Companies Act requirements for offers to the public.

Background

Fundraising by way of public offers / crowdfunding.

The requirements for Isle of Man companies making offers to the public vary depending on whether you are operating via a 2006 Act company or one formed under the 1931-2004 Acts.

Either way we suggest legal advice is taken before proceeding. However, set out below are extracts of the relevant parts of the applicable legislation together with some comments.

Companies formed under the 1931 Act,

It is important to note that s26 of the 1931 Act prohibits private companies from making invitations to the public to subscribe for any shares or debentures. As a result, fund raising by way of a public offer is only available to Public companies. 

Section 35 of the 1931 Act is the relvant part which details the Prospectus requirements and the most important part is set out below for reference:-

35 Prospectus to contain material information

(1) The directors of a company or (in the case of a company yet to be incorporated) the proposed directors shall ensure that any prospectus issued in relation to such company shall —

(a) contain all material information relating to the offer or invitation which the prospectus contains in it —
(i) that the intended recipients would reasonably expect to be included in it in order to enable them to make an informed decision as to whether or not to accept the offer or make the application referred to in it; and
(ii) of which the directors or proposed directors (as the case may be) were aware at the time of issue of the prospectus, or of which they would have been aware had they made such enquiries as would have been reasonable in all the circumstances; and
(b) set out such information fairly and accurately.

The rest of the section is available here.

Companies formed under the Companies Act 2006 

There is no concept of public / private companies under the 2006 Act, consequently all 2006 Act companies are entitled to make inviations to the public (subject to any other securities laws inside or outside the Isle of Man that may be relevant).

Section 45 of the 2006 Act is the relevant part – again the most important part is set out below for reference.  

45 Offering documents

(1) The directors of a company or (in the case of a company yet to be incorporated) the proposed directors shall ensure that any offering document issued in relation to such company shall —
(a) contain all material information relating to the offer or invitation contained therein —
(i) that the intended recipients would reasonably expect to be included therein in order to enable them to make an informed decision as to whether or not to accept the offer or make the application referred to therein; and
(ii) of which the directors or proposed directors (as the case may be) were aware at the time of issue of the offering document, or of which they would have been aware had they made such enquiries as would have been reasonable in all the circumstances; and
(b) set out such information fairly and accurately.

The rest of the section is available here

Conclusion.

The legislation under both Acts is quite consistant. In reality the 1931 Act was simplified (substantially) to mirror the principles based approach that had been successfully employed under section 45 of the 2006 Act.