Company Formations - an IR Global feature

Company Formations – an IR Global feature - A jurisdictional guide to setting up a business.

Please list your top 3-5 reasons why your jurisdiction is a good place to establish a company/key points to consider.

Support for start-up businesses

The Island’s Government invested over £4.5 million in local businesses last year alone. The Island has developed the infrastructure to provide the support that new start-ups need, including; assistance and support schemes from the Government targeting entrepreneurs establishing a business here on the Island.

Tax Regime

The tax regime is favourable on the Island with 0% corporation tax for most businesses. Personal tax rates are also relatively low with a lower band of 10% and a higher band of 20%. There is also a tax cap available for high earners to limit the amount of income tax payable.

Advanced infrastructure

The Isle of Man has world-class connectivity with an excellent telecoms and power infrastructure which has benefitted from hundreds of millions of pounds worth of public and private sector investment in recent years and which has helped develop the e-gaming industry on the Island.

Global transport links

We have excellent transport links taking us to and from various location round the UK and Ireland via aeroplane or a ferry. In terms of travelling time, if you would like to travel to the UK, you can be in Liverpool or Manchester within 20 minutes, or if you are travelling to London, you can be there within 60 minutes. It’s easy and generally inexpensive to get to your preferred destination.

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% 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 ownership.

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.

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-residents 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”) overseas 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 focussing on the gaming industry. Again, focussing 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.

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 has 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 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 such as; a lawyer or notary public; an accountant; a member of the judiciary, or a serving police or customs officer; an officer of an embassy, consulate or high commission of the country of issue of the document being certified; or a director, company secretary or board member of a business regulated by the Isle of Man Financial Services Authority or a regulated financial services company in an equivalent country.

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 benefitted from the trust or at the time they come to benefit from the trust.

To read the full feature, please download it here.

Peregrine Corporate Services Limited is licensed by the Isle of Man Financial Services Authority.

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