18 September 2017
Isle of Man Companies suitable for listing on AIM can be incorporated under two separate pieces of legislation:
The Companies Acts 1931 – 2004 (the “1931 Act”); and
The Companies Act 2006 (the “2006 Act”; a company incorporated under this Act is sometimes referred to as a “New Manx Vehicle” or “NMV”).
Since the coming into effect of the 2006 Act, a number of listings have used companies incorporated under this Act and it is expected that this trend will continue. Advantages of the 2006 Act include the following:
In general, companies incorporated under the 2006 Act are simple, flexible and easy to administer.
The 2006 Act does not make the traditional distinction between public companies (plc) and private companies (Limited). Any company may offer its securities to the public. However, the name of any company may include the words “Public Limited Company” or “public limited company” or the abbreviations “PLC” or “plc”. Indeed, there is the further option to use the words “Limited” or “Corporation” or “Incorporated” or the abbreviations “Ltd” or “Corp” or “Inc”.
The prospectus requirements under the 2006 Act are far less detailed than those under the 1931 Act. The directors are required to ensure any prospectus (called an “offering document”) issued in relation to the company (i) contains all material information that investors would reasonably expect to be included in order to enable them to make an informed decision and of which the directors 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 (ii) sets out such information fairly and accurately.
These less detailed requirements are nevertheless onerous; but it is likely they will be fulfilled by the process of drafting, finalisation and verification of the prospectus undertaken for the purpose of compliance with the AIM Rules. On the other hand, with a 1931 Act Company, additional information may need to be inserted in the prospectus in compliance with the prospectus requirements of the 1931 Act.
The traditional concept of capital maintenance has been dispensed with. A 2006 Company may make a distribution (whether dividend or share buy back) or provide financial assistance or undertake other share capital reorganisations, provided a simple solvency test is met.
Companies incorporated under the 1931 Act remain available for use as listing vehicles in a suitable case, for example where there has been a previous listing under this Act and the promoters wish to replicate the same structure.
It is possible to establish an Isle of Man company (whether a 1931 Act Company or a 2006 Act Company) on a same-day basis. If necessary, a company can be formed with standard articles of association (or even “taken off the shelf”) and suitable articles adopted later, prior to the listing.
Simcocks can prepare articles which meet the requirements of the AIM rules. The articles can have incorporated therein provisions (such as pre-emption and notification of interests in shares) which are not mandated by either the 1931 Act or the 2006 Act, thus ensuring that the company not only complies with the AIM rules but has the “look and feel” of a UK company.
Note that it is possible to redomicile or migrate companies originally incorporated elsewhere to the Isle of Man. In this respect, Isle of Man legislation exists for both 1931 Act companies and 2006 Act companies. Jurisdictions which allow migration out include Jersey, the British Virgin Islands and civil law European countries. Migration is deemed not to create a new legal entity, or to prejudice or affect the continuity of the company which was formerly a company incorporated elsewhere and becomes a Isle of Man company.
It is not necessary for the prospectus/admission document to be submitted to any regulatory authority for approval. Accordingly, there is no question of the timetable to listing being delayed by approval in the Isle of Man having to be obtained.
As a corollary, the company may undertake a preliminary marketing of its shares on the basis of a pathfinder prospectus (with the usual “red herring” language” appearing on its face) without any Isle of Man implications.
Isle of Man companies listed on AIM can use the CREST system to hold and transfer their shares and other securities in electronic or paperless form. The articles will provide for shares to be in uncertificated form and for title to be transferred by means of an instruction issued in accordance with the rules of the CREST system. An investor applying for shares may elect to receive them in uncertificated form if such investor is a system member (as defined in the Uncertified Securities Regulations 2001) in relation to CREST.
The City Code on Takeovers and Mergers applies to an Isle of Man company listed on AIM only if it is deemed by the Panel on Takeovers and Mergers to have its place of central management and control in the UK, the Channel Islands or the Isle of Man. Ordinarily, where central management and control of the company vests in the Isle of Man, promoters (and potential investors) will have the comfort of knowing the Code applies. However, application of the Code can be avoided if desired by ensuring central management and control vests elsewhere. If this is done, tax advice should be sought in the relevant jurisdiction.