A step-by-step guide to converting an Isle of Man 2006 Act Company to the 1931 Act.

Overview.

It’s always been possible to reregister a Isle of Man 1931 Act Company under the 2006 Act – but not to convert the other way. I don’t know the reason for this odd asymmetry (if there was one) but this has now been addressed by the Companies Amendment Act 2021 which provides a straightforward mechanism to allow 2006 Act companies the freedom to register under 1931 Act.

‘Correction’ of the position is important because while both Acts are “good” legislation – there are significant differences between them – see comparison here.

In particular, the requirement to appoint a Registered Agent often makes 2006 Act companies very expensive to maintain compared with their 1931 Act counterparts – which can be managed entirely by their owners and directors without oversight by or the associated cost of having a Corporate Service Provider to act as the Registered Agent. 

Step 1 – Notices 

The Company must issue 28 days notice to the existing Registered Agent of the intention to reregister as a 1931 Act Company. (Note; the Registered Agent can consent to shorter notice).

Note that the decision to re-register a 2006 Act company a 1931 Act company is purely a shareholders decision and there is no requirement to provide notices or to obtain consent from the Company’s directors, bankers, charge holders, debenture holders, directors, auditors or anybody else.

Step 2 – Members Resolutions and revised constitutional documents

The decision to convert to a 1931 Act Company is members business so they should be asked to consider, and if thought fit pass resolutions as follows:-

1. THAT the Company should apply to re-register as a Company formed under the Isle of Man Companies Acts 1931-2004
2. THAT the Company should adopt a new memorandum of association complying with section 16C(2) of the Companies (Amendment) Act 2021 – see drafts here
3. THAT the Company should adopt new Articles of Association in substitution for its existing Articles (which are applicable to the 1931 Act).

The resolutions are required to be passed by 75% of the Members and of each class of Members.

Step 3 – for Public Companies only – (Not relevant for 99% of companies) 

This part will not be relevant unless your 2006 Act company has more than 50 shareholders and/or is making an offer to the public.. If your company is going to re-register as a Public company then we suggest you take legal advice as additional requirements for conversion will apply:-

• Balance sheet is required.
• Secretary needs to be a qualified person (s19(4) of Companies Act 1982)
• Prepare a statement of compliance as per s16C(4).

Step 4 – Registry Filings 

In order to progress the re-registration, the Company should file the following documents at the Registry:-

(i) A completed Registry form 101 – together with prescribed fee – currently GBP100.00

(ii) Certified copies of the resolutions passed in Step (2)

(iii) Revised Memorandum of Association 

(iv) Revised Articles of Association (compliant with 1931-2004 Act)

(v) Statement of compliance (public company only).  

Consequences of re-registration.

The consequences of re-registration are set out in Section 16E of the Act and can be summarised as follows:-

• Re-registration does not create a new legal entity or prejudice or affect the continuity of the Company.
• The revised Memorandum of Association and Articles of Association shall be deemed to take effect upon re-registration of the Company under the 1931 Act
• The Company shall cease to be a company formed under the Isle of Man Companies Act 2006 and its shall be subject to the provisions contained within the Companies Act 1931-2004.
• Charges granted under the Companies Act 2006 shall remain in force and do not need to be reregistered. A register of charges under section 82 of the Act will be created and detail any charges registered since the incorporation of the Company. 

Note that, unlike the 2006 Act (see s138(1)), registration of charges is compulsory under the 1931 Act and late registration of charges is not permitted without consent of the court and so, it is important to ensure that all charges are properly registered prior to the re-registration of the Company under the 1931-2004 Acts.

You can find a copy of the Isle of Man Government practice note PN27/2021 here.

Contact Martin Katz (tel +44 1624 777900) for more information.