Isle of Man

Types of Companies

Isle of Man Private Company Limited by Shares

Isle of Man Private Limited Companies are incorporated under the Companies Acts 1931 to 2004 and 2006. A private company limited by shares is required to have at least one member, who can be an individual or a company, and it must be stated in the Memorandum of Association that the company is private.

Annual returns must be made to the Registrar (cost GBP42 at the time of writing), and details of the shareholders are held on the public files; but nominee shareholders can be used. A minimum of two directors are required, and they cannot be companies. An Isle of Man company can be incorporated within 7 working days and ready made companies are available for immediate use.

Isle of Man Company Limited by Guarantee

The Company Limited by Guarantee, and its sibling, the Company Limited by Guarantee and having Shares, have existed since the earliest days of Company Law over 135 years ago. They are essentially mutual companies, and as such have historically been used essentially for charitable and non-profit purposes.

In the last thirty years, they have been increasingly used for private family foundations instead of discretionary trusts, since they are readily intelligible to persons from a non-equitable legal background, and avoid most of the problems associated with trusts. In addition, they have been used for proprietary and members' clubs in the international leisure and timeshare resort industry, where they meet all the requirements of modern EU (and Spanish) law, as well as for other social organisations. They have also been used for tax planning, making use of the extraordinary flexibility in relation to ownership and capital that such companies can provide. The Isle of Man is one of the leading jurisdictions for this form of company, not because it is unique to the Isle of Man, but because it was in the Isle of Man that all the development work has been done in the last three decades.

Isle of Man Exempt Private Company

NB Exempt companies ceased to be formed as from 2006, although existing companies were permitted to continue in existence until 1st January, 2007.

The Income Tax (Exempt Companies) Act 1984 (as amended) provided exemption from Income Tax to a private company owned by non-residents, did not engage in any activity on the island (with minor exceptions), and had no source of income in the Isle of Man other than income from money invested with the Isle of Man Government or from banks licensed by the Treasury.

One of the company directors had to be resident in the Isle of Man.

Additionally, the secretary of the company had to be a Manx resident and hold a qualification as required by the Act. The exemption required annual renewal (not available after 2006). The granting of exemption did not affect the liability of a company to deduct and account for income tax under the Income Tax (Instalment Payments) Act 1974.

To make a first-time application for exemption a company was required to complete forms TEC1 (signed by a director of the company) and TEC1(u), signed by a Manx-resident director of the company. The completed forms were to be submitted to the Income Tax Division together with the appropriate fee: GBP475 if the application was received not later than 30th June in the year of assessment; GBP1,260 if the application was received after 30th June but not later than 30th September.

Isle of Man Public Company Limited by Shares

A public company is defined by the Companies Acts as one which is not a private company and which has at the end of its name the words 'Public Limited Company' or 'P.L.C.'. A public company must have a minimum of two members.

Isle of Man Limited Liability Company

Limited Liability Companies were introduced by the Limited Liability Companies Act 1996. A Limited Liability Company (LLC) must have at least two members whose liability is limited to the extent of the capital they contribute to the company. Profits are divided among the members and are taxed in their hands, as for a partnership. An LLC does not have directors or a secretary, but it must have a registered agent on the island. The life of an LLC is limited to thirty years. LLCs are governed by articles of organisation and not memorandum and articles of association.

Isle of Man International Company

The International Company (IC) was introduced by the International Business Act 1994. In effect this form broadened the concept of the exempt company. IC status could be acquired by a Manx-registered company (including public companies and limited liability companies) or by a foreign company registered on the island. International Companies were excluded from the same activities on the island as exempt companies (see above). The income and receipts of an IC (other than local bank deposit or approved investment income) had to be derived from outside the island, or from dealings with other ICs. An IC had to have a resident director and secretary (or agent in the case of a Limited Liability Company).

The International Company legislation was particularly aimed at helping finance sector companies. The rates of tax payable were negotiated between the company and the Manx authorities, but were not less than the annual duty of GBP1,260 (more if the application was filed late). As with exempt companies, the status of International Company had to be applied for each year.

International Companies were abolished along with Exempt Companies (see above) as from 2006.

Isle of Man Branch of Overseas Company

If a foreign company intends to establish a branch or a permanent place of business in the Isle of Man, it is subject to Part XI of the Companies Act 1931, which provides for registration on the island. Within one month it must deposit with the Registrar a certified copy of its Memorandum and Articles of Association, a list and particulars of its directors and company secretary, and details of one or more resident individuals authorised to receive notices and communications. Once registered, the foreign company will be treated in the same way as a Manx company.

Isle of Man Non-Resident Company

A Manx-registered company could apply to be non-resident if its central management and control was exercised from a foreign base. It was only liable to income tax if there was any income from the Isle of Man apart from bank interest. To obtain Non-Resident status a Declaration of Non-Residency had to be filed with the Registrar of Companies.

NB. In June 1999 the Manx Government imposed a moratorium on the formation of non-resident companies as part of its response to the Edwards Report. Non-resident companies were formally abolished as from 2006.

Isle of Man General Partnership

Partnerships are governed by the Partnership Act 1909, which is based on the UK Partnership Act 1890 and the UK Limited Partnership Act 1907. Partners may be individuals or companies. In a general partnership, a partner's liability is unlimited. Under the Registration of Business Names Acts 1918 and 1954, partnership names must be registered if they differ from the surnames of the partners. Partnership agreements and financial accounts do not have to be filed at the general registry.

Isle of Man Limited Partnership

Limited partnerships are also governed by the Partnership Act 1909. They must be registered as such, or they may be deemed to be general partnerships. Partners may be individuals or companies. A limited partnership consists of one or more general partners with unlimited liability, and one or more limited partners, who are liable only to the extent of their capital contributions. A limited partner does not take part in the management of the partnership and is not entitled to dissolve the partnership by notice. Limited partnerships may have up to twenty partners; but in banking only up to ten partners.

Isle of Man International Limited Partnership

An International Limited Partnership (ILP) is similar in structure to a Limited Partnership and was introduced by the International Business Act 1994. The general partner must be a Manx-resident company and must comply with the requirements for a company to be an International Company (see above); the limited partners must either be non-resident or must be themselves International Companies. The status of International Limited Partnership has to be applied for each year, with payment of a GBP475 fee, and the Assessor issues a certificate. On demand, an ILP must produce its accounting records to the Assessor. There is no limitation on the number of partners in an ILP, and this format is suitable for collective investment vehicles, among others.

Isle of Man Sole Proprietorship

The business name of a sole trader, who has unlimited responsibility for his liabilities, must be registered at the General Registry if it is other than the name of the sole trader.

Isle of Man Trusts

The law of trusts is based on the English law and is governed by the following acts: the Trustee Act 1961 as amended; the Variation of Trusts Act 1961; the Perpetuities and Accumulations Act 1961; the Trusts Act 1995; and the Purpose Trusts Act 1996. The Trusts Act 1995 establishes that both for Manx trusts and for foreign trusts migrating to the island, Manx law is conclusive and will overcome any forced heirship provisions emanating from civil law jurisdictions. The Isle of Man adopted the Hague Convention in the Recognition of Trusts Act 1988, albeit with some modifications. Trust documents are in English, and there are no requirements for registration; there is no stamp duty. The normal perpetuity period of a Manx trust is 80 years. There are no restrictions on the accumulation of income during the perpetuity period. Trusts used for Investment Funds (Unit Trusts) are governed by the Prevention of Fraud (Investments) Act 1968, which contains prudential rules among others.