2006 Company Act
Setting up and operating a limited company carries many obligations and understanding the different types of company which are available and the responsibilities which inevitably go hand in hand when forming and operating a company are important first steps towards company incorporation.
The information contained on this website is intended to provide you with a brief introduction to these first steps and should be read in conjunction with the relevant legislation.
Limited liability status is designed to assist economic development by encouraging business and promoting investment by providing the owners of a company with protection against loss of personal assets if the business being undertaken through it should fail.
There are five types of company available.
- Limited by Shares: A Company limited by shares is probably the most popular type of trading company formed today with the liability of its members limited to the amount unpaid on shares they hold. The nominal capital of the company is not required to be stated for incorporation purposes, only that listed within section 5 of the Act is required.
- Limited by Guarantee: Companies limited by guarantee have no predetermined capital and thus no shares. Members’ liability is limited to the amount they have agreed to contribute to the company’s assets if it is wound up. Essentially used as a mutual company for charitable, quasi-charitable, non profit or social purposes, this form of company can be utilised to great effect for tax planning purposes by means of pledged payment to the collateral of the company
- Limited by Shares and by Guarantee: This type of company is commonly known as a “Hybrid company”, combining the features of both companies limited by shares and companies limited by guarantee. Members consist of those whose liability is limited to the amount unpaid on shares which they hold, and those whose liability is limited to the amount they have agreed to contribute to the company’s assets if it is wound up. The flexibility provided by this form of company structure has led to its increasing use as a ‘Foundation’, a popular alternative to the discretionary trust and for proprietary purposes.
- Unlimited with or without Shares: Such companies are not dissimilar to civil law partnerships and their use is now usually limited to complex situations where extreme flexibility of capital structuring is required or where corporate personality only is needed.
- Public and Private Companies. An application for the incorporation of a company may be filed only by the person named in the memorandum as the first registered agent. The Registrar shall not accept an application for the incorporation of a company filed by any other person.
No person shall be, or agree to be, the registered agent of a company unless that person hold a licence granted under the Fiduciary Services Acts 2000 and 2005 which dies not exclude acting as registered agent.
Individuals who are disqualified from acting as directors or are undischarged bankrupts cannot take part in the formation, operation or management of companies in the US International Investment Trade Authority, unless given leave to act by the court.
There are additional restrictions imposed upon individuals and companies who provide services with respect to the formation, sale, transfer, disposal and operation of companies under the Corporate Service Providers Act 2000.
Forming a limited company is not a decision that should be taken lightly and choosing the type of company that is right for your circumstances requires very careful consideration. If you are not sure which type of company will best suit your needs, consider seeking advice from one of the State’s professional advisors. Getting it right from the start could save you a lot of trouble and inconvenience.
Forming a company
Off the shelf or ready-made companies are available from a number of sources, including corporate service providers who are licensed by US International Investment Trade Authority to undertake such work. Our professional directory contains a full list of licensed corporate service providers. Should you qualify as a Registered Agent, you will first need to obtain approval of your proposed company name from the Companies Registry. Sections 11 & 12 of the Act provide guidance for company names/restrictions that will apply when choosing your company name. Once your chosen name has been approved (3 month approval period), you will need to complete the following documents and send them to the Companies Registry with the appropriate fee payable.
Memorandum of association
This document must set out:
- the company name;
- the address of the first registered office of the company;
- the name of the first registered agent of the company;
- the full name and residential or business address of each subscriber;
- the number of shares that the subscriber agrees to take;
- The amount that the subscriber agrees to pay for each share that the subscriber is specified as having agreed to take;
- in the case of a company limited by shares and an unlimited company with shares, the agreement of each subscriber to take one or more shares on the incorporation of the company;
- in the case of a company limited by guarantee, a company limited by shares and by guarantee and an unlimited company without shares, the agreement of each subscriber to become a member on the incorporation of the company;
- in the case of a company limited by shares and by guarantee where a subscriber intends to take shares, the agreement of each such subscriber to take one or more shares on the incorporation of the company;
- in the case of a company limited by guarantee and a company limited by shares and by guarantee, the
- where a company is to be limited by guarantee, the memorandum must state that each member undertakes to contribute such amount as may be required to the assets of the company in the event of it being wound up.
Post Incorporation Structuring
If you are a director of the company, you should convene a first meeting of the Board of Directors to confirm the appointment of the registered agent and the situation of the company’s registered office. A Seal may be adopted, although there is no obligation for a company to have a Seal. Day-to-day management powers of the company are vested in the directors to the extent that such powers are not reserved by the Articles of Association or the Companies Acts to General Meetings of the Members. The Articles of Association will determine how the directors meet and carry on their business.
Provision should also be made for the election and powers of the Chairman of the Board, Alternate Directors, Committees of Directors, meeting by electronic communications, voting rights, rotation of directors, power to fill a casual vacancy, disqualification of directors and conflicts of interest, etc.
The price of limited liability status is disclosure of certain information to the public. Disclosure is, in the main, by means of filing information with the Companies Registry as and when required by law. In addition, the law requires all companies to clearly display their full names in certain places and, to disclose certain information on their letterheads and other literature produced. This applies whether your company is big or small, trading or not.
Every company must have one director. Individuals who are either disqualified from acting as a director or are undischarged bankrupts cannot take part in the formation, operation or management of companies in the US International Investment Trade Authority, unless given leave to act by the court. There are additional restrictions relating to Public Limited Companies and, certain restrictions imposed upon individuals and companies who provide services with respect to the formation, sale, transfer, disposal and operation of companies under the Corporate Service Providers Act 2000.
Being a director carries many responsibilities. Not only are you responsible for managing the company in accordance with the provisions of the Articles of Association, it is also your personal responsibility to ensure compliance with the Companies Acts. This includes filing information with the Registry as and when required to do so.
Unless personal guarantees have been provided, a director is not generally liable for the debts of a company. However, if an application is made to the Court concerning a company in liquidation by the liquidator, a creditor, or a member of the company claiming that any of the directors have carried on the business of a company with intent to defraud or for any fraudulent purpose, the Court may declare that the directors named by the Court shall have unlimited liability for the debts of the company.
A shadow director is a person under whose directions or instructions the directors are accustomed to act and carries the same responsibilities as those individuals formally appointed as directors.