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6 November 2006
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2006 has been another key year for the progressive development of the Isle of Man's finance industry. In April the territory moved to a zero rate of taxation for virtually all companies and introduced a tax cap on personal income.
In the meantime, the popularity of Isle of Man companies for use on the AIM and Official List markets has continued apace. Recent high-profile listings have included mining outfit Nikanor and more recently Lamprell. Indeed, some 50 Manx plcs are now quoted and the Isle of Man has become the most commonly used offshore jurisdiction for AIM-related work.
New companies legislation
The Isle of Man government will, on 1 November, implement the biggest shake-up in Manx company law for 75 years with the introduction of the Companies Act 2006.
The act provides for the new Manx corporate vehicle (NMV) to coexist with present and future companies incorporated under the existing legislation. It has been reviewed by off-island experts from a practical company law perspective and, in the context of the island's current and likely future obligations, in terms of international standards.
There are many similarities with the international business company model promoted successfully by jurisdictions such as the British Virgin Islands. However, although the NMV is more streamlined and relevant to the needs of modern business than the existing corporate vehicle, some of the safeguards as to administration and corporate governance developed over time in the Isle of Man will continue to apply to the NMV.
There are key legal features of the new act:
Administration and corporate governance
Some of the key administration and corporate governance features of the new act include:
Ease of regulatory approval
One of the useful features of the new act is simplified offering document requirements. Under the old legislation, most UK listings of Manx vehicles were able to take advantage of private placement exemptions, which meant that no Isle of Man regulatory approvals were required as part of the listings process. The ability to list an Isle of Man company without the need for prior regulatory approval (in contrast to some other competing offshore jurisdictions) has been a major selling point for the island.
The lack of direct regulatory approval continues under the new act. The prospectus /offering document requirements in the act are less prescriptive and more simple. From now on directors need only ensure that any offering document contains all material information relating to the offer or invitation, including:
It should be noted that the act is a baseline for companies. Some businesses will be happy to use the NMV with the standard model 'Table A'-style memorandum and articles. Others, however, will require bespoke documentation, for example when listing vehicles or in funds/private equity/joint venture scenarios. It will, of course, remain feasible to tailor a company's articles to give the company a more 'English' feel and thus meet the expectations of institutional investors and businesses.
Initial discussions with London-based law firms suggest that investment banks, institutional investors and their advisers will be comfortable dealing with the NMV.
Daniel Mackelden is head of Cains' London office