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The Isle of Man is an offshore jurisdiction on the OECD white list with an excellent track record in setting up effective, efficient and above all compliant corporate structures. One such vehicle, which offers both flexibility and tax efficiency when used for structuring, is a Isle of Man company.
The requirements and formation of an Isle of Man company are governed either by the Companies Act of 1931 (CA 1931) or the Companies Act 2006 (CA 2006) – whose merits are not examined here. In both laws, there are provisions relating to registered offices and in the Companies Act 2006, registered agents.
In this short article, we’ll cover the following topics, to help illustrate the rules and obligations associated with these requirements and how Dixcart can help you:
Why incorporate on the Isle of Man?
The Isle of Man is rated Aa3 stable and is an independent dependency of the Crown. Among other things, Manx registered companies benefit from the business friendly government and locally established tax regime.
In addition to offering effective wealth management, the island also offers great privacy to incoming investors, while meeting global compliance standards; which earns it a place on the OECD white list, which means that it is not considered a tax haven.
The main tax rates include:
- 0% corporate tax
- 0% Capital gains tax
- 0% inheritance tax
- 0% withholding tax on dividends
Isle of Man businesses can also register for VAT, and Isle of Man businesses fall under the UK VAT regime.
What is a head office in the Isle of Man?
In the Isle of Man, as in other common law jurisdictions – such as the United Kingdom, a registered office is the official address where all legal correspondence and notices of default are issued. This address may be separate from the company’s head office and is very often the address of a duly authorized third party agent; usually a law firm, accountants, or a business service provider (CSP) such as Dixcart.
Requirements for a registered office on the Isle of Man
Whether incorporated under CA 1931 or CA 2006, the Isle of Man company must have a physical address of the registered office on the island, and an official registration of the address must be provided in the documents of incorporation of the company filed with the Isle of Man Companies Register.
In addition to providing a physical address on the Isle of Man where notices can be served and received, the registered office must also be the place where certain company records are properly kept. These include the following:
- Constitution and statutes
- Accounting Archives
- Register of directors
- Membership register
- Copies of the minute books
- Expense register
Depending on whether it is a CA 1931 or CA 2006 company, certain administrative tasks are the responsibility of the Administrators or the Registered Agent. For example, in the event of a change in the registered office of a CA 1931 company, the directors must file a Form 4 with the Register within one month of the change to avoid a penalty; whereas in a CA 2006 company, this notice must be submitted by the Registered Agent.
What is a Isle of Man registered agent?
The CA 2006 introduced the role of the registered agent in Manx law. Companies incorporated under this Act are commonly referred to as New Manx Vehicles (NMV).
A registered agent is appointed to ensure the proper recording and retention of company information in order to comply with regulatory obligations; including activities such as filing and maintaining statutory documentation. The Registered Agent is a key trustee, but is not an officer of the Company.
The appointee must be authorized to act as a 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 general secretary, CA 2006 companies only require one director and do not require a general secretary. However, a registered agent must be appointed at all times.
A registered office and a registered agent are requirements for a CA 2006 company; most often, both functions are performed by the same licensed third-party service provider, such as Dixcart.
The registered agent must be aware and understand the business of the company at all times; therefore, systems and procedures will be put in place to manage the flow of information about the company to which the services are provided.
When expressed in layman’s terms, it can be easy to think of head office and registered agent functions as simple and straightforward. However, there are many pitfalls that can lead to penalties or even worse, removing the business from the register.
Pitfalls to be aware of: setting up and running a Isle of Man business
As with many things in life, there is not an insignificant degree of nuance involved in establishing and administering a business structure; it can be easy to expose yourself to a myriad of potential risks if you don’t know what you’re doing.
When setting up a Isle of Man business
Note the requirement for the memorandum of association, filed upon incorporation, to include details of the Isle of Man head office, and for a CA 2006 company, the registered agent. From the outset, these are absolute conditions for the constitution of society; which means you need a service provider with a Class 4 license issued by the IOM FSA to set up. In the case of a registered agent, that person will effectively submit the documentation to the Registrar.
Many online service providers claim to offer Isle of Man incorporation, but many do not have a real Isle of Man address etc. It is recommended that you make sure that you are dealing directly with a Isle of Man service provider, which will ensure both compliance and value for money.
Before you incorporate, you need to make sure that the structure is in place and functioning in the way that best suits your personal and financial goals. It is recommended to seek professional advice in order to know the legal obligations related to the chosen structure.
Seeking appropriate advice is also particularly important, if the proposed business activity is impacted by the Substance requirements legislation entered into force in 2019. Companies carrying out a relevant sector activity are required to demonstrate that they have an adequate substance on the island. Failure to comply can lead to significant penalties and, if it persists, may result in the business being blocked from the registry.
Dixcart is well positioned to provide advice on all business services and structuring matters, and can work alongside your chosen personal advisors.
Current statutory requirements for a Isle of Man business
Statutory and procedural knowledge are essential to overcome the requirements and obligations associated with a well-managed and compliant business. For example, if reporting obligations are not met, such as filing returns with the Isle of Man Companies Register, penalties may be imposed.
There is a continuing need for a head office, and a registered agent if necessary, to be in place “at all times”. The legislation specifies that it is an offense to have a business without respecting these commitments.
If a Registered Agent chooses to discontinue services, they must give formal 8 weeks notice of their resignation. Within one week of serving the 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 Register can initiate a non-compliance proceeding.
Where legal obligations are not met, such violations may signal to the Isle of Man Companies Register that the company may no longer be in business. In such cases, or when a serious breach occurs, steps may be taken to remove the company from the register, which could result in the dissolution of the company while it still holds assets.
Working with Dixcart
At Dixcart, we have been providing business services and advice for over 45 years; assist clients in the efficient structuring and efficient administration of businesses tailored to their individual objectives.
Our in-house experts and senior employees are professionally qualified, with rich experience; this means that we are well positioned to support and take responsibility for different roles, including acting as an executive director, non-executive director and providing specialist advisory services where required. If needed, our trained professionals can also help entities with any substance issue.
We have developed a wide range of offerings, which includes providing head office and registered agent services to Isle of Man businesses. From planning and pre-incorporation advice to day-to-day business management and troubleshooting issues, we can support your goals every step of the way.
Originally posted March 31, 2021
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.