The Isle of Man operates two regimes – the traditional Companies Act 1931 and a more modern regime under the Companies Act 2006. These types of company exist in parallel with each other.
Companies incorporated under each Act can be used for asset protection and asset holding structures to hold luxury assets such as aircraft and yachts, property holding and management, succession planning structures to ensure that your wealth is preserved for future generations, trading companies and tech companies. Types of company that can be established are limited by shares, limited by guarantee, limited by guarantee and having a share capital and by having a share capital with unlimited liability, unlimited with or without shares.
There are distinct differences between the two Acts:
| 1931 Companies Act | 2006 Companies Act | |
| Directors | Minimum number of two Directors. Corporate Directors are not permitted. | Minimum number of one Director appointed within one month of incorporation. Corporate Directors are permitted however they must hold the appropriate fiduciary licence. |
| Members | Minimum number of Shareholders is one. | Minimum number of shareholders is one. |
| Capital requirements | Every company must state in its Memorandum the share capital with which it is to be registered and how that share capital is divided into shares. The usual number is £2,000. | No nominal share capital is required. |
| Secretary | Appointment of Company Secretary is required. | Appointment of Company Secretary is not required. |
| Registered Office | Local Registered Office | Local Registered Office |
| Registered Agent | Not required | A Registered Agent is always required and must hold a Financial Services Licence |
| Incorporation method | Submission of signed Memorandum and Articles of Association along with relevant form and fee. | Submission of Memorandum and Articles of Association and fee. All 2006 Act companies must have a Registered Agent in the Isle of Man who holds the appropriate licence and only Registered Agents can incorporate companies. |
Whilst companies incorporated under the 1931 Companies still have their place, those incorporated under the 2006 Companies Act offers a more modern and flexible vehicle as far as administration and statutory filing requirements are concerned, for example:
| 1931 Companies Act | 2006 Companies Act | |
| Annual Meetings | Must hold an AGM each year unless formally dispensed with. | No AGM requirement. |
| Accounts | Company must prepare annual accounts which are laid before the members in a general meeting within 6 months in the case of a PLC or 9 months of the accounting year end in the case of a private company | Whilst there is no requirement to prepare regular financial statements, a Company must keep reliable accounting records which correctly explain the transactions, enable the financial position to be determined and allow financial statements to be prepared. |
| Isle of Man Tax | Tax Return | Tax Return |
| Public Filings | Annual Return: Changes in Directors and Members are recorded in public record | Annual Return: Director changes are filed once a year when the Annual Return of the company is filed. Members are not required in public record. |
Transfer of Domicile
There is legislation in place which allows for the transfer of a company to the Isle of Man from another country. When a company is transferred to the Isle of Man it must cease to be registered in its current jurisdiction.
Foundations
Foundations are established under the Isle of Man Foundations Act 2011. Broadly speaking, Foundations generally fall into the following categories, although they can be established to embrace a wide range of purposes and objectives.
- Private Foundation – often used in planning succession management and family matters.
- Corporate Foundation – used for the continuity of business control and pension / employee benefit schemes.
- Charitable Foundation – generally formed to serve the philanthropic interests of the founder.
Foundations are independent self-governing legal entities established by an official body in the jurisdiction where they are set up. They are designed to hold an endowment provided by the founder for a specific purpose for the benefit of the beneficiaries. Like Trusts, Foundations are set up for the specific benefit of their beneficiaries and neither have shareholders.
Foundations can play an important role in the application of asset protection, succession planning and wealth management, although this will very much depend on the individual circumstances and outcomes required by the founder.
Isle of Man Trusts
The Trustee Act 1931 (as amended) provides the basis of Isle of Man legislation. There are many benefits for the use of a trust:
Asset Protection, consolidation, and management – placing geographically diverse assets into a trust as a single holding vehicle can help to provide centralised reporting and management. As such they can become an effective way to implement governance and succession structures that in turn streamline wealth protection and growth as well as transfer to future generations.
Succession planning – trusts provide greater flexibility for how an estate is distributed, subject to certain forced heirship rules. Trusts are often established to allow a second spouse to benefit from an estate during their lifetime whilst also ensuring that children from a previous marriage nevertheless receives the estate when the spouse dies.
Confidentiality – Assets are held in the name of the trustees, thereby keeping the identity and interests of the beneficiaries confidential.
Tax planning – Trusts may be used to reduce tax liability in some circumstances such as inheritance taxes.
Protecting minors – Trustees can be empowered to manage assets on behalf of children until they are experienced enough to take on management themselves, or to ensure funds are always available for education and other essentials.
Core differences between a trust and foundation are that a private Foundation is an independent self-governing legal entity while a Trust is a legal obligation between two parties. A private Foundation is registered and publicly recorded to the government while the specifics of a Trust are not normally readily available to the public. The assets of a private foundation are placed into the foundation on behalf of the beneficiary and not in the custody of any one person, while the assets of the Trust are placed in the custody of a trustee on behalf of beneficiaries.
Why the Isle of Man?
In short, the Isle of Man can offer you the ideal jurisdiction in which to start or relocate an existing business. As well as a highly desirable place to live and do business, the Island has a strong and vibrant community, a stable legal infrastructure and the longest serving unbroken parliament in the world and an attractive tax regime.
The Isle of Man has advantages for its residents with low-income taxes including a maximum income tax liability (a ‘tax cap’) of £200K per annum (jointly assessed couple is £400K maximum per annum) for high-net-worth individuals. Additionally, there are no inheritance, capital gains or wealth taxes.
Companies in the Isle of Man are subject to Income Tax on their profits. The standard rate of tax for most companies is 0%. However, profits derived from Isle of Man property are taxed at 20% and profits generated by banking and large retail businesses taxed are at 10%. There are no capital or inheritance taxes in the Isle of Man.
Boston Multi Family Office
Boston clients know the value of heritage – and so do we. From our beginnings as a single-family office, serving many generations, we have built our history and reputation by taking the time to know our families. We understand and protect their legacies and align ourselves with their ambitions.
Our Team – our people are our heart. They define our company, culture and our success. As a business we have an experienced management team who specialise in trust and fiduciary services. We are committed to ensuring we have the best culture to retain and attract the best staff, as well as retain and attract clients through long-term, meaningful relationships.
For more information about how we can help you visit our website www.bostonmfo.com