Once the type of corporate structure has been chosen for your business, the next step is to incorporate the said structure. “Incorporation” is the process by which a company becomes a legal entity, separate to that of its members or directors.
As discussed in more detail in Part 1 of this article series, “Choosing a Structure”, there are two main regimes under which a company can be incorporated either as a 1931 Act Company or a 2006 Act Company. Each of these structures have distinct requirements when looking to incorporate a company, and the necessary steps and considerations are outlined in the table below.
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1931 Act Company |
2006 Act Company
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| Choosing a Company Name
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The first step in incorporating a company is to decide what the company will be named. There are certain restrictions that apply to both a 1931 Act Company and a 2006 Act Company in regards to choosing the company name.
The Company and Business Names etc Act 2012 (the “Names Act”) sets out the full parameters and restrictions in relation to company. However, in short, the Names Act restricts the use of company names which would contravene an enactment (go against an Act of Tynwald), is identical to another company name or is so similar to another company’s name that it would be likely to confuse or mislead, it contains a restricted word or phrase (as set out in more detail under the Company and Business Names (restricted words and phrases) Regulations 2013) or the Companies Registry considers the name as being undesirable.
The Isle of Man Companies Registry have a “Check Name Availability” search function which you can use to determine if your chosen name is available. It is also worth bearing in mind that you can make an application to reserve a company name which will last for a period of up to 3 months and can save a lot of time and money ensuring that this matter is finalised and secured before progressing with other aspects of incorporation/setting up the business.
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| Business Name | A company can also apply to Companies Registry for a business name which is required if a company wants to use a name that is in any way different from its full corporate name. For example, if ABC Limited was incorporated but wishes to advertise using the name ABC Builders.
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| Application Process | In order to incorporate a 1931 Act Company certain documents are required to be submitted to the Companies Registry:
· Form 1 This must contain details of the following: o Registered office (must be in the Isle of Man – see below); o Nominated officer (must be a resident in the Isle of Man) o First directors (minimum of two and cannot be corporate directors i.e. must be individuals) o First secretary (can be an individual or a corporate entity); o Presenter (details of the person presenting the application for incorporation who must be resident in the Isle of Man); and o Signed by all officers and subscribers (first shareholders/members). · Memorandum of Association · Articles of Association
The process is slightly different for a public company due to a number of reasons but most importantly the requirement to file a prospectus/statement in lieu of prospectus.
Verification Checks
From October 2023, where an application for incorporation is not submitted by a licensed corporate service provider, a verification check (production of certain due diligence documents) is required for both the identity of the company officers and the person making the application, as well as verification of the address of the registered office.
Once accepted by Companies Registry a certificate of incorporation will be sent to the registered office of the Company. |
When incorporating a 2006 Act Company the application must be processed by the person named as the first registered agent of the Company. Companies Registry will not accept an application made by any other person.
The proposed first registered agent is required to submit the company’s Memorandum and Articles of Association to the Companies Registry.
Companies Registry will then consider whether the company name is acceptable and, upon approval, register the documents and incorporate the company.
2006 Act Companies are not required to have appointed any directors at the time of incorporation, however at least one director (which can be a corporate entity unlike a 1931 Act Company director) must be appointed within one month of incorporation. |
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| Governing Documents |
Memorandum of Association
This document must contain certain matters as required under the relevant Act including (amongst others) details of the type of company, if the company has a share capital, the agreement of each subscriber (first member) of the company to take one or more shares, the amount taken, or if the company is limited by guarantee the agreement of each subscriber to become a member.
In the case of a 2006 Act Company, it must also contain details of the first registered agent.
Articles of Association
This document details the internal “rules” of the Company, which includes provisions relating to dealing with any share transfers, appointment and resignation of directors, board and member meetings, the passing of written resolutions along with many other provisions that determine the framework for the Company.
· 1931 Act Company A Company can either have bespoke articles drafted or can adopt model articles (either completely or with amendments) that are set out in the Companies (Memorandum and Articles of Association) Regulations 1988 for the various types of company (i.e. limited by shares, limited by guarantee etc..)
· 2006 Act Company A Company can either have bespoke articles drafted or can adopt model articles (either completely or with amendments) that are set out in the Companies (Model Articles) Regulations 2006 for the various types of company (i.e. limited by shares, limited by guarantee etc..).
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Registered Office
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A physical address located in the Isle of Man must be listed as the registered office address for both a 2006 Act Company and a 1931 Act Company in their Memorandum of Association.
Companies Registry will also require further confirmation from the individuals involved in a 1931 Act Company incorporation if the registered office appears to have no direct association with those individuals.
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| Other practical considerations | Type of Company
A 1931 Act Company is effectively self-managed by the directors/secretary (although a company can engage the services of a corporate service provider to provide directors) and therefore these officers are responsible for the administration and all filings of the company.
A 2006 Act Company on the other hand is required to engage the services of a registered agent who usually attends/is required to attend to the various filings of the company. The balance of the administrative burden of a 1931 Act Company compared to the additional cost (but low maintenance) of a 2006 Act Company is often a consideration of many when incorporating a company in the Isle of Man.
Bank Account
When incorporating a company it is also usual to set up a bank account in the company’s name. Consideration should be given as to authorised signatories on this account (it is often sensible to choose more than one).
Registration as employer/data controller
Depending on the nature of the business to be undertaken by the company, the company may also be required to register as an employer/data controller with the relevant authority/government department.
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Fees
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The fees for incorporating both a 1931 Act Company and a 2006 Act Company are as follows:
– ‘Standard Incorporation’, to be considered within 48 hours – £100 – ‘2 hour incorporation’ – £250 – ‘While you wait incorporation’ – £500
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| Registers | Both types of companies are required to keep registers and so these should be set up with regards to directors, members and charges. | ||
The above table covers some of the main requirements and considerations when incorporating a company, however it is by no means conclusive. There are numerous other factors which should also be considered on a case by case basis depending on the specific type and structure of the company.
If you would like further information on this subject please contact Kim Emery or Rachel Winterbach.
Kim Emery
Disclaimer
The information and/or opinions contained in this article is necessarily brief and general in nature and does not constitute legal or taxation advice. Appropriate legal or other professional advice should be sought for any specific matter. Any reliance on such information and/or opinions is therefore solely at the user’s own risk and DQ Advocates Limited (and its associates and subsidiaries) is not responsible for, and does not accept any responsibility or liability in connection with any action taken or reliance placed upon such content.
