Isle of Man
is a very appealing investment destination for those who want to open offshore companies
, however it is also great for trading purposes with countries in the European Union because its legislation is based on the British one.
Foreign investors can set up several types of companies in the Isle of Man, however, the private limited liability company is usually their preferred choice because of the easy incorporation procedure. Even so, starting such a business implies a few requirements, one of the most important ones being the appointment of a director. For this purpose, the Business Act in the Isle of Man accepts nominee directors for private companies.
Definition of nominee directors and their appointment in the Isle of Man
Nominee directors are persons or companies who can take on the role of company managers for a business in the Isle of Man. These will act as trustees and will be appointed by the shareholders based on a contract which clearly defines their role and attributions.
Nominee directors will fulfill some of the roles taken by a company manager, among which:
- to act in good faith of the company and the shareholders;
- to report to the shareholders and other persons of interest in the company;
- to maintain confidentiality;
- to take on their role up to the freedom acknowledged in the contract.
The role and attributions of an Isle of Man nominee director
The nominee director is appointed both for the purpose of allowing for a high degree of investor confidentiality and also for the purpose of having an appointed individual who will observe the best interest of the company.
He can be referred to as a third-party director who, in essence, will be unrelated to the company’s real beneficial owner but will be the one who will appear on the company’s incorporation documents. Some of the issues to take into consideration when deciding to appoint a nominee include the following:
- Conflict of interest: this can arise between the nominee director and the company or between the nominee director and the appointer; special measures and contractual clauses can be included in order to allow for a preferred dispute resolution method.
- Liability: nominees bear full liability, just as any regular company director in the Isle of Man; the nominee should always remember this and act accordingly.
- Access to company information: the nominee is entitled to have full access to the company information, for the purpose of performing their duties; the beneficial owners should remember this aspect.
- Acting in good faith: the nominee director can be bound by fiduciary duty and it is expected that he will act in good faith and reasonably in all cases.
A nominee director will be appointed for the purpose of representing the beneficial owner in the Board of the company and also to offer a separate identity in the company documents (for those investors who wish to remain anonymous). While this is a process that will run smoothly, a conflict of interest can arise through the very nature of appointing a different individual. Like all company directors, nominees are expected to focus on the best interest of the company and here a difference of opinion, and thus a conflict of interest may arise when the beneficial owner and the nominee directors have diverging opinions. In general, it is recommended to accept that the nominees will engage in all and any needed activities that will help them to perform their duties for the wellbeing of the company. In all cases, the nominee director should consider how a conflict of interest can be resolved without breaching any of his duties.
Direct and indirect company control
Investors in the Isle of Man can either choose to have direct control over their company (when the beneficial owner remains the company director) or, as previously stated, appoint a nominee director and thus have a company with indirect control.
The main advantages of having direct control include maintaining the usual, simpler organizational structure for an Isle of Man company. Moreover, this is preferred for those investors who wish to have lower annual maintenance costs (that will not include the fees for the nominee director services). However, there are a set of disadvantages for the direct control, or otherwise said, a number of advantages for appointing a nominee director:
- confidentiality: benefiting from a higher degree of confidentiality is one of the main reasons why investors choose to seek nominee director services; owners who do not wish to make their position as company directors public can take advantage of this service.
- no tax issues: being the beneficial owner of a company in another jurisdiction can have a number of tax implications for the owner; appointing a nominee will mean that the beneficial owner will not need to declare the fact that he owns a business in another jurisdiction.
- adjustable attributions: the actual involvement of the nominee director in the company can be adjusted when deciding to use this service and a power of attorney can be used to formally appoint (and limit the powers) of the nominee.
The level of involvement and management from the beneficial owner can be adjusted so as to meet the needs of the company, and at the same time take into consideration the reasons for personal confidentiality, should this be required. As far as the taxation issues are concerned, we do recommend to consider all of the tax implications when starting to do business in the Isle of Man and one of our agents can help you with information on double taxation as well as any other questions you may have about direct and indirect company control.
Nominee director services in the Isle of Man
Even if resident company managers or directors are not a mandatory requirement when opening a company in Isle of Man, a resident representative who keeps in contact with the local authorities is required. This role can be very well taken on by a nominee director. He will be the one who will engage in the daily activities of the company and whose services can greatly improve the representation and overall management of the company. Using a proper third-party director service can be useful for keeping in mind the best interests of the company and at the same time meet the needs of foreign investors who are looking for a certain degree of confidentiality.
Our local advisors offer nominee director services in the Isle of Man and will assist foreign investors to the extent of their needs. The services will be provided based on a contract which will clearly define the attributes assigned to the Isle of Man nominee director.
For nominee director services
and assistance in setting up a business in Isle of Man
, please feel free to contact us