Isle of Man Company Formation
Companies can be formed in the Isle of Man in one of two ways. The Companies’ Act 2006 provides a modern, flexible legal framework and is designed to meet the requirements of international business. The old law, the Companies’ Acts 1993-2004 remains in force and operates independently. It is not expected that the old law will continue to be used by international business and the information in this web site refers to the Companies’ Act 2006.
Features of Isle of Man Companies
Isle of Man company law is amongst the most modern and flexible available and the following is a list of some of the more important features:
- Unrestricted capacity
- No authorised capital requirement
- No capital maintenance requirements subject to solvency
- Bearer shares are not allowed
- No par value shares are permitted
- The company may assist with the purchase of its own shares
- Only one director required
- Certain corporate directors permitted
- Accounting records to be kept but no requirement to produce accounts
- No audit requirement
- Protected cell companies permitted
- No differentiation between private and public companies
- There must be a Registered Agent on the Isle of Man
- No disclosure of beneficial ownership
Types of company
Company limited by shares
This is the most common form of company. There is no distinction between private and public companies although it is generally recommended that the name of a private company should end with the word “Limited” and a public company “Plc” or “Public Limited Company”. It is owned by shareholders who purchase their shares for cash or equivalent value and who own in proportion to their shareholdings. Once payment is made for the shares (except in the case of partly paid shares) the shareholder has no liability to contribute to the debts of the company in the event of insolvency. The company may issue different classes of shares, each class having different rights. The holders within each class have equal rights amongst themselves.
Company Limited by Guarantee
A guarantee company has no shareholders. It is owned instead by members who undertake to contribute a nominal amount, say $10 towards the debts in the event of an insolvent liquidation – hence “guarantee member”. The company is further distinct from a company limited by shares in that there is no requirement for the rights of the guarantee members to be equal. This creates opportunities for planning and the company limited by guarantee can often perform the same function as a trust.
Company Limited by Guarantee
This company is generally known as a hybrid company because of its ability to have both shareholders and guarantee members. This creates additional flexibility for purposes such as estate planning, as the rights of shareholders may be different from those of guarantee members.
Unlimited company, with or without shares
This type of company is not often found as every member is, in the event of an insolvent liquidation, jointly and severally liable for all the obligations of the company.
Taxation of Isle of Man companies
The Isle of Man operates a zero rate tax system for all except certain finance sector businesses (banks etc.) operating on the Island. Where a company is partly or wholly owned by a resident of the Isle of Man there are provisions for the company to deduct and pay over to the Tax Authority the tax for which the local resident is liable. This is an anti avoidance measure to prevent tax deferral by retaining profits within companies.
To talk to an adviser specialising in offshore company formation on the Isle of Man, call us on +353 1 431 9663 or complete our contact form.
