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Isle of Man

Fund Administration in the Isle of Man

1024 683 Galileo Fund Services Limited


The Isle of Man, amongst many other things, is an ideal centre for the administration of niche fund and investment products. The legislation in place offers a wide variety of fund structures around which the most appropriate investment vehicle may be constructed.

Moreover, the Island has developed over many years, a robust political and financial infrastructure with an emphasis on pragmatic regulation. The purpose of this paper is to give a brief background to the Isle of Man fund environment and to focus on one particular type of popular structure available in the Isle of Man, the Closed-Ended Investment Company or “CEIC”. CEIC’s have been successfully used by many fund promoters in recent years as the vehicle of choice when establishing an investment company, be it a private unlisted company or a stock market listed company. It should be remembered that the information contained within this paper is for guidance only and interested parties should consult the relevant original legislation when structuring an Isle of Man product.

The Constitutional position of the Isle of Man

The Isle of Man is a self-governing dependency of the British Crown and is not part of the United Kingdom. Through long-established constitutional convention, the Isle of Man has autonomy in relation to its domestic affairs, including taxation and business law. As the Island is not a member state of the European Union (as provided under Protocol 3 to the Act of Accession), EU rules only apply to the Isle of Man in relation to a limited range of matters. Tynwald, the Island’s parliament, has been in existence for over 1,000 years and is the world’s oldest continuously functioning parliament. As a common law jurisdiction, the Island’s legal traditions draw heavily on those of England providing a level of familiarity when dealing with the Island.

Regulatory environment

The Isle of Man has developed a reputation as a jurisdiction of quality through its enactment of pragmatic legislation enabling industry to operate in a business friendly environment whilst at the same time adhering to international standards of financial supervision. Fund managers, administrators, and providers of corporate and fiduciary services, are regulated by the Isle of Man Financial Services Authority (“FSA”) and to complement the licensing framework for the regulation of such entities, the Island has adopted extensive measures to prevent money laundering and the financing of terrorism.

Closed-ended Investment Companies

Legislation in the Isle of Man makes a fundamental distinction between an “open-ended investment company” and a “closed-ended investment company”. Open-ended investment companies are corporate vehicles which provide investors with a right of exit by allowing them to redeem their shares and are considered to be collective investment schemes for the purposes of Isle of Man law.

A collective investment scheme or fund is subject to regulation in the Isle of Man under the Collective Investment Schemes (“CIS”) legislation whilst a CEIC, which provides no such right of exit, is not currently subject to the same CIS regulations. To that end, a CEIC is treated in the same way as any other operating company for regulatory purposes and, as a result of this approach, there are a number of important advantages to operating such a company from the Isle of Man including:

• no regulatory pre-approval requirements for launch in the Isle of Man
• no requirement for a licensed fund manager or administrator to be appointed
• no prescriptive requirements as regards board composition
• no requirement for a separate custodian
• no restrictions on asset classes, investment strategy or leverage
• no prescriptive rules about permitted investors or minimum subscription requirements

Companies – both traditional and modern

Company legislation introduced in 2006 has given promoters wishing to use an Isle of Man investment company the choice between using a vehicle incorporated under the Companies Act 2006 or alternatively a more traditional vehicle established under the Companies Act 1931.

Key features of a 2006 Act company are:

• minimal administrative requirements
• flexible capital structure
• limited disclosure requirements
• suitably regulated registered agent must be appointed

1931 Act companies draw heavily on English corporate legislation and therefore have more prescriptive administrative and statutory filing requirements.

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Listing an Isle of Man CEIC

Isle of Man CEIC’s are suitable for listing on many recognised investment exchanges and over the years have proved to be a popular choice of vehicle for listing on the AIM Market in particular. A CEIC is not required to appoint a licensed fund administrator, however an Isle of Man corporate services provider may be required to deliver statutory and on-going compliance services.


The Isle of Man offers a tax neutral environment in many cases with no capital taxes and a zero rate of corporate tax for CEIC’s. Value added tax may, however be payable on fees levied by certain functionaries to an investment company, dependent on the jurisdiction in which they are based.


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Establishing Insurance Companies in Malta

1023 683 Jatco Insurance


Since Malta joined the European Union (EU) in May 2004, it has become an attractive domicile for establishing an insurance company or an affiliated insurance company.

A Maltese insurance undertaking is defined as a company authorised in terms of the Insurance Business Act, whose head office is in Malta, and is entitled to carry on business of insurance in a member/EEA state in exercise of a European Right.

Malta has an established regulatory framework that operates to EU standards and which accommodates insurance companies. Thus, Malta is worth considering as the location for a captive where the ability to issue policies directly into the EU/EEA may provide significant savings on fronting and collateral costs. This offers cost saving advantages to:

Multinationals with operations in EU locations;
UK corporations paying significant Employers’ Liability and Motor Third Party premiums;
Companies using captives to provide insurance to their customer base, e.g. travel, warranty, credit protection, room cancellation insurance.

The benefits of setting up an insurance company in Malta

1. Ability to write policies directly into the EU and European Economic Area – Full EU membership enables Maltese captives to dispense with the need for fronting companies into the EU/European Economic Area (EEA).
2. Effective and responsive regulation – Regulation is to EU standards while being flexible and responsive for which the most successful established captive domiciles are favoured.
3. Established financial centre – Insurance, legal and accounting expertise is all available within Malta’s highly trained professional workforce.
4. Tax efficiency – The standard rate of corporate tax in Malta is 35%, but an insurance company insuring risks outside Malta could benefit from the Malta tax refund system.
5. In addition, Malta has double taxation treaties with 60 countries.
6. Protected cell companies – PCC legislation enables a PCC to be formed in Malta whereby each cell’s assets and liabilities are legally separated.
7. Migration from other jurisdictions – The Continuation of Insurance Companies Regulations 2003 enables captives to be easily relocated from other jurisdictions which have similar legislation.

The benefits of using an Affiliated Insurance Company in Malta

1. Solution to market limitations: Captives can provide cover for risks that is not available or affordable in the traditional insurance market.
2. Improved and flexible risk management: Policies are custom-designed and specially tailored to the needs of the insured.
3. Reduced risk financing expenses: Lower transaction costs and administration expenses compared to traditional insurance programmes. Companies can also retain underwriting profit and investment income earned on loss reserves.
4. Better cash flow management: Companies have control over the payment or premiums and the timing and the payment of claims. They can direct the flow of funds to and from the captive according to their own investment strategy. This leads to a more efficient use of capital.
5. Direct access to reinsurers: Companies can buy excess loss protection on a wholesale basis rather than on a retail basis (traditional insurance policy). They benefit from better conditions and the opportunity of negotiating price and contract terms directly.
6. Coordinated risk management: Multinational companies can use a captive to manage risks at group level and centralize their insurance programmes. This translates into improved risk awareness and cost-transparency.
7. Protection from price fluctuations: Pricing swings occur periodically in the traditional marketplace. Companies using a captive can negotiate a premium established on the basis of their own loss experience. Other market factors and loss experiences of other insured parties have no effect.
8. Potential tax advantages for Captives: Malta tax refund system that could be beneficial to foreign investors.

Furthermore, the growth of the insurance sector, has attracted a significant increase in the number of insurance managers in Malta. Most insurance managers offer a full range of products and services which encompass every aspect of alternative risk management, from initial consulting, to program structuring and formation, to ongoing administration and regulatory compliance for insurance companies.