Isle of Man:
A Practical Comparison Of The 1931 And 2006 Isle Of Man Companies Acts – November 2023
28 November 2023
Simcocks
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An Isle of Man Government press release of 2 August 2005
promised the creation of a new type of business friendly company
that would be simple and inexpensive to administer.
The Companies Act 2006 came into effect on November 1 2006
creating the 2006 Act Company. The 2006 Act operates in parallel to
the Companies Acts 1931 – 2004 which govern the traditional
type of company (a "1931 Act Company").
Several years into the existence of the 2006 Act Simcocks
Advocates sees the two different types of company as "horses
for courses". Which is more suitable for a particular
client's needs depends on the situation. A characteristic of
one type of company which might be an advantage in one situation
may be a disadvantage in a different situation.
Following enquiries from clients, Simcocks has prepared the
comparison table below setting out in summary form the
characteristics of each type of company. This table is not
exhaustive; it is intended as a practical guide and should not be
taken as a statement of the law on any matter. References in the
table to the Registry are to the relevant Isle of Man Department
whose functions will typically be carried out by the Companies
Registry, and references to the IoMFSA are to the Isle of Man
Financial Services Authority.
We hope that this paper is of assistance both to clients
deciding which type of company to use, and in working with each
type of company.
Incorporation and initial matters
2006 Act Company |
1931 Act Company |
May be incorporated as limited (by shares, by guarantee, or
hybrid) or unlimited (with or without shares) |
Same |
Memorandum and articles of association required |
Same |
Only licensed CSP may apply to incorporate a 2006 company |
No similar restriction |
Company has separate legal personality |
Same |
Subscriber shares required |
Same |
Constitutional documents
2006 Act Company |
1931 Act Company |
The memorandum may specify the majority or conditions required
to amend it or the articles |
75% voting majority required to amend articles |
The memorandum may authorise the directors to amend the
memorandum or the articles |
No equivalent |
The memorandum may restrict the company's activities in any
way (but without limiting its capacity) |
Only specified restrictions permitted (but without limiting the
company's capacity) |
Memorandum and articles and changes thereto must be filed with
Registry |
Same |
Name of company
2006 Act Company |
1931 Act Company |
No distinction between designations; can be
"Limited", "Ltd", "Incorporated",
"Inc" etc |
Private company designation is "Limited" or
"Ltd" and public company is "public limited
company" or "PLC" |
No distinction between private and public companies |
A company which may offer its securities to the public is a
public company and has additional requirements as to filings
etc |
Name is subject to Registry approval |
Same |
No equivalent |
Name must be displayed outside registered office |
Name, number and registered office must be in all written
communications |
Same |
Shares
2006 Act Company |
1931 Act Company |
Shares may be ordinary, convertible, redeemable, preference,
non-voting etc |
Same |
Shares may be issued with or without a par value |
Shares must have a par value |
Bearer shares prohibited |
Same |
Treasury shares permitted |
Same |
Directors may consolidate or divide shares |
Company in general meeting may consolidate or divide
shares |
Directors may redenominate shares in other currency |
No statutory provision to redenominate shares, and in practice
redenomination is complicated |
Share certificates optional |
Same |
Commissions at the rate decided by the directors may be paid
for subscriptions for shares |
Commissions for share subscriptions limited to 10% |
Statutory pre-emption rights may be applied by the articles to
the issue of new shares by the company |
No statutory pre-emption rights |
No filing requirement in relation to share capital |
Notice of consolidation or division of shares, or increase in
authorised share capital, must be filed with the Registry |
Class rights may be varied with the consent of the majority
stated in the articles or 75% voting majority |
Same, but 15% dissenters may apply to Court to disapply the
variation |
No share premium account is required |
Share premium account (undistributable) required |
No restriction on issuing shares at a discount |
Issue of shares at a discount must be approved in general
meeting and by the Court |
A purchaser which has acquired at least 90% of shares may
compulsorily acquire the shares of the dissenting minority |
Same |
Offering documents
2006 Act Company |
1931 Act Company |
Offering document is required to contain all material
information |
Same |
Directors may be liable for misstatement or omission in
offering document |
Same |
No equivalent |
Registry may direct a company to amend an untrue or misleading
statement in a prospectus by which securities are offered to the
public (unless private placement exemption applies) |
Filing of offering document optional |
Prospectus by which securities are offered to the public must
be filed (unless private placement exemption applies) |
Capital maintenance
2006 Act Company |
1931 Act Company |
Distribution of share capital permitted provided a solvency
test is satisfied |
Reduction of share capital not permitted without specified
shareholder and Court approval |
Company may purchase or redeem its own shares subject to the
solvency test and shareholder approval in certain cases |
Purchase by a company of its own shares is permitted subject to
shareholder approval and in some cases solvency and auditor
requirements |
Shares may be redeemed from any account provided the company
passes the solvency test |
Reserves from which redeemable shares may be redeemed are
restricted |
No equivalent prohibition (subject to the solvency test) |
Financial assistance for the acquisition of its own shares by a
public company prohibited |
No equivalent restriction (subject to the solvency test) |
Financial assistance for the acquisition of its own shares by a
private company not permitted if it reduces share capital or share
premium |
No restriction on share capital being reduced provided the
company satisfies the solvency test |
Reduction of ordinary share capital and share premium account
only with specified shareholder and Court approval |
Company may make any distribution to members it wishes (subject
to the solvency test) |
No equivalent; common law capital maintenance rules apply |
Wide statutory definition of "distribution" |
No equivalent |
Directors may be liable for distribution made when company did
not satisfy the solvency test |
Directors may be liable for dividend made when company did not
have distributable profits |
Solvency test is (i) able to pay debts in the normal course of
business and (ii) value of assets exceeds liabilities |
Concept of "solvency test" not applicable |
Members
2006 Act Company |
1931 Act Company |
Must have at least one member |
Same for private company (but a PLC must have at least two
members) |
Must keep register of members |
Same |
No notice of any trust may be entered on the register of
members |
Same |
The directors may rectify the register of members if satisfied
inaccurate, or rectification by the Court available if
necessary |
Rectification by the Court available if necessary to rectify
the register of members |
Members' remedies are provided by statute e.g. derivative
actions, conduct that is oppressive or unfairly prejudicial |
Members' remedies are largely a matter of common law (e.g.
exceptions to the rule in Foss v Harbottle) with a
statutory remedy for oppression |
Company may elect to file register of members; annual return
does not contain details of members |
No requirement to file register of members but annual return
must contain identity of members and shareholding |
No equivalent |
Statement that company has only one member must be entered in
register of members |
No equivalent |
Index of members required in certain circumstances |
Register of members open to inspection by a member, the IoMFSA
and the Attorney General |
Register of members open to public inspection |
Register of members prima facie evidence of title to
shares |
Same |
Meetings and resolutions of members
2006 Act Company |
1931 Act Company |
Shareholders exercise powers by resolution of simple (50%)
majority unless the articles specify a higher majority (this
applies to matters such as amending the articles and winding
up) |
Special or extraordinary resolution requiring 75% majority
required in certain cases (e.g. amending the articles, winding
up) |
14 days notice required for shareholder meetings, which may be
waived by 90% or smaller percentage stated in articles |
14 or 21 days notice required. Table A permits 95% of
shareholders to consent to short notice |
No equivalent |
Notice of general meeting must be given to auditor (if
any) |
Resolutions not required to be filed unless altering memorandum
or articles |
Special, extraordinary and certain other resolutions must be
filed |
10% of members may require directors to convene meeting |
Same |
Requisitionists do not have statutory power to convene meeting
in default of directors doing so |
Requisitionists have statutory power to convene meeting in
default of directors doing so |
Telephone or electronic meetings permitted by statute |
No equivalent but can be permitted by the articles |
Written resolutions permitted by statute |
Same, and it is also possible for the articles to permit
written resolutions |
Articles may specify the percentage of voting rights required
to pass written resolution |
Written resolutions using the statutory procedure must be
passed by all members entitled to vote on the matter |
No equivalent in relation to the statutory procedure |
Written resolution using the statutory procedure must be given
to the auditor who may refer it to general meeting (the procedure
in the articles need not require this) |
No requirement for AGM |
AGM must be held; except that the members of a private company
(not being a charity) may unanimously elect to dispense with
AGMs |
No equivalent |
Any member may rescind or suspend such election |
Court may order calling of general meeting if otherwise
impracticable to do so |
Same |
Member has no statutory right to inspect minutes of general
meetings and written resolutions |
Member may inspect minutes of general meetings and written
resolutions |
Minority protection
2006 Act Company |
1931 Act Company |
Remedy available in the event of oppression or unfair
prejudice |
Remedy available in the event of oppression or disregard of
member's proper interests as such |
Registered office and registered agent
2006 Act Company |
1931 Act Company |
Must have registered office in the Isle of Man |
Same |
Must have a registered agent in the Isle of Man which must be
licensed by IoMFSA |
No equivalent requirement |
Registered agent must give at least eight weeks notice of
resignation |
No equivalent requirement |
Accounts and accounting records
2006 Act Company |
1931 Act Company |
Company must keep accounting records and other documents at
office of registered agent or send copies every 12 months |
No equivalent requirement |
Company must keep reliable accounting records |
Same, with certain prescribed requirements |
Not required to prepare financial statements, but a member or
director may demand that they be prepared |
Required to prepare financial statements |
Member may inspect accounting records if company fails to
comply with demand that financial statements be prepared |
Member not generally entitled to inspect accounting
records |
IoMFSA and Attorney General entitled to inspect documents and
records |
No equivalent |
Not required to have financial statements audited unless
securities listed |
Required to have financial statements audited
unless exemption applies |
If financial statements audited, auditor must have the
statutory qualifications |
Auditor must have the statutory qualifications |
If financial statements prepared must give a true and fair view
and be in accordance with UK or US GAAP or IFRS |
Financial statements must give a true and fair view, must be in
accordance with UK or US GAAP or IFRS and contain prescribed
details of loans to and remuneration of directors |
No equivalent (but restrictions may apply to companies
regulated by the IoMFSA or IPA) |
Restrictions on limitation of liability of auditors |
Annual return
2006 Act Company |
1931 Act Company |
Must make annual return to the Registry of identity of
registered agent, registered office and directors |
Must make annual return to the Registry of share capital,
secured debt, registered office, directors and members (with
financial statements in the case of a PLC) |
Directors and officers
2006 Act Company |
1931 Act Company |
One director may execute a deed for the company |
Two directors or director and company secretary
required to execute a deed |
No requirement for company secretary |
Company secretary required, who must have a
prescribed qualification in the case of a PLC |
Must have at least one director |
Must have at least two directors |
Director may be a body corporate provided licensed as a
corporate services provider |
Corporate director not permitted |
Register of directors must be kept |
Same |
Register of directors open to inspection by members, IoMFSA and
Attorney General but not by the public |
Register of directors open to inspection by the
public |
No equivalent |
Company must state names of directors in all
official documents |
Directors must disclose interests in transactions |
Same |
Company may indemnify director who acts honestly, in good faith
and in what he believed was in the best interests of the
company |
Company may indemnify director but not for
negligence, default, breach of trust or breach of duty |
Company may buy D&O cover |
Same |
Company must file particulars of directors with Registry |
Same |
Director includes "shadow director" for certain
purposes |
Same |
Director may be removed by the directors (if articles permit),
by resolution (50%) in general meeting or written resolution by 75%
of shareholders |
By statute a special (75%) resolution is required to remove a
director, but the articles often allow removal by ordinary (50%)
resolution |
No equivalent |
Director entitled to be heard in general meeting on resolution
to remove him using the statutory power |
No equivalent |
Directors must disclose their audited remuneration over the
past three years if required by 25% of members |
No equivalent |
Contract between company and sole member who is also a director
must be recorded in writing or the directors minutes |
No equivalent |
Assignment of office by director must be permitted by the
articles and approved by special resolution |
Must keep minutes of meetings of directors and members |
Same |
Must inform registered agent where minutes of directors
meetings are kept (if not kept by registered agent) |
No equivalent |
Protected cell companies
2006 Act Company |
1931 Act Company |
Protected cell company limited by shares permitted |
Same |
Existing company limited by shares may convert to PCC |
Same |
May reduce share capital subject to the solvency test |
May reduce share capital with Court approval |
No equivalent |
Restrictions on transfer of cell assets (other than in the
ordinary course of business) without a "cell transfer
order" by the Court |
Same |
PCC must inform counterparty to a transaction that it is
dealing with a PCC and of the identity of the relevant cell |
Failure to so inform counterparty is an offence by the PCC (and
by any director who consented or was negligent in relation
thereto) |
Failure to so inform counterparty results in personal liability
for directors for that transaction, unless excused by the
Court |
No equivalent |
Cell cannot (without written consent of all members of that
cell) grant security in respect liabilities |
Charges/security
2006 Act Company |
1931 Act Company |
Company may but is not obliged to file security interests with
Registry |
Company must file specified charges with Registry |
Non-filing of a security interest means it will be void as
against a liquidator/creditor of the company |
Same, except that the charges which will be void as against a
liquidator/creditor are of a narrower class than "security
interests" |
Registry may file a security interest late provided winding up
has not commenced |
Application to Court required to file a charge late |
Company must keep a register of security interests, with a copy
at the registered agent's office |
Company must keep a register of charges |
Conversion
2006 Act Company |
1931 Act Company |
1931 Act Company may convert to a 2006 Act company with
shareholder consent |
2006 Act Company may convert to a 1931 Act company with
shareholder consent and certain other requirements |
Statutory merger
2006 Act Company |
1931 Act Company |
Statutory schemes of merger and consolidation permitted |
No equivalent |
Schemes of arrangement and takeovers
2006 Act Company |
1931 Act Company |
Schemes of arrangement permitted with Court approval |
Same |
Scheme approved by 75% of members/creditors (and classes
thereof) and sanctioned by the Court is binding on all |
Same |
Scheme must be filed with Registry within seven days of Court
approval |
Scheme not obliged to be filed with Registry, but Court
approval has no effect until filed |
A purchaser which has acquired at least 90% of shares may
compulsorily acquire the shares of the dissenting minority |
Same |
Takeover Code statutorily applied |
Same |
Redomiciliation
2006 Act Company |
1931 Act Company |
Foreign company may continue as a 2006 Act Company with
Registry approval |
Foreign company may continue as 1931 Act Company with Registry
approval |
Company may redomicile out of the Isle of Man with Registry
approval |
Company may redomicile out of the Isle of Man with Registry
approval |
No equivalent provisions |
Redomicile of insurance company is possible under the Insurance
Act 2008 |
Statutory declaration by registered agent (continuation) or
directors (discontinuation) required |
Advocate's certificate required |
Registry approval is administrative and takes about two days
(depending on workload) |
Registry approval is discretionary and in a complicated case
may take longer |
Liquidation and strike off
2006 Act Company |
1931 Act Company |
The 1931 Act applies in relation to liquidation |
Same |
Company may be struck off the register by Registry in certain
circumstances |
Same |
Registry may strike defaulting company off register; company is
then substantially disabled and will be dissolved after 6 years,
but can be restored on application within 12 years |
Registry can strike off inactive company which is then
dissolved, but can be restored on application within 12 years |
Company that has ceased to operate and has discharged all its
debts and liabilities can apply for administrative dissolution |
Same (except for public company) |
Inspector
2006 Act Company |
1931 Act Company |
Any member may apply to Court for the appointment of an
inspector to investigate the affairs of the company |
Members holding 33% (of a bank) or 10% (others) of issued
shares or Registry may apply to Court for the appointment of an
inspector |
No equivalent |
Members may by special resolution appoint an inspector to
investigate the affairs of the company |
Regulatory and capital markets
2006 Act Company |
1931 Act Company |
IoMFSA licensing policy 1 March 2023 states that the IoMFSA
will not normally grant a class 1(1) deposit taking licence to a
2006 Act Company unless in exceptional circumstances |
Not applicable |
The IoMFSA may grant other licences to a 2006 Act Company
subject to the company adopting certain 1931 Act requirements |
Not applicable |
Have been listed on AIM, NYSE and on other markets |
Listed on LSE main market, AIM and on other markets |
Pursuant to IoMFSA guidance note, may be an international
collective investment scheme if certain 1931 Act characteristics
adopted |
No equivalent IoMFSA guidance note |
The IoMFSA Insurers Authorisation Guidance states that it will
authorise 2006 Act companies subject to the company adopting
certain 1931 Act requirements |
Not applicable |
Registry filings
2006 Act Company |
1931 Act Company |
Memorandum and articles of association and changes to each |
Same |
Filing of offering document optional |
Prospectus by which securities are offered to the public must
be filed |
No equivalent |
Return of allotments of shares must be filed except by an open
ended investment company |
No equivalent |
Notice of consolidation, division or cancellation of shares, or
redemption of preference shares, must be filed except by an open
ended investment company |
No equivalent |
Notice of increase in authorised share capital must be
filed |
No equivalent |
Court order reducing share capital must be filed |
No equivalent |
Register of debentures open to inspection by
debentureholder |
Registration of security interests optional (see above) |
Specified charges must be registered |
Order for appointment of receiver of the property of the
company must be filed |
Order for appointment of receiver or manager of the property of
the company must be filed |
Annual return required of registered agent, registered office
and directors |
Annual return required of share capital, secured debt,
registered office, directors and members (with financial statements
in the case of a PLC) |
Resolutions amending the memorandum or articles must be
filed |
Special, extraordinary and certain other resolutions must be
filed |
Register of directors may be filed |
Register of directors must be filed |
Register of members may be filed |
No equivalent |
Registered office must be filed |
Same |
Registered agent must be filed |
No equivalent |
Certain documents in relation to statutory procedures such as
merger, consolidation, redomiciliation etc |
Similar |
No equivalent |
Various filings in relation to share buy-backs |
Functions of registered agent (2006 Act Company only)
Making application for incorporation |
Reserving a name |
Filing an offering document which the company elects to
file |
Receiving and registering stock transfer forms unless another
person has been appointed |
Give not less than eight weeks notice if it wishes to resign as
such |
May file notice of change of registered office or registered
agent |
Keep the constitutional documents, registers and accounting
records of the company at its office (or copies of those
documents) |
Either keep the directors' and members' minutes and
resolutions, or be notified where they are kept |
Service of documents on the company may be effected by being
sent to the registered agent |
Keep an imprint of the common seal (if any) |
Filing annual return |
Filing notice of release of a charge |
Applying to re-register a 1931 Act Company as a 2006 Act
Company |
Filing a scheme of merger or consolidation and making it
available for inspection |
Applying for consent to a foreign company being continued in
the Isle of Man |
Applying for consent to a 2006 Act Company being discontinued
in the Isle of Man |
Service of proceedings on a discontinued company or a director
may be effected on the registered agent |
Miscellaneous
2006 Act Company |
1931 Act Company |
Registrar may issue certificate of good standing |
No power to issue certificate of good standing but the Registry
will issue a certificate confirming the details held on the
register |
Definition of group similar |
Definition of group similar |
No equivalent |
Insurance company to prepare and post an annual statement in
prescribed form |
Registry fees
Registry fees for 2006 Act Company generally the same as for
1931 Act Company |
Isle of Man tax
2006 Act Company |
1931 Act Company |
Provided the company does not derive income from a banking
business or land in the Isle of Man, it is currently taxed at
0% |
Same |
The profits of the company may be attributed to and taxed on
Isle of Man residents |
Same |
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.
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