Whether for administrative, tax, confidentiality, substance or other reasons, the ability to re-domicile a company into – or out of – the Isle of Man is a useful feature of Isle of Man Companies legislation.
Appleby routinely receives instructions to assist foreign incorporated companies wishing to migrate into the Isle of Man. Increasingly, the Isle of Man is regarded as a safe, well-regulated and respected offshore jurisdiction compared to some of its competitors and an Isle of Man company is often deemed a more acceptable vehicle for banks to lend to or to be listed on international stock exchanges.
CONTINUING IN – A CHOICE OF LEGISLATIVE REGIMES
Your company can be re-domiciled to the Isle of Man under either the Companies Acts 1931 – 2004 (1931 Act) or the Companies Act 2006 (2006 Act). We do not consider the relative merits of each regime in this article, other than to note that a foreign company will follow different procedures to continue into the Isle of Man successfully, depending on the type of company that you want at the end of the process.
Any foreign company can apply to be continued into the Isle of Man:
a. except those carrying on insurance or other prescribed business (where you have to elect to transfer under the 1931 Act); or
b. under the 2006 Act, unless:
- the laws of the jurisdiction in which it is currently incorporated do not permit it to be continued in the Isle of Man. Reciprocal legislation must be in place allowing the foreign company to be discontinued in its jurisdiction of incorporation and continued in the Isle of Man;
- it is in liquidation or subject to insolvency or analogous proceedings in any jurisdiction;
- a receiver or manager has been appointed in relation to any of its assets;
- it has entered into an arrangement with its creditors that has not been concluded;
- an application made to a court in any jurisdiction for its liquidation, insolvency or analogous proceedings has not yet been determined; or
- it fails to satisfy the solvency test set out in section 49 of the 2006 Act. A company will satisfy the solvency test if it is able to pay its debts as they become due in the normal course of the company's business and if the value of the company's assets exceeds the value of its liabilities.
Before making a formal application, a foreign company's officers should also consider:
- where your company proposes to carry out an activity that is licensable in the Isle of Man, contacting the appropriate regulator in advance to ascertain the appropriate licence or consent that is required;
- reserving the proposed company name to ensure availability and that it is acceptable to the Isle of Man Registrar of Companies;
- whether the company's existing articles of association should be tailored or standard form model articles can be adopted;
- gathering the consent of any charge holder prior to the continuation application being made; and
- (in respect of 2006 Act companies only), appointing a registered agent.
You will, of course, also need to comply with all the requirements to "continue out" of the company's current jurisdiction and obtain proof that the company has obtained all necessary authorisations in that jurisdiction. Often, that takes the form of a legal opinion from a law firm qualified to practice in the jurisdiction addressed to the Isle of Man Companies Registry (Registry).
An application for consent, in the prescribed form, is submitted to the Registry (in the case of a company applying under the 2006 Act, the application must be made by the company's first registered agent) and is accompanied by:
a. in all cases:
- the relevant fee;
- articles of association to be adopted by the company on continuation;
- statutory forms in respect of each outstanding charge, if any, and the written consent of the charge holders; and
- authorisation to discontinue in the country of incorporation; and
b. for companies continued under the 1931 Act only:
- a memorandum of continuance (including (i) the memorandum to be adopted by the company on continuation, (ii) details of the proposed officers, registered office and outstanding charges (if any) and (iii) a breakdown of the nominal and issued share capital (if any));
- audited financial statements of the company prepared up to a period less than one year before the application date or evidence that the company is not required by law to have its accounts audited, along with its unaudited accounts;
- copies of notices published in two newspapers published and circulating in the Isle of Man, showing the name of the newspaper and the date of publication;
- an advocate's certificate;
- a statement of nature of the company's current business;
- an organisation chart identifying the company and any subsidiary, parent or ultimate holding company (if applicable);
- certified copies of the company's certificate of incorporation and memorandum and articles of association; and
- where the company is a subsidiary of another company, a copy of that company's accounts made up to a date not more than fifteen months before the application date; or
c. for companies continued under the 2006 Act only:
- memorandum (complying with the requirements of the 2006 Act) to be adopted by the company on continuation; and
- statutory declaration – rather unusually this has to be sworn by a representative of the newly appointed registered agent and confirms the points mentioned above, including that the company is not in liquidation and that it is able to satisfy the solvency test. Clearly the registered agent (who may not have any prior knowledge of the company) will need to ensure that it is provided with the necessary information and comfort so that it is able to swear this declaration.
Consent and Registration
If an application is approved, the consent issued by the Registry will, subject to there being no material change in the information provided, be valid for 3 months (in the case of applications under the 1931 Act) or 12 weeks (for the 2006 Act) from its date. During the consent period, the registration procedure must be completed, including registering the memorandum of continuance (for a 1931 Act company) or memorandum and articles (for a 2006 Act company).
In practice, these final documents can be delivered immediately after the consent has been provided so the whole procedure can be finalised relatively quickly.
Following the continuance of a foreign company:
- the company ceases to be registered in its current jurisdiction;
- the property of the foreign company continues to be the property of the continued company;
- the continued company continues to be liable for the obligations of the foreign company;
- any existing cause of action, claim or liability to prosecution in respect of the foreign company is unaffected;
- any civil, criminal or administrative action or proceeding pending by or against the foreign company is unaffected; and
- any conviction against, or any ruling, order or judgment in favour of or against the foreign company may be enforced by or against the continued company.
The continuation shall not be deemed to:
- create a new legal entity, or
- prejudice or affect the continuity of the body corporate which was formerly a foreign company and becomes a continued company.
There may, of course, be other loose ends that need to be tied up in the jurisdiction from which the company has continued out, but these will be specific to the laws of that jurisdiction.
Incoming companies must now also give consideration to whether new economic substance requirements relevant to resident corporate taxpayers are applicable.
The Isle of Man government (complying with EU regulations) has approved legislation in relation to new substance requirements which came in to effect for accounting periods starting on or after 1 January 2019. Isle of Man tax resident companies deriving any income from:
- Fund management;
- Financing and leasing;
- Operation of a holding company;
- Holding of intangible property; or
- Distribution and service centre business,
must have adequate substance in the Isle of Man. In effect, this means that a relevant company must:
- be managed and directed in the Isle of Man;
- have an adequate number of qualified employees on the Isle of Man;
- have adequate expenditure on the Isle of Man, proportionate to its level of activity on the Island;
- have an adequate physical presence on the Isle of Man; and
- conduct its core income generating activity on the Isle of Man.
Appleby's Isle of Man office is able to assist companies wishing to move into and out of the Isle of Man. If the company in question is a BVI company or an Isle of Man company wishing to migrate to the BVI, we are also able to advise on both sides of the procedure from this office helping to keep the process as streamlined as possible.
Additionally, if your company is based in one of our other jurisdictions where we have offices (Bermuda, Cayman, Guernsey, Jersey, Mauritius or Seychelles), we are able to work closely with our colleagues based in that office to ensure that a seamless service is provided.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.