be attached to shares;
- directors of a 2006 Act company can alter a company's share capital comprising shares with a par value in any way, including by consolidating and dividing, re-denominating or subdividing the shares.
Flexibility In Relation To Constitutional Documents
- a lot of sections in the 2006 Act are very flexible and allow a company to do or not do something subject to contrary provision in the company's memorandum or articles and there is therefore a lot of scope for a 2006 Act company to tailor its articles to suit its particular circumstances;
- a company's articles can be drafted to require certain actions to be carried out more stringently that the statutory default position set out in the 2006 Act e.g. to require the company to hold AGMs, to require specific or all members resolutions to be passed by a member or members holding more than 50% of the relevant voting rights, to require the making of a distribution or an alteration of a company's share capital to be subject to the approval of the company's members;
- similarly a company's articles can be drafted to require certain actions to be carried out less stringently than the statutory default position set out in the 2006 Act e.g. to enable the directors to amend the company's constitutional documents, to enable directors and members written resolutions to be passed by less than 100% of the directors or members.
Reduced Compulsory Filings And Public Disclosure
- unless a company voluntary elects to do so, a 2006 Act company is not required to file details of its members at the Companies Registry;
- unless a company voluntarily elects to do so, a 2006 Act company is not required to notify the Companies Registry of any changes in its directors as they occur—although directors details will need to be included in the company's annual return;
- a 2006 Act company is not required to file details of its share capital at the Companies Registry;
- a 2006 Act company's register of members, register of directors and register of charges is not open to public inspection.
- the 2006 Act contains innovative merger and consolidation provisions;
- a 2006 Act company of one type can re-register as a 2006 Act company of a different type;
- companies incorporated under the Isle of Man Companies Acts 1931-2004 can re-register as 2006 Act companies;
- the 2006 Act contains provisions which enable foreign companies to continue in the Isle of Man as 2006 Act companies and which enable 2006 Act companies to continue in a foreign country or territory outside the Island.
The flexibility and administrative ease offered by 2006 Act companies is counterbalanced by the requirement for every 2006 Act company to have an Isle of Man registered agent licensed by the Isle of Man Financial Supervision Commission.
It is interesting to note that a number of the concepts being introduced by the new English Companies Act 2006 in relation to private companies are similar to those which have already been introduced by the Isle of Man Companies Act 2006. For example, pursuant to the English Companies Act 2006 private companies will no longer be required to hold AGMs, there will be no prohibition upon a private company providing financial assistance, private companies will no longer have to have a company secretary and private companies will be able to reduce their share capital without having to obtain the sanction of the court (subject to solvency).
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.