Isle of Man Companies Act FAQIsle of Man 1931 Act Companies
1931 Companies Act FAQs
Simple answers to some common technical questions…
How many directors does my 1931 Act company require ?
s18 of the 1982 Act requires 1931 Act companies to have 2 directors. They must be natural persons – corporate directors are not permitted under the ‘31 Act. Under s19 it is an offence for a company to have less than 2 directors for more than 3 months.
What activities does my company have the power to undertake ?
S2(1) of Part 1 of the 1986 Act, 1931 Act provides companies with “all the rights, powers and privileges of an individual.” so they can do anything that a natural person can do. That said, you will need to check if the proposed activity is licenceable under our financial services legislation or is restricted by some other laws.
Does my 1931 Act company have a requirement to prepare accounts ?
Yes, under the 1931-2004 Act the accounting requirements are quite prescriptive – see Part 1 of the 1982 Act. Basically a company needs to prepare accounts under “generally accepted accounting principles or practice which is defined as UK GAAP / US GAAP or IFRS.
Does my Company require an Audit ?
Not necessarily….the Companies Act 1931 Companies (Audit Exemption) Regulations 2007 permits private companies to be exempt from Audit, subject to the following conditions:- (a) Agreement by 100% of the members and (b) at least two of the following three conditions being met: (i) turnover <£5.6m (ii) Balance sheet total <£2.8m (iii) <50 employees. Usually the audit exemption is included within the Articles.
Does my company need to hold an Annual General Meetings (‘AGM’) ?
Generally, yes see s111 of the 1931 Act which says, an AGM shall be held within 15 months of incorporation of the Company and then at least in every calendar year.
However, The Companies Act 1931 (Dispensation for Private Companies) (Annual General Meeting) Regulations 2010 permits private company to elect, via special resolution, to be dispensed from the requirement to hold annual general meetings.
How can the shareholders remove a Director ?
Notwithstanding anything in the Articles or any other agreements, s141A of the 1931 Act permits the shareholders to remove a director by the passing of a Special Resolution.
It’s still a pretty awkward process as notice for the meeting can’t be waived – even if all the shareholders agree and the director has a right to speak at the meeting.
What information is my company required to show on its letterheads and in Email correspondence ?
s94A & s144 of the 1931 Act requires that the following information is included within a business letter: (a) Company number and that it is registered in the Isle of Man (b) Registered office address (c) If the Company is a limited company that has been granted a licence omit the word Limited from its name (eg a Charity) then it must state that it is a limited company. (d) If the Company states its share capital, it must state the ‘paid up’ amount. (e) The names of each of the directors of the Company – and in certain limited cases their former names (if any). Note – Nationalities of directors are no longer required to be shown on letterheads.
What are the requirements for the company to validly execute official documents such as deeds on behalf of the Company ?
See s29A of Companies Act 1931. Some latitude has been introduced but the most sensible option is to have documents executed by two directors or director and the company secretary as per s29A(4).
Can I Re-register my 1931 Act Company as 2006 Act Company.
Yes, you can ! s16A allows a 1931 Act company to re-register under the 2006 Act. The process is straightforward and inexpensive.
How do I dissolve my 1931 Act Company ?
Solvent companies, which have ceased to operate and are no longer required may apply to be removed from the register by making an application to the Registrar of Companies pursuant to s273a of Companies Act 1931.
Alternatively, a liquidator can be appointed and a liquidation performed. Generally the s273 process is preferred as it’s far more straightforward and much less expensive.
Who should sign the balance sheet of a 1931 Act Company ?
Under s8(1) of the 1982 Act it is a criminal offence for a company to circulate a balance sheet unless signed by 2 directors (beware !).
Can I reduce the share capital of my Company ?
s56 of Companies Act 1931 permits the reduction of share capital of a 1931 Act Company – subject to (i) consent by the Court and (ii) Consent of its members by way of a special resolution.
Note – much easier under the 2006 Act as no court order is required.
What is a Special Resolution ?
A resolution passed by a 75% majority at a meeting which has been duly convened with no less than 21days notice. Shorter notice is permitted with consent of all members. See s116 of the 1931 Act.
We have a small number of shareholders - do we have to hold formal meetings ?
No – formal shareholders meeting are not always required. S118A permits private companies to pass members resolutions in writing if they are consenting to, in writing, by all members.
Note: this section does not apply to passing a resolution for the removal of a Director or Auditor- see Schedule 6A(2)(a) & (b)).
My Company is owed by a Trust - shall I put the name of the trust in the share register and on the share certificate ?
No, don’t do that. s102 of the Companies Act 1931 prohibits entering details of any trust in the register of members.
i.e only the legal owners should be entered.
I want the directors to call a meeting of the shareholders - how do I get them to do that ?
s133 of the 1931 Act permits a shareholder(s) exercising 10% of the voting shares to direct the directors to call a members meeting. If the directors do not call the meeting within 21days of the date of the requisition then the members may call a meeting themselves.
I am a director of a Company which is going to enter into an agreement with another company that I have an interest in. Is that allowed ?
S148 of Companies Act 1931 requires a director who is in any way, whether directly or indirectly, interested in a contract or proposed contract with the company to declare the nature of his interest at a meeting of the directors of the company. (Penalty; fine upto £5000). However, directors are permitted to enjoy the benefit of any Interest provided it has been properly disclosed.
Does the Company need to keep records of its directors and shareholders meetings ?
Yes, s119 of Companies Act 1931 requires minutes to be kept of both directors and members meetings.
Some 1931 Act companies seem to have very short Articles of Association - whereas others run to many pages - What’s going on ?
Some 1931 Act share capital companies adopt Articles of Association follow Table A either directly or in modified form. This means that they don’t state all their articles themselves in their constitutional documents – just the differences between their Articles and table A.
It’s confusing and not recomended but it saved time typing before the age of computers.
You can find table A in the First Schedule of the Companies Act 1931 (starting on page 195).
Are the shareholders entitled to see the Company’s annual financial statements ?
Yes, always – notwithstanding any exemption from holding AGMs or laying accounts, under s11 of the 1982 Act – shareholders are entitled to receive copies of the accounts.
I am a shareholder, what are my rights to look at the Company’s books ?
s120 permits members to inspect the minutes of proceedings of any general meetings of the Company free of charge. S74 permits Debenture holders and shareholders to inspect the debentures register. s99 permits inspection of the register of members by any member and any other person on payment of a reasonable sum. s143 permits the inspection of the register of directors of the company by any members and by any other person on the payment of a reasonable charge.
I am a director, what are my rights to look at the Company’s books & records ?
Directors are entitled to see all the company’s books and records. Specifically, s98 of the Companies Act 1931 requires the books of account to be available for the inspection of directors.
What’s the difference between a private and a public company ?
According to s26 of the 1931 Act, a Private Company is a Company whose Articles prohibit any invitation to the public to subscribe for any shares or debentures and whose memorandum states that it is a Private Company’s
My PLC is going to raise money from the public against a prospectus. Where do I find the rules for that ?
Requirements relating to the issue of a Prospectus are set out s34-38 of the Companies Act 1931 and have been hugely simplified from the previous requirements. In summary, the information must be sufficient, fair and accurate so as to enable the recipient to make an informed investment decision. s38 requires 1931 Act companies to file a copy of the prospectus with the Registrar of Companies.
Some charitable companies don’t use the word limited in their name. How come ?
Under s18 of the 1931 Act, in cases where a company is formed for Charitable or with other ‘useful objects’, the Attorney General may issue a licence permitting a private company to dispense with the word ‘Limited’ in a company name.