QUESTION ONE – What are the most common structures used when international clients want to form a company in your jurisdiction? Any examples?
We have both private and public limited companies in the Isle of Man, and the public companies incorporated here can be listed in the UK on the main FTSE or secondary AIM Stock Exchange as well as many other International Exchanges, including the International Stock Exchange, which has an office on the Island.
We also have LLC and limited partnership structures as well as foundations and trusts.
Many structures that we deal with are holding companies and comprise of a mixture of both trust and corporate entities. Trusts have long been a popular choice on the Island due to their effectiveness in maintaining wealth for the next generation. Increasingly, however, we have seen a move towards foundations, which provide a mixture of both trust and limited company features to enable the initiator to maintain a greater level of involvement in the management of assets.
As the Island has 0 per cent corporation tax for most businesses, it does attract trading companies as well as holding structures. The low tax rate can enable the Island to be tax neutral in many circumstances. Recently, we have also seen a growth in interest in protected cell companies. This is still a relatively new concept on the Island, though it is clear that there is high interest in this area from clients setting up global structures.
Asset management companies are ever popular and the Island has become known for its internationally respected aircraft and superyacht registers and is still a popular choice for property owners. We also act for a number of high net worth, private clients, providing wealth management structures and solutions, generally with the aim of preserving and growing wealth before passing it on to the next generation.
QUESTION TWO – Please detail some of the favourable and unfavourable legislation that businesses considering establishing a presence in your jurisdiction should be aware of? How can you help them to streamline the process?
In 2006, the Isle of Man brought in a new company form with various features designed to be attractive to non-resident investors. The 2006 Act company has reduced administration requirements for public filing and flexible share capital, removing the requirement for authorised share capital.
Accountancy requirements are also reduced which, in many cases, means that companies incorporated under the 2006 Act can dispense with the requirement for an audit, which is a significant cost saving. There are also no capital maintenance requirements, apart from complying with a solvency test.
The distribution and buyback of shares can be done relatively easily and the act allows for the re-domiciliation of companies between different countries to happen quickly.
The 1931 Act remains a popular choice but does require a minimum of two directors and a company secretary and does not allow for corporate directors to act.
Neither act requires the directors to be based on the Island, but both require some form of local presence. The 2006 Act requires a licensed registered agent and the 1931 Act requires an Isle of Man-resident Nominated Officer, if there is not a licensed CSP already appointed.
The Island both benefits and suffers from a strong regulatory environment.
The Financial Services Authority (FSA) oversees licensed corporate service providers with the aim of making the Island a reliable, professional and trustworthy place to do business as well as minimising the risk of money laundering and financing of criminal activity being run through the Island.
As well as the FSA, the Gambling Supervision Commission (GSC) is a regulator specifically focusing on the gaming industry. Again, focusing on similar targets as the FSA, but extending also to player protection. The Isle of Man Online Gambling Regulation Act license is now regarded as a well-respected license for international gaming providers and the success of the industry is clear to see with the number of high-profile e-gaming business based here.
QUESTION THREE – What due diligence is required to be undertaken by company formations agents under anti-money laundering laws in your jurisdiction?
The Isle of Man has a reputation as a sound and well-regulated jurisdiction and this reputation have been earned partly as a result of the legislative framework for anti-money laundering and countering the financing of terrorism in place in the Isle of Man. Under this framework our regulators, the Financial Authority FSA), have defined Customer Due Diligence (CDD) procedures that all companies must follow to verify the identity of all a company’s clients. Identification documents must be provided for every client including, but not necessarily limited to, shareholders, beneficial owners, company officers (e.g. directors), trust instigators, trust protectors and trust beneficiaries.
The documentation required for an individual includes a photo ID, which is typically a certified copy of the person’s passport, driving licence or national identity card, and a proof of the residential address. The proof of address must be no more than six months old when it is received and cannot be a business address or P.O Box address.
All identification and address documents must be certified by a professional. For companies, certified copies of documents such as a certificate of incorporation or registration documents and change of name documents; memorandum and articles of association, or bye-laws; registered office details, place of business; register of directors, and details of any other authorised person(s); register of members; due diligence for the underlying principles are required. It is a requirement for us to identify the ultimate beneficial owner of all Peregrine clients.
For a trust, we require certified copies of documents such as an extract of the trust deed and any amendments; due diligence for the trustee(s), the settlor(s), for any person(s) whose wishes the trustees may be expected to take into account, any other parties including the protector(s) and enforcer(s), any beneficiaries who have benefited from the trust or at the time they come to benefit from the trust.