Limited Liability Companies Act 1996
(as amended, 1999)
PART 1 -
LIMITED LIABILITY COMPANIES
1.(1) A limited liability
company formed under this Act is a body of persons the principal features of
which are that -
(a) the company
has legal personality and capacity for the exercise of its purposes and powers
(section 2); and
(b) Repealed;
(c) the
liability of its members is limited to the extent of their contribution to its
capital (section 13); and
(d) restrictions
are imposed on the transfer of members interests in the company (section 16);
and
(e) the
management of the company is vested in the members in proportion to their
contribution to the capital of the company or as otherwise permitted by this
Act (section 17); and
(f) the
company must be wound up and dissolved on the happening of certain events such
as the death or resignation of a member (section 27); and
(g) the profits
of the company will be treated as the income of the members for the purposes of
income tax (section 46).
(2) This
section is for the purposes of explanation only and does not affect the
operation of the following provisions of this Act.
Status,
purposes and powers of limited liability companies.
2.(1) A limited liability company
is a legal entity which is distinct from its members, manager and registered
agent.
(2) A limited
liability company which is organised under this Act may undertake any lawful
activity, trade or business except -
(a) banking
business within the meaning of section 1(1)(a) of the Banking Act 1975; or
(b) insurance
business within the meaning of section 34 of the Insurance Act 1986;
(c) investment
business within the meaning of the Investment Business Act 1991;
(d) such other
business as may be prescribed.
(3) Nothing in
this Act shall be interpreted as -
(a) precluding
a person who carries on a business which requires licensing or authorisation
under any statutory provision from forming a limited liability company; or
(b) precluding
a limited liability company from holding any shares in, or debentures of a body
corporate which carries on such a business,
if the
applicable statutory provision does not prohibit it and the body licensing or
authorising the occupation does not prohibit it in exercise of any power
conferred under such provision.
(4) A limited
liability company has the status and powers specified in Schedule 1.
Name of
limited liability company.
3.(1) The words "limited liability
company," or its abbreviations "LLC" or "L.L.C." shall be included at the end
of the name of every limited liability company.
(2) The
omission of the words "limited liability company," or the abbreviations "LLC"
or "L.L.C." in the use of the name of the limited liability company shall
render any person who participates in the omission, or knowingly acquiesces in
it, liable for any indebtedness, damage or liability occasioned by the
omission.
(3) No limited
liability company may be registered by a name which in the opinion of the Chief
Registrar after consultation with the Financial Supervision Commission is
undesirable.
(4) A limited
liability company may not change the name by which it is registered without the
consent of the Chief Registrar.
(5) If in the
opinion of the Chief Registrar the name by which a limited liability company is
registered is -
(a) misleading or offensive;
or
(b) in any way likely
to be harmful to the public; or
(c) too
like the name by which another limited liability company or other body
corporate is registered, either in the Island or elsewhere in the British
Isles,
he may, after
consultation with the Financial Supervision Commission, direct the company to
change its name.
(6) A direction
under subsection (5) must be complied with within 6 weeks of the direction
unless it is the subject of an application under subsection (8).
(7) The Chief
Registrar, after consultation with the Financial Supervision Commission, may
extend the period within which the company must comply with the direction.
(8) A limited
liability company may within 3 weeks of being given a direction under
subsection (5) apply to the High Court for the direction to be set aside.
(9) If an
application under subsection (8) fails, the court shall specify a period within
which the direction is to be complied with.
(10) if a company fails to
comply with a direction under subsection (5) it shall be guilty of an offence
and shall be liable on summary conviction to a fine not exceeding £5,000.
Registered
office.
4.(1) A limited liability
company shall at all times maintain a registered office in the Island.
(2) If a
limited liability company fails for 1 month to maintain a registered office in
contravention of subsection (1) -
(a) it shall be
guilty of an offence and shall be liable on summary conviction to a fine not
exceeding £5,000; and
(b) it shall be
deemed to be defunct until a registered office is established and a statement
in the prescribed form is delivered to the Chief Registrar.
Registered
agent.
5.(1) A limited liability company
shall at all times maintain a registered agent in the Island who shall hold the
prescribed qualifications.
(2) If a
limited liability company fails for 1 month to maintain a registered agent in
contravention of subsection (1) -
(a) it shall be
guilty of an offence and shall be liable on summary conviction to a fine not
exceeding £5,000; and
(b) it shall be
deemed to be defunct until a registered agent is appointed and a statement in
the prescribed form is delivered to the Chief Registrar.
CHAPTER
II - REGISTRATION
Formation.
6.(1) Any person may apply to form
a limited liability company which shall have 2 or more members by delivering to
the Chief Registrar -
(a) articles of
organisation which comply with the requirements of this Act and which are
signed by -
(i) the person
forming the company; and
(ii) the first
members named in the articles of organisation; and
(b) a consent
in the prescribed form signed by the person named in the articles as the
registered agent; and
(c) a
statement in the prescribed form of the intended registered office in the
Island.
(2) The person
forming the company need not be a member of the limited liability company.
Articles
of organisation.
7.(1) The articles of organisation shall
specify
(a) the name of
the limited liability company;
(b) Repealed;
(c) the names and
addresses of its members;
(d) the name
and address of its registered agent in the Island;
(e) the matters referred to
in Schedule 2.
(1A) Except where the
articles of organisation fix a time for the dissolution of the limited
liability company, the duration of the company shall not be limited to any
fixed period of time.
(2) It is not
necessary to set out in the articles of organisation any of the powers
specified in this Act.
(3) Subject to
subsection (5), the articles of organisation shall be amended when
(a) there is a
change in the name of the limited liability company; or
(b) there is a
change in the amount or the character of the contributions to capital;
(c) there
is any change in the membership of the limited liability company;
(d) there is a
false or erroneous statement in the articles of organisation;
(e) there
is a change in the time as stated in the articles of organisation for the
dissolution of the limited liability company;
(f) a
time is fixed for the dissolution of the limited liability company if no time
is specified in the articles of organisation; or
(g) the members
desire to make a change in any other statement in the articles of organisation
in order that it shall accurately represent the agreement between them.
(4) Any amendment
to the articles of organisation shall be adopted in accordance with the
operating agreement or with the consent of all members.
(5) Where a
limited liability company amends its articles of organisation its registered
agent shall within 1 month of the making of the amendment deliver to the Chief
Registrar notice, in the prescribed form, of the amendment and the Chief
Registrar shall retain it with the registered copy of the articles of
organisation of the company.
(6) Where a
limited liability company changes its name, the Chief Registrar shall on
delivery of the documents referred to in subsection (5) issue a replacement
certificate of organisation to meet the circumstances of the case.
(7) A change of
name shall have effect from the date on which a replacement certificate is
issued.
(8) A change of
name of a limited liability company shall not affect any rights or obligations
of the company, or render defective any legal proceedings by or against the
company, and any legal proceedings that might have been continued or commenced
against it by its former name may be continued or commenced against it by its
new name.
Registration
of limited liability company.
8.(1) If the Chief Registrar is
satisfied that the requirements of this Act in respect of the registration and
of matters precedent and incidental to registration have been complied with, he
shall retain and register the documents delivered under section 6.
(2) On the
registration of documents under subsection (1), the Chief Registrar shall
certify in writing that the limited liability company is organised and
registered under this Act.
(3) A
certificate of organisation shall be conclusive evidence that all the
requirements of this Act in respect of registration and of matters precedent
and incidental to registration have been complied with and that a limited
liability company has been organised and registered under this Act.
(4) A limited
liability company shall not transact business nor incur indebtedness, except
that which is incidental -
(a) to its
organisation and registration; or
(b) to
obtaining subscriptions for or payment of contributions, until the certificate
of organisation is issued.
Change
etc. of registered office or registered agent.
9.(1) If for any reason there is a
change in the registered office or the registered agent of a limited liability
company, the company shall deliver to the Chief Registrar within 1 month of the
change a statement in the prescribed form.
(2) If a
limited liability company fails to comply with subsection (1) -
(a) it shall be
guilty of an offence and shall be liable on summary conviction to a fine not
exceeding £5,000;
(b) it shall be
deemed to be defunct until the statement is delivered to the Chief Registrar.
Annual
returns.
10.(1) Every limited liability company shall in each
year deliver an annual return in the prescribed form to the Chief Registrar
within 28 days of the anniversary of the company's registration under this Act.
(2) The annual
return shall state-
(a) the address
of the registered office of the company;
(b) the name
and address of the registered agent of the company;
(c) the
name and address of the manager (if any) of the company;
(d) the names
and addresses of the members of the company,
or, where any
of those particulars remain unchanged, it shall state that fact.
(3) If a
limited liability company fails to comply with subsection (1) -
(a) it shall be
guilty of an offence and shall be liable on summary conviction to a fine not
exceeding £5,000;
(b) it shall be
deemed to be defunct until the annual return is delivered to the Chief
Registrar.
Defunct
limited liability companies.
11.(1) Where a limited liability company is
deemed to be defunct under any provision of this Act, the Chief Registrar may
strike the name of the company off the register in the same manner and subject
to the same notice and conditions as may be done under section 273(1) to (5) of
the Companies Act 1931 in relation to a company under that Act which is not in
operation.
(2) For the
purposes of subsection (1), a requirement to send a letter or notice to a
limited liability company shall be treated as complied with if the letter or
notice is sent by post to each person who, on the date on which the letter or
notice is sent, is shown as a member of the company in the documents kept by
the Chief Registrar.
(3) Any defunct
limited liability company may, at any time within 2 years after it is dissolved
under subsection (1), apply to the Chief Registrar for the restoration of the
company to the register in the same manner and subject to the same notice and
conditions as may be done under section 273B(1) to (9) of the Companies Act
1931 in relation to a company under that Act which was dissolved under section
273 of that Act.
CHAPTER III
- CAPITAL: CONTRIBUTIONS, WITHDRAWAL, REDUCTION, ETC.
Contributions
to capital.
12. The
contributions to capital of a member to a limited liability company may be in
cash, property or services rendered, or by means of a promissory note or any
form of binding obligation to contribute cash or property or to perform
services.
Liability
of members of limited liability companies.
13.(1) The liability of a member is limited to -
(a) the
difference between his contributions to capital as actually made and that
stated in the articles of organisation, operating agreement, subscription for
contribution or other document executed by the member as having been made by
the member; and
(b) any unpaid
contribution to capital which he agreed in the articles of organisation,
operating agreement or other document executed by the member to make in the
future at the time and on the conditions stated in the articles of
organisation, operating agreement or other document evidencing such agreement.
(2) Subject to
subsection (3), the liabilities of a member specified in subsection (1) can be
waived or compromised with the consent of all members.
(3) A waiver or
compromise under subsection (2) shall not affect the rights of any creditor of,
or any other person having a claim against, the limited liability company.
(4) When the
whole or part of the capital of a contributor has been returned to him, he
shall for a period of 6 years after the return continue to be liable to the
limited liability company for any sum (not exceeding the amount returned)
necessary to discharge its relevant liabilities.
(5) For the
purposes of subsection (4), the relevant liabilities are the liabilities to all
creditors of, and other persons having claims against, the limited liability
company, in respect of -
(a) any credit
extended during the period that the returned capital contribution was held by
the limited liability company; or
(b) any claims which
arose before the return.
Withdrawal
or reduction of members' contributions to capital.
14.(1) A member shall not receive out of the property
of a limited liability company any part of his contribution to capital unless -
(a) all
liabilities of the limited liability company, except liabilities to members on
account of their contributions to capital, have been paid or there remains
property of the limited liability company sufficient to pay them;
(b) the consent
of all members is had, unless the return of the contribution to capital may be
rightfully demanded as provided in this Act; and
(c) the
articles of organisation permit the withdrawal or reduction.
(2) Subject to
the provisions of subsection (1), a member may demand the return of his
contribution -
(a) on the
dissolution of the limited liability company; or
(b) unless
otherwise prohibited or restricted in the operating agreement, after the member
has given all other members of the limited liability company prior notice in writing
in conformity with the operating agreement.
(3) If the
operating agreement does not prohibit or restrict the right to demand the
return of capital and no notice period is specified, a member making the demand
must give 6 months prior notice in writing.
(4) In the
absence of a statement in the articles of organisation to the contrary or the
consent of all members of the limited liability company, a member, irrespective
of the nature of his contribution, has only the right to demand and receive
cash in return for his contribution to capital.
(5) A member of
a limited liability company may have the limited liability company dissolved
and its affairs wound up when -
(a) the member
rightfully but unsuccessfully has demanded the return of his contribution; or
(b) the other
liabilities of the limited liability company have not been paid, or the
property of the limited liability company property is insufficient for their
payment and the member would otherwise be entitled to the return of his
contribution.
Division
of profits; impairment of capital.
15.(1) Subject to subsection (2), a limited liability
company may, from time to time, divide and allocate the profits and losses of
its business among the members and among classes of the members of the company
in accordance with the operating agreement.
(2) No
distribution shall be made if, after such distribution, the assets of the
limited liability company would not be in excess of all liabilities of the
limited liability company except liabilities to members on account of their
contributions.
(3) If the
operating agreement does not so provide, profits and losses shall be allocated
on the basis of the value of the contributions made by each member to the
extent they have been received by the limited liability company and have not
been returned.
(4) Subject to
subsection (5), distributions of cash or other assets of a limited liability
company shall be allocated among the members and among classes of members in
the manner provided in the operating agreement.
(5) If the
operating agreement does not so provide, distributions shall be made on the
basis of the value of the contributions made by each member to the extent they
have been received by the limited liability company and have not been returned.
(6) The
provisions of this section relating to the allocation of losses shall not
affect the limitation on liability of members under section 13.
Members
interest and transferability
16.(1) The interest of all members in a limited
liability company constitutes the personal estate of the member, and may be
transferred or assigned as provided in the operating agreement.
(2) If all the
members of a limited liability company other than the member proposing to
dispose of his interest do not approve of the proposed transfer or assignment
by unanimous written consent, the transferee of the member's interest shall
have no right -
(a) to become a
member of the limited liability company; or
(b) to participate
in the management of the business and affairs of the limited liability company.
(3) Such a
transferee shall only be entitled to receive the share of profits or other
compensation by way of income and the return of contributions, to which the original
member would otherwise have been entitled.
CHAPTER IV
- MANAGEMENT
17.(1) Subject to
the following provisions of this section, a limited liability company shall be
managed by its members.
(2) The rights of
the members to manage a limited liability company shall be in proportion to
their contribution to the capital of the company, as adjusted from time to time
to reflect any additional contributions or withdrawals by the members.
(3) If
provision is made for it in the articles of organisation, management of the
limited liability company may be vested in a manager who shall -
(a) be elected
by the members in a manner provided for in the operating agreement; and
(b) hold office
for such period as the members shall determine,
unless the
operating agreement expressly provides otherwise.
(4) The manager and
any person appointed by him, shall have any such right or duty as is -
(a) specified in the
operating agreement; and
(b) expressly
confirmed by the members.
Contracting
debts.
18. Except as
otherwise provided in this Act, no debt shall be contracted or liability
incurred by or on behalf of a limited liability company, except by -
(a) any member
if management of the limited liability company is retained by the members; or
(b) its manager
if management of the limited liability company has been conferred on a manager.
Accounting
records.
19.(1) Every limited liability company shall
cause accounting records to be kept in accordance with the provisions of this
section.
(2) The accounting
records shall be sufficient to show and explain the company's transactions.
(3) The
accounting records shall be such as to disclose, within a reasonable time and
with reasonable accuracy, the financial position of the company at any time.
(4) The
accounting records shall in particular contain -
(a) entries
from day to day of all sums of money received and expended by the company and
the matters in respect of which the receipt and expenditure takes place;
(b) a record of
the assets and liabilities of the company; and
(c) where
the company's business involves dealing in goods -
(i) statements
of stock held by the company at the end of each financial year of the company;
(ii) all
statements of stocktakings from which any such statement as is mentioned in
sub-paragraph (i) has been or is to be prepared; and
(iii) except in the
case of goods sold by way of ordinary retail trade, statements of all goods
sold and purchased showing the goods and the buyers and sellers in sufficient
detail to enable the goods and the buyers and sellers to be identified.
(5) Subject to
subsection (6), the accounting records shall be kept at the registered office
of the company or at such other place as the members of the company think fit
and shall at all times be open to inspection by the members of the company.
(6) If
accounting records are kept at a place outside the Island by a company,
accounts and returns with respect to the business dealt with in the accounting
records so kept shall be sent to, and kept at a place in the Island and shall
at all times be open to inspection by the members of the company.
(7) The
accounts and returns to be sent to the Island in accordance with subsection (6)
shall be such as to disclose with reasonable accuracy the financial position of
the business in question at intervals not exceeding 6 months.
(8) Subject to
any direction with respect to the disposal of any records kept by a company
given under any regulations under section 28, any accounting records which a
company is required by this section to keep shall be preserved by it for 6
years from the date on which they are made.
(9) If a
company fails to comply with any provision of subsections (1) to (6), every
member and manager (if any) of the company shall be guilty of an offence.
(10) A person shall not be
guilty of an offence under subsection (9) if he shows that he acted honestly
and that in the circumstances in which the business of the company was carried
on the default was excusable.
(11) If any member or
manager of a company fails to take all reasonable steps for securing compliance
by the company with subsection (8) or has intentionally caused any default by
the company thereunder he shall be guilty of an offence.
(12) Any person guilty of an
offence under this section shall be liable -
(a) on
conviction on information to custody for a term not exceeding 2 years, or to a
fine, or to both;
(b) on summary
conviction, to custody for a term not exceeding 6 months, or to a fine not
exceeding £5,000, or to both.
Registration
of charges.
20. Schedule 3, which
provides for the registration of charges, shall have effect.
Execution
of instruments.
21. Instruments
and documents providing for the acquisition, mortgage or disposition of
property of a limited liability company shall be valid and binding upon the
limited liability company if executed by -
(a) any member
if management of the limited liability company is retained by the members; or
(b) its manager
if management of the limited liability company has been conferred on a manager.
Unauthorised
assumption of powers.
22. All persons
who assume to act as a limited liability company without authority to do so
shall be jointly and severally liable for all debts and liabilities.
Waiver of
notice
23. When, under
this Act or under the articles of organisation or operating agreement of a
limited liability company, notice is required to be given to a member or to a
manager of a limited liability company having a manager or managers, a waiver
in writing signed by the person or persons entitled to the notice, whether
before or after the time stated in it, is equivalent to the giving of notice.
CHAPTER V
- PROCEEDINGS AND INSPECTION
Parties to
actions.
24. A member of a
limited liability company is not a proper party to proceedings by or against a
limited liability company, except where the object is to enforce a member's
right against or liability to the limited liability company.
Service of
process.
25.(1) Any process, notice or demand required or
permitted to be served upon a limited liability company may be served on the
company at its registered office.
(2) Where this
subsection applies to a limited liability company, any document may be served
on it by sending a copy of the document by post to each person who, on the date
on which the document is sent, is shown as a member of the company in the
documents kept by the Chief Registrar.
(3) Subsection
(2) applies to a limited liability company where the person having control of
the premises at which the company purports to have its registered office has
delivered to the Chief Registrar a notice in the prescribed form stating that
the company does not have authority to maintain its registered office at the premises.
(4) This
section shall not limit or affect the right to serve any process, notice or
demand required or permitted by law to be served upon a limited liability
company in any other manner now or hereafter permitted by law.
Inspection
of affairs of companies.
26.(1) The High Court may on the application of
the Treasury or a member of a limited liability company appoint one or more
competent inspectors to investigate the affairs of the company and to report as
the court directs.
(2) It shall be
the duty of all members, managers and registered agents of the limited
liability company, and of other persons who, in the opinion of the inspectors,
have or may be in possession of, any book, document or other records of or
relating to the company -
(a) to produce
to the inspector all such books and documents which are in their custody or
power;
(b) to attend
before the inspectors when required to do so; and
(c) otherwise
to give the inspectors all assistance in connection with the investigation
which they are reasonably able to give.
(3) The
inspectors may examine on oath the persons mentioned in subsection (2) in
relation to the affairs of the company and may administer an oath accordingly.
(4) If any
person mentioned in subsection (2) refuses -
(a) to produce to
the inspectors any book or document which it is his duty under this section so
to produce; or
(b) to answer
any question which is put to him by the inspectors with respect to the affairs
of the company,
the
inspectors may certify the refusal under their hand to the High Court, and the
court may thereupon enquire into the case, and after hearing the evidence of
the inspectors and any evidence which may be offered in defence, may punish the
offender in the like manner as if he had been in contempt of the court.
(5) On the
conclusion of the investigation the inspectors shall report their opinion to
the court, and a copy of the report shall be forwarded by the court to the
Treasury, the registered office of the company, its registered agent and
manager (if any).
(6) If at any
stage during the course of an inspection under this section it appears to the
High Court that any person may have been guilty of an offence in relation to
the company, it may refer the matter to the Attorney General.
(7) The
expenses of and incidental to an inspection under this section shall be paid by
the applicant or by the company or in part by the applicant and in part by the
company according to the direction of the court.
(8) Any balance
of the expenses not defrayed either by the company or the applicant shall be
defrayed by the Treasury.
(9) The power
of the High Court under this section shall be exercisable in respect of a
limited liability company notwithstanding that it is in the course of winding
up.
PART 2 -
DISSOLUTION OF LIMITED LIABILITY COMPANIES
Circumstances
in which limited liability companies are to be wound up.
27. The affairs
of a limited liability company organised under this Act shall be wound up on
the occurrence of any of the following events -
(a) when the
period (if any) fixed by the articles of organisation for the duration of the
limited liability company expires; or
(b) by the
unanimous written agreement of all members; or
(c) subject
to section 28(2), on the death, retirement, resignation, expulsion, dissolution
of a member or occurrence of any other event which terminates the continued
membership of a member in the limited liability company; or
(d) where the
High Court makes an order under section 32; or
(e) in any
other case for which this Act provides,
but its
separate existence shall continue until a certificate of dissolution has been
issued by the Chief Registrar or until an order dissolving the limited
liability company has been made by the High Court.
Winding up
procedure.
28.(1) On the occurrence of any of the events
specified in section 27(a) to (c) and (e) the remaining members of a limited
liability company -
(a) shall be
deemed to be joint provisional liquidators of the company for the purpose of
winding up the affairs of the company; and
(b) shall
forthwith deliver to the Chief Registrar a notice in the prescribed form of
provisional intent to wind up the company,
and the
company shall cease to carry on its business, except insofar as may be
necessary for the intended winding up of its business.
(2) If, within
60 days of the occurrence of any of the events specified in section 27(c),
there is delivered to the Chief Registrar a notice in the prescribed form that
all the remaining members -
(a) have agreed
to continue the business of the company under a right to do so stated in the
articles of organisation of the limited liability company; and
(b) have
entered into a legally binding agreement with the former member, his agent or
personal representatives for the purchase of his interest in the company,
the
obligation to wind up the company shall cease to have effect and the company
may continue to carry on its business.
(3) Except
where a notice has been delivered under subsection (2), on the expiry of 60
days following the occurrence of any of the events specified in section 27(a)
to (c) and (e) the provisional liquidators -
(a) shall be
obliged to proceed to wind up the affairs of the company; and
(b) shall publish a
notice in the prescribed form in 2 newspapers published and circulating in the
Island.
(4) The
provisional liquidators may at any time by unanimous written agreement appoint
a person to act as liquidator in their place and shall, upon making such an
appointment, forthwith deliver a notice of appointment in the prescribed form
to the Chief Registrar.
(5) Where a
liquidator appointed under subsection (4) ceases to act as such, the persons
who were the provisional liquidators who appointed the liquidator shall resume
office as provisional liquidators and -
(a) shall be
obliged to continue the winding up of the affairs of the company;
(b) shall
forthwith deliver a notice of cessation in the prescribed form to the Chief
Registrar; and
(c) may
exercise the power conferred by subsection (4) to replace the former
liquidator.
(6) The
Treasury may by regulations provide for the practice and procedure to be
adopted by provisional liquidators and liquidators in the winding up of limited
liability companies.
(7) A
provisional liquidator or liquidator who fails to comply with regulations under
subsection (6) shall be guilty of an offence and shall be liable on summary
conviction to a fine not exceeding £2,500.
(8) If on the
expiry of the period of 12 months immediately following the delivery of a
notice under subsection (1)(b) -
(a) no notice has been
delivered under subsection (2); and
(b) no notice has
been delivered under subsection (4); and
(c) no liquidator has
been appointed by the High Court under section 32; and
(d) no notice of
dissolution has been delivered under section 30; and
(e) the Chief
Registrar is satisfied that the provisional liquidators are not fulfilling
their obligations under subsection (3),
the company
shall be deemed to be defunct until a liquidator is appointed under subsection
(4) or by the High Court under section 32.
(9) If on the
expiry of the period of 12 months immediately following the delivery of a
notice under subsection (4) -
(a) the Chief
Registrar is satisfied that the liquidator has ceased to act as such; and
(b) no
replacement has been appointed; and
(c) no
liquidator has been appointed by the High Court under section 32; and
(d) no notice
of dissolution has been delivered under section 30;
the company
shall be deemed to be defunct until a new liquidator is appointed under
subsection (4) or by the High Court under section 32.
Distribution
of assets in winding up.
29.(1) In winding up a limited liability
company, debts and liabilities shall be settled in the following order -
(a) creditors and
others having any claim against the company in respect of any liability or
obligation, except those to members of the limited liability company on account
of their contributions;
(b) members of
the limited liability company in respect of their share of the profits and
other compensation by way of income on their contributions; and
(c) members
of the limited liability company in respect of their contributions to capital.
(2) In winding
up a limited liability company there shall be paid in priority to all other
debts the debts specified in the Preferential Payments Act 1908.
(3) Subject to
the operating agreement, members share in the assets of a limited liability
company in respect to their claims for capital and in respect to their claims
for profits or for compensation by way of income on their contributions,
respectively, in proportion to the respective amounts of the claims.
Dissolution.
30.(1) When all debts, liabilities and
obligations have been paid and discharged or adequate provision has been made
therefor and all of the remaining property and assets have been distributed to
the members, notice of dissolution in the prescribed form shall be delivered to
the Chief Registrar.
(2) On receipt of
the notice of dissolution under subsection (1) the Chief Registrar shall issue
a certificate of dissolution in the prescribed form.
(3) On the
issue of the certificate of dissolution the company is dissolved.
Application
of bankruptcy rules in winding up of insolvent limited liability companies.
31. In the
winding up of an insolvent limited liability company the same rules shall apply
with respect to the rights of secured and unsecured creditors and to debts
provable and the valuation of annuities and future and contingent liabilities
as are in force for the time being under the law of bankruptcy with respect to
the estates of persons adjudged bankrupt.
Jurisdiction
of the High Court.
32.(1) The High Court shall have the power to
order the winding up and dissolution of a limited liability company on such
terms as it may think fit and may do or secure the doing of all such things as
appear necessary or expedient for such winding up and dissolution.
(2) Sections 28
and 30 shall not apply in respect of the winding up and dissolution of a
limited liability company by order of the High Court.
Application
of Part X of the Companies Act 1931.
33.(1) Part X of the Companies
Act 1931 shall apply as if a limited liability company were an unregistered
company within the meaning of section 306 of that Act.
(2) This section
is without prejudice to the jurisdiction and powers of the High Court under
section 32.
Property
discovered after dissolution.
34.(1) Where, after the dissolution of a limited
liability company, there is discovered any property of the company -
(a) the
registered agent in office at the time of dissolution; or
(b) if there is
no such agent, the members of the company at that time,
shall,
subject to subsection (2), thereafter be trustee for the members and creditors
of the dissolved limited liability company and as such shall have authority to
distribute any such company property, convey land and take such other action as
may be necessary on behalf of and in the name of such dissolved limited liability
company.
(2) Where the
members of a limited liability company are trustees by virtue of subsection
(1), they may at any time by unanimous written agreement appoint a person to
act as trustee in their place and shall, upon making such an appointment, forthwith
deliver a notice of appointment in the prescribed form to the Chief Registrar.
(3) On the
delivery of the notice of appointment to the Chief Registrar under subsection
(2), the appointed person shall be the trustee for the members and creditors of
the dissolved limited liability company in place of the members and as such
shall have authority to distribute the company property discovered after
dissolution, convey land and take such other action as may be necessary on
behalf of and in the name of such dissolved limited liability company.
Power of
court to declare dissolution of limited liability company void.
35.(1) The High Court may at any time within 2
years of the date of dissolution of a limited liability company, make an order
declaring the dissolution to have been void.
(2) On the
making of an order under subsection (1), the company shall be deemed to have
continued in existence as if it had not been dissolved but only for the purpose
of winding up its affairs or distributing its property.
(3) An order
under subsection (1) may be made upon such terms as the court thinks fit.
(4) An
application for an order under subsection (1) may be made by any member or
creditor of the company or any person who appears to the court to be interested
in the company.
(5) It shall be
the duty of the person on whose application the order was made, within 7 days
after the making of the order, or such further time as the court may allow, to
deliver to the Chief Registrar for registration a copy of the order, and if
that person fails so to do that person shall be guilty of an offence and on
summary conviction shall be liable to a fine not exceeding £5,000.
Offences.
36. Schedule 4
(offences antecedent etc. to winding up) shall have effect.
PART 3 -
TAXATION
CHAPTER I
- TAX EXEMPTION FOR INTERNATIONAL LIMITED LIABILITY COMPANIES
Application
37.(1) This Chapter shall apply in respect of a
limited liability company -
(a) which is
registered under Part 1 of this Act; and
(b) in which
all the members are resident outside the Island; and
(c) which
does not carry on or transact any trade or business which is prescribed; and
(d) which is
not, nor is any member in it, -
(i) the
holder of a licence under section 3 of the Banking Act 1975;
(ii) authorised
to carry on insurance business under section 6 of the Insurance Act 1986;
(iii) the holder
of a licence under section 3 of the Investment Business Act 1991; or
(iv) such other
class of person as may be prescribed; and
(e) which
satisfies the Assessor that -
(i) subject
to subsection (2), the company will not carry on nor transact its trade or
business in the Island, unless that trade or business is such that all receipts
and income arising from it arise either-
(a) outside the
Island; or
(b) from
dealings with other international LLC's or with exempt companies, international
companies or international limited partnerships,
and originate from persons who are not resident
in the Island;
(ii) no person
resident in the Island, (other than an exempt company or an international
company) will have, for so long as the company is an international LLC, any
interest in such company, other than as a member or creditor of a company which
-
(a) has an interest
in such international LLC and is quoted on a Stock Exchange; or
(b) is a public
company and complies with such conditions as are prescribed.
(2) For the
purposes of subsection (1)(e)(i), no account shall be taken of -
(a) the holding
of any authorised security issued by the Government under the Isle of Man Loans
Act 1974;
(b) the keeping
of bank accounts in the Island with any bank licensed under section 3 of the
Banking Act 1975;
(c) such
other descriptions of receipts, income, trade, business or transaction as is
prescribed.
(3) A limited
liability company to which this Chapter applies and in respect of which a
certificate of status has been issued by the Assessor under section 39 is
referred to in this Chapter as an "international LLC".
Liability
of members to income tax.
38. Notwithstanding
the l970 Act, and subject to this Chapter, a member of an international LLC
shall not be liable to pay tax in respect of income received from that company.
Application
for and issue of certificate of status.
39.(1) A limited liability company may make an
application for a certificate of status as an international LLC in respect of a
year of assessment in the manner specified in this section.
(2) An
application under this section shall be made -
(a) not later
than 30 June in the year of assessment; or
(b) if the
company first commences business that year, not later than 30 days after the
date on which the business commences,
whichever is
the later, by submitting to the Assessor -
(i) a
completed application form; and
(ii) £300 or such
other sum as may be prescribed; and
(iii) a declaration and
undertaking in the prescribed form, executed by the registered agent of the
company; and
(iv) where the limited
liability company was an international LLC in any year before the year of
assessment in respect of which the application is made, a declaration in the
prescribed form executed by the registered agent.
(3) In a case
to which subsection (2)(b) applies, the fee shall be calculated by deducting
from the amount of the minimum tax charge the result of the following formula -
F
x M
12
where: F = the amount of the fee under subsection
(2)(ii), and
M =
the number of complete tax months that have elapsed since the beginning of the
year of assessment as at the date on which the company commenced business.
(4) If for any
reason a limited liability company ceases to be an international LLC, the
Assessor shall not be required to make a refund of the whole or any part of a
fee paid by the company under this section.
(5) Where an
application is made to the Assessor in accordance with this section he shall,
if satisfied as required by this Chapter, issue to the international LLC a
certificate of status in the prescribed form.
(6) An
international LLC or a limited liability company making an application under
this section shall, when required by the Assessor, produce to him -
(a) the balance
sheet and the profit and loss account of the company for any year of assessment
that he may specify; and
(b) such other
accounting records and documents as he may specify;
(c) a
copy of the articles of organisation and the operating agreement of the
company,
and such
balance sheets, accounts, records, articles and agreement shall be verified in
such manner as the Assessor may require.
Assessment
following breach of this Chapter.
40.(1) Subject to subsections (2) to (5), if the
Assessor is satisfied that during any year of assessment any of the
requirements of this Chapter have been contravened in relation to an
international LLC, he may assess the income of the members of that company for
the whole of that year of assessment under the Income Tax Acts 1970 to 1995
without reference to the provisions of this Chapter.
(2) If an
international LLC is in receipt of income derived from a source within the
Island but satisfies the Assessor that, taking into account the nature of its
business and its turnover, the income is derived from an isolated and
insignificant transaction, he may disregard that income for the purposes of
subsection (1).
(3) Any member
of a limited liability company who is either-
(a) assessed under
subsection (1); or
(b) assessed
following a decision of the Assessor not to disregard income under subsection
(2),
shall be
entitled to appeal to the Commissioners.
(4) In any
appeal against an assessment under subsection (1), the Commissioners may, in
private and in the absence of the Assessor, require the disclosure to them of
the identity of the beneficial owner of any interest in the company, and if
such information is not given the appeal shall be dismissed.
(5) Any
information received under subsection (4) shall not be communicated by the
Commissioners to the Assessor.
Offences.
41.(1) A person who, without reasonable excuse,
fails to comply with a requirement under section 39(6) shall be guilty of an
offence and shall be liable on summary conviction to a fine not exceeding
£5,000.
(2) A person
who knowingly acts in breach of an undertaking given in a declaration under
section 39(2)(iii) shall be guilty of an offence and shall be liable on summary
conviction to a fine not exceeding £5,000 or to custody for a term not
exceeding 6 months or to both.
Chapter I
: Interpretation.
42. In this Chapter -
"1970 Act" means the Income Tax Act 1970;
"exempt company" has the meaning given in the
Income Tax (Exempt Companies) Act 1984;
"interest" means any interest (whether such
interest is equitable, legal or contractual) and whether such interest is a contingent
interest or is direct, or through or partly through, a body corporate or a
trust, or bodies corporate or trusts, and a person shall be deemed to have an
interest in an international LLC if he has any right to acquire or dispose of
any interest in such a company, or to vote in respect thereof, or if his
consent is necessary for the exercise of any of the rights of other persons
interested therein, or if other persons interested therein can be required or
are accustomed to exercise their rights in accordance with his instructions,
and, for the purposes of this definition -
(a) a loan to a
limited liability company shall, subject to regulations made for the purposes
of section 37(2)(c), be treated as if the loan were an interest in the company;
(b) the
following shall not be treated as an interest in a limited liability company -
(i) an
interest as a bare nominee or as a bare trustee;
(ii) an interest
as the trustee or protector of a discretionary trust if the trust deed or the
document constituting the trust expressly excludes the vesting of any
beneficial interest in a person resident in the Island;
(iii) any other
interest as the trustee of a trust (other than a discretionary trust) if the
trust does not permit (whether by express provision in the trust deed or the
document constituting the trust, or by operation of law or otherwise) the
vesting of a beneficial interest in the trustee nor the payment of any sums to
the trustee other than as expenses or as fees for professional services;
"international company" and "international
limited partnership" have the meanings given in the International Business Act
1994;
"international LLC" has the meaning given in
section 37(3);
"Stock Exchange" means the London Stock Exchange
and any other investment exchange which is prescribed.
Receipts.
43. Any money
received by the Assessor under this Chapter shall form part of the General
Revenue of the Island.
Savings.
44.(1) This Chapter shall not prejudice the
operation of the Income Tax Acts 1970 to 1995 as those Acts have effect apart
from this Chapter.
(2) Nothing in
this Chapter shall be construed as affecting the liability of a company to
deduct and account for income tax under the Income Tax (Instalment Payments)
Act 1974.
Construction
of Chapter I
45. This Chapter
shall be construed as one with the Income Acts 1970 to 1995.
CHAPTER II
- TAXATION OF OTHER LIMITED LIABILITY COMPANIES
Tax status
of limited liability companies.
46. After
section 2K of the Income Tax Act 1970 insert-
"Taxation
of members of limited liability companies.
2L.(1) Notwithstanding the provisions of the Income Tax Acts relating
to the taxation of a body corporate, for the purposes of those Acts-
(a) a limited
liability company shall be treated in all respects as if it is a partnership;
and
(b) each member
of a limited liability company shall be treated as a partner.
(2) As a consequence
of subsection (1)
(a) a limited
liability company shall not be liable to pay income tax on its profits; and
(b) each member
shall be liable to pay income tax at the appropriate rate in respect of his
whole income, including his share of the profits of the limited liability
company.
(3) Nothing in this section shall
operate to release or extinguish any liability of an attorney or agent to pay
Manx income tax as attorney or agent of the individual members of a limited
liability company.
(4) Without prejudice to the
generality of subsections (1) and (2), no deductions, allowances or reliefs -
(a) which can
be taken into account in the calculation of the taxable income of a body
corporate; and
(b) which, but
for those subsections, could have been taken into account in the calculation of
the taxable income of a limited liability company,
shall be allowed or taken into account in the
calculation of the profits of a limited liability company or the portion of the
taxable income of a member arising from that member's share of the profits of
the company.
(5) Without prejudice to the
foregoing provisions of this section, section 63 of this Act shall not apply in
respect of a limited liability company.
(6) This section shall not affect
the liability of a limited liability company to deduct and account for tax
under -
(a) the Income
Tax (Instalment Payments) Act 1974;
(b) Part 3 of the
Income Tax Act 1989.".
Returns of
members of limited liability companies.
47. After
section 63 of the Income Tax Act 1970 insert-
"Returns
in respect of members of limited liability companies.
63A.(1) A
return in respect of the income of members from a limited liability company -
(a) shall be
made and delivered in the prescribed form by the registered agent on behalf of
the members; and
(b) shall state
the names of the members and the proportion of the profits of the company to
which they are severally entitled,
and the registered agent of a limited liability
company shall for all the purposes of this Act be deemed to be the agent of
each of the members of such a company and accordingly, references in this Act
to a person's agent shall in relation to a member of a limited liability
company be construed as including the registered agent of the company of which
he is a member.
(2) The registered agent of a
limited liability company shall have all such rights of access to the records
of the company as are necessary for him to perform his functions as agent of
the members of the company for the purposes of this Act.
(3) In any case where there is no
registered agent and there is a member present in the Isle of Man, then the
return shall be made by that member.
(4) A member of a limited liability
company shall have all such rights of access to the records of the company as
are necessary for him to make a return in accordance with subsection (3).
(5) In any case where there is no registered
agent and no member is present in the Isle of Man, the return shall be made by
the attorney or agent in the Isle of Man of such members or any of them having
the receipt of any income of such member or any of them.
(6) The Assessor may require any
person making a return under this section and any person on whose behalf a
return is so made to appear before him to verify on oath the statements
contained in his return or to produce such oral and documentary evidence in
support of the return for the information of the Assessor as the Assessor may
require.
(7) If the Assessor is not satisfied
with the return made by any person under this section, or the person fails to
appear before him, or fails to produce the evidence required, or the Assessor
is not satisfied with the evidence which has been furnished, the Assessor shall
make an assessment in such sum as, according to the best of his judgment, ought
to be charged.
(8) The Assessor may administer oaths for
the purposes of this section.
(9) Section 84 of this Act shall
not apply in respect of the returns of limited liability companies."
PART 4 -
GENERAL
Inspection
of documents by the public
48.(1) Any person may inspect -
(a) a copy of
any document kept by the Chief Registrar under this Act;
(b) if the copy
is illegible or unavailable, the document itself.
(2) In subsection
(1), a copy is to be treated as the copy of a document if it is taken from a
copy or other reproduction of the original.
Offences:
members and officers
49. Where an
offence by a limited liability company was committed with the consent or
connivance of, or was attributable to any neglect on the part of, any member,
registered agent, manager or similar officer of the company, or any person who
was purporting to act as any such officer, that person shall also be guilty of
the like offence as the body corporate and shall be punishable accordingly.
Fees
50. The fees to
be paid in respect of the registration of limited liability companies, the
filing of documents, the issue of certificates, the inspection of documents and
the exercise of functions by the Chief Registrar under this Act shall be those
prescribed under the Fees and Duties Act 1989.
Public
documents.
51.(1) The Treasury may make such regulations as
are necessary to give effect to this Act.
(2) Regulations
under this Act shall be laid before Tynwald as soon as practicable after they
are made, and if Tynwald at the sitting at which the regulations are laid or at
the next following sitting resolves that they shall be annulled, they shall
cease to have effect.
Amendment
of Companies Act 1931.
52.(1) In section 79 of the
Companies Act 1931, after subsection (3) insert -
"(3A) In the case of a charge which -
(a) was created
or purported to be created, before 1 July 1996; and
(b) was
validated by section 6(3) of the Law Reform (Miscellaneous Provisions) Act
1996; and
(c) is a
charge to which this section applies but which has not been registered in
accordance with this Part,
subsection (1) shall have effect as if the
reference to registration within 1 month after the date of the creation of a
charge were substituted by a reference to registration within 6 months after
the date on which this subsection comes into operation.".
(2) In the proviso to
section 290(1) of that Act, after paragraph (i) insert -
"(ia) A limited liability company
organised under the Limited Liability Companies Act 1996 shall not register in
pursuance of this section:".
(3) In Part XI of
that Act (registration of foreign companies with place of business in the
Island) -
(a) in section
312, after "shall apply to all companies" insert "(including limited liability
companies)";
(b) in section
313(1)(b), after "directors and secretaries", wherever occurring, insert "(if
any)";
(c) in
section 315(2), after "directors and secretaries" insert "(if any)";
(d) in section
321, after the definition of "director" insert-
"limited liability company" means a company
which corresponds to a limited liability company organised under the Limited
Liability Companies Act 1996;".
(4) In the
Partnership Act 1909
(a) in section
49 after subsection (1B) insert -
"(1C) A limited partner is not to be treated as
taking part in the management of the partnership business within the meaning of
subsection (1) above in such cases or classes of case as are prescribed for the
purposes of this subsection in regulations made by the Treasury with the
approval of Tynwald.
(1D) Where any case or class of case is prescribed
for the purposes of subsection (1C), a limited partner will have power to bind
the firm in such a case.";
(b) in section
49A -
(i) in
subsection (2), at the beginning insert "Subject to subsection (2A),";
(ii) insert -
"(2A) In the case
of a limited partnership which is a collective investment scheme within the
meaning of section 30 of the Financial Supervision Act 1988, subsection (2)
shall apply in respect of a repayment only during the 6 months immediately
following the date on which the repayment is made but this subsection shall not
apply in the case of fraud.";
(c) section 50(g)
shall cease to have effect;
(d) in section 51(1B)
(i) in
paragraph (d), the words ", and the sum contributed by," shall cease to have
effect;
(ii) in
paragraph (e), the words ", and the sum which was contributed by," shall cease
to have effect.
Financial
provision
53. There shall
be paid out of money provided by Tynwald any expenses of the Treasury and the
Chief Registrar under this Act.
Short title
and commencement
54.(1) This Act shall be cited
as the Limited Liability Companies Act 1996.
(2) This Act
shall come into force on such day as the Treasury may by order appoint and
different days may be so appointed for different provisions and for different
purposes.
SCHEDULES
Schedule 1
Section
2(4)
Status and
Powers of Limited Liability Companies
1. To
sue and be sued, complain and defend, in its name.
2. To
purchase, take, receive, lease or otherwise acquire, own, hold, improve, use
and otherwise deal in and with real or personal property, or an interest in it,
wherever situated.
3. To
sell, convey, mortgage, pledge, lease, exchange, transfer and otherwise dispose
of all or any part of its property and assets.
4. To
lend money to and otherwise assist its members, managers and employees.
5. To
purchase, take, receive, subscribe for or otherwise acquire, own, hold, vote,
use, employ, sell, mortgage, lend, pledge or otherwise dispose of, and
otherwise use and deal in and with shares or other interests in or obligations
of other limited liability companies, domestic or foreign corporations,
associations, general or limited partnerships or individuals, or direct or
indirect obligations of the Island or of any government, state, territory,
governmental district or municipality or of any instrumentality of it.
6. To
make contracts and guarantees and incur liabilities, borrow money at such rates
of interest as the limited liability company may determine, issue its notes,
bonds and other obligations and secure any of its obligations by mortgage or
pledge of all or any part of its property, franchises and income.
7. To
lend money for its proper purposes, invest and reinvest its funds and take and
hold real property and personal property for the payment of funds so loaned or
invested.
8. To
conduct its business, carry on its operations and have and exercise the powers
granted by this Act anywhere in the world.
9. To
elect or appoint managers, officers, employees and agents of the limited
liability company, and define their duties and authority, which may include
authority also delegated to the members or managers under sections 17 and 18,
and fix their compensation.
10. To make and
alter operating agreements, not inconsistent with its articles of organisation
or with the laws of the Island, for the administration and regulation of the
affairs of the limited liability company.
11. To
indemnify a member or manager or former member or manager of the limited
liability company against expenses actually and reasonably incurred by him or
it in connection with the defence of an action, suit or proceeding, civil or
criminal, in which he or it is made a party by reason of being or having been
such member or manager, except in relation to matters as to which he or it
shall be adjudged in the action, suit or proceeding to be liable to the company
for negligence or misconduct in the performance of duty or to have received
improper personal benefit on account thereof.
12. To make any
other indemnification that is authorised by the articles of organisation or by
an article of the operating agreement or resolution adopted by the members
after notice.
13. To cease
its activities and surrender its certificate of organisation.
14. To have and
exercise all powers necessary or convenient to effect any activity, trade or
business of the limited liability company.
15. To become a
member of a general partnership, limited partnership, joint venture or similar
association, or any other limited liability company.
16. To pay
pensions and establish pension plans, pension trusts, profit-sharing plans,
ownership interest bonus plans and option plans, and benefit or incentive plans
for any or all of its current or former managers, officers, employees and
agents.
17. To make donations
for the public welfare or for charitable, scientific or educational purposes.
Schedule 2
Section
7(1)
Matters To
Be Specified in The Articles of Organisation
1. The
total amount of cash and a description and agreed value of property other than
cash contributed by the members.
2. The
total additional contributions, if any, agreed to be made by all members and
the times at which or events upon the happening of which they shall be made.
3. The
right, if given, of the members to admit additional members, and the terms and
conditions of the admission.
4. The
right, if given, of the remaining members of the limited liability company to
continue the business on the death, retirement, resignation, expulsion,
bankruptcy or dissolution of a member or occurrence of any other event which
terminates the continued membership of a member in the limited liability
company.
5. If
the members of a limited liability company are to be permitted to elect a
manager to manage the limited liability company, the articles of organisation
shall so state.
6. Any
other provision which the members elect to set out in the articles of
organisation for the regulation of the internal affairs of the limited
liability company, including any provisions which under this Act are required
or permitted to be set out in the operating agreement of the limited liability
company.
Section 20
Registration of Charges
Registration
of Charges with Chief Registrar
Registration
of charges created by limited liability companies.
1.(1) Subject to the provisions of
this Schedule, every charge created by a limited liability company and being a
charge to which this paragraph applies shall, so far as any security on the
company's property or undertaking is conferred thereby, be void against the
liquidator and any creditor of the company, unless the prescribed particulars
of the charge, together with the instrument, if any, by which the charge is
created or evidenced, are delivered to the Chief Registrar for registration
within 1 month after the date of its creation.
(2) Sub-paragraph
(1) is without prejudice to any contract or obligation for repayment of the
money secured by a charge.
(3) When a charge
becomes void under this paragraph the money securedthereby shall immediately
become payable.
(4) This
paragraph applies to the following charges -
(a) a charge
for the purpose of securing any issue of debentures;
(b) a charge
created or evidenced by an instrument which, if executed by an individual,
would require registration;
(c) a
charge on land, wherever situate, or any interest therein;
(d) a charge on
book debts of the company;
(e) a
floating charge on the undertaking or property of the company;
(f) a
charge on a ship or an aircraft or any share in a ship;
(g) a charge on
goodwill, on a patent or a licence under a patent, on a trademark or on a
copyright or a licence under a copyright.
2.(1) In the case of a charge
created out of the Island comprising solely of property situate outside the
Island, the delivery to and the receipt by the Chief Registrar of a copy
verified in the prescribed manner of the instrument by which the charge is
created or evidenced, shall have the same effect for the purposes of paragraph
1 as the delivery and receipt of the instrument itself, and 1 month after the
date on which the instrument or copy could, in due course of post, and if
dispatched with due diligence, have been received in the Island, shall be
substituted for one month after the date of the creation of the charge, as the
time within which the particulars and instrument or copy are to be delivered to
the Chief Registrar.
(2) Where a
charge is created in the Island but comprises property outside the Island, the
instrument creating or purporting to create the charge may be sent for
registration under paragraph 1 notwithstanding that further proceedings may be
necessary to make the charge valid or effectual according to the law of the country
in which the property is situate.
(3) Where a
negotiable instrument has been given to secure the payment of any book debts of
a limited liability company, the deposit of the instrument for the purpose of
securing an advance to the company shall not for the purposes of paragraph 1 be
treated as a charge on those book debts.
(4) The holding
of debentures entitling the holder to a charge on land shall not for the
purposes of paragraph 1 be deemed to be an interest in land.
(5) Where a
series of debentures containing, or giving by reference to any other
instrument, any charge to the benefit of which the debenture holders of that
series are entitled pari passu is created by a limited liability
company, it shall for the purposes of paragraph 1 be sufficient if there are
delivered to or received by the Chief Registrar within 1 month after the
execution of the deed containing the charge or, if there is no such deed, after
the execution of any debentures of the series the following particulars -
(a) the total amount
secured by the whole series; and
(b) the dates
of the resolutions authorising the issue of the series and the date of the
covering deed, if any, by which the security is created or defined; and
(c) a
general description of the property charged; and
(d) the names
of the trustees, if any, for the debenture holders;
together with
the deed containing the charge, or, if there is no such deed, one of the
debentures of the series:
Provided
that, where more than one issue is made of debentures in the series, there
shall be sent to the Chief Registrar for entry in the register particulars of
the date and amount of each issue, but an omission to do this shall not affect
the validity of the debentures issued.
(6) Where any
commission, allowance, or discount has been paid or made either directly or
indirectly by a limited liability company to any person in consideration of his
subscribing or agreeing to subscribe, whether absolutely or conditionally, for
any debentures of the company, or procuring or agreeing to procure
subscriptions, whether absolute or conditional, for any such debentures, the
particulars required to be sent for registration under this section shall
include particulars as to the amount or rate per cent. of the commission,
discount, or allowance so paid or made, but omission to do this shall not
affect the validity of the debentures issued:
Provided
that the deposit of any debentures as security for any debt of the company
shall not for the purposes of this subsection be treated as the issue of the debentures
at a discount.
(7) In this
Schedule, the expression "charge" includes mortgage.
Duty of
limited liability company to register charges created by company.
3.(1) It shall be the duty of a
limited liability company to send to the Chief Registrar for registration the
particulars of every charge created by the company and of the issue of
debentures of a series, requiring registration under paragraph 1, but
registration of any such charge may be effected on the application of any
person interested therein.
(2) Where
registration is effected on the application of some person other than the
company that person shall be entitled to recover from the company the amount of
any fees properly paid by him to the Chief Registrar on the registration.
(3) If any limited
liability company makes default in sending to the Chief Registrar for
registration the particulars of any charge created by the company, or of the
issues of debentures of a series, requiring registration as aforesaid, then,
unless the registration has been effected on the application of some other
person, the company and every member, registered agent, or other person, who is
knowingly a party to the default shall be guilty of an offence and shall be
liable-
(a) on
conviction on information, to a fine;
(b) on summary
conviction, to a fine not exceeding £5,000.
Duty of
limited liability company to register charges on property acquired.
4.(1) Where a limited liability
company acquires any property which is subject to a charge of any such kind as
would, if it had been created by the company after the acquisition of the
property, have been required to be registered under this Schedule, the company
shall cause the prescribed particulars of the charge, together with the
instrument or a copy (certified in the prescribed manner to be a correct copy)
of the instrument, if any, by which the charge was created or is evidenced, to
be delivered to the Chief Registrar for registration within one month after the
date on which the instrument or the acquisition is completed:
Provided
that, if the property is situate and the charge was created outside the Island,
1 month after the date on which the instrument or copy of the instrument could,
in due course of post, and if dispatched with due diligence, have been received
in the Island, shall be substituted for one month after the completion of the
acquisition as the time within which the particulars and the instrument or the
copy of the instrument are to be delivered to the Chief Registrar.
(2) If default
is made in complying with this paragraph, the limited liability company and
every officer of the company who is knowingly a party to the default shall be
guilty of an offence and shall be liable -
(a) on
conviction on information, to a fine;
(b) on summary
conviction, to a fine not exceeding £5,000.
Entry of
satisfaction.
5. The
Chief Registrar may, on evidence being given to his satisfaction that the debt
for which any registered charge was given has been paid or satisfied, register
a memorandum of satisfaction in the prescribed form.
Rectification
of register of charges.
6. The
High Court, on being satisfied that the omission to register a charge within
the time required by this Schedule, or that the omission or mis-statement of
any particular with respect to any such charge or in a memorandum of
satisfaction, was accidental, or due to inadvertence or to some other
sufficient cause, or is not of a nature to prejudice the position of creditors
or shareholders of the company, or that on other grounds it is just and
equitable to grant relief, may, on the application of the company or any person
interested, and on such terms and conditions as seem to the court just and
expedient, order that the time for registration shall be extended, or, as the
case may be, that the omission or mis-statement shall be rectified.
Registration
of enforcement of security.
7.(1) If any person obtains an
order for the appointment of a receiver or manager of the property of a limited
liability company, or appoints such a receiver or manager under any powers
contained in any instrument, he shall within 7 days from the date of the order
or of the appointment under the said powers deliver a notice in the prescribed
form to the Chief Registrar.
(2) Where any
person appointed receiver or manager of the property of a limited liability
company under the powers contained in any instrument ceases to act as such
receiver or manager, he shall, on so ceasing, deliver to the Chief Registrar
notice in the prescribed form.
(3) If any
person makes default in complying with the requirements ofthis paragraph he
shall be guilty of an offence and shall be liable -
(a) on conviction on
information, to a fine;
(b) on summary
conviction, to a fine not exceeding £5,000.
Provisions
as to Limited Liability Company's Register of Charges and as to Copies of
Instruments creating Charges
Copies of
instruments creating charges to be kept by limited liability company.
8. Every
limited liability company shall cause a copy of every instrument creating any
charge requiring registration under this Schedule to be kept at the registered
office of the company:
Provided
that, in the case of a series of uniform debentures, a copy of onedebenture of
the series shall be sufficient.
Limited
liability company's register of charges.
9.(1) Every limited liability
company shall keep at the registered office the company a register of charges
and enter therein all charges specifically affecting property of the company
and all floating charges on the undertaking or any property of the company,
giving in each case a short description of the property charged, the amount of
the charge, and, except in the case of securities to bearer, the names of the
persons entitled thereto.
(2) If any
member, registered agent, manager, or other officer of the company knowingly
and wilfully authorises or permits the omission of any entry required to be
made in pursuance of this paragraph, he shall be guilty of an offence and shall
be liable on summary conviction to a fine not exceeding £5,000.
Right to
inspect copies of instruments creating mortgages and charges and limited
liability company's register of charges.
10.(1) The copies of instruments creating any charge
requiring registration under this Schedule with the Chief Registrar, and the
register of charges kept in pursuance of paragraph 9, shall be open during
business hours, but subject to such reasonable restrictions as the company in
general meeting may impose, so that not less than two hours in each day shall
be allowed for inspection, to the inspection of any creditor or member of the
company without fee, and the register of charges shall also be open to the
inspection of any other person on payment of such reasonable fee, for each
inspection, as the company may require.
(2) If
inspection of the said copies or register is refused, any officer of the
company refusing inspection, and every member, registered agent and manager of
the company authorising or knowingly and wilfully permitting the refusal, shall
be guilty of an offence and shall be liable on summary conviction to a fine not
exceeding £5,000.
(3) If any such
refusal occurs in relation to a limited liability company, the High Court may
by order compel an immediate inspection of the copies or register.
Section 36
Offences
etc. Antecedent to or in The
Course of Winding Up
Offences
by members etc. of companies in liquidation.
1.(1) If any person, being a past
or present member, manager or registered agent of a limited liability company
which at the time of the commission of the alleged offence is being wound up or
is subsequently wound up -
(a) does not to
the best of his knowledge and belief fully and truly discover to the liquidator
all the property, real and personal, of the company, and how and to whom and
for what consideration and when the company disposed of any part thereof,
except such part as has been disposed of in the ordinary way of the business of
the company; or
(b) does not
deliver up to the liquidator, or as he directs, all such part of the real and
personal property of the company as is in his custody or under his control, and
which he is required by law to deliver up; or
(c) does
not deliver up to the liquidator, or as he directs, all books and papers in his
custody or under his control belonging to the company and which he is required
by law to deliver up; or
(d) within 12
months next before the commencement of the winding up or at any time thereafter
conceals any part of the property of the company, or conceals any debt due to
or from the company; or
(e) within 12
months next before the commencement of the winding up or at any time thereafter
fraudulently removes any part of the property of the company; or
(f) makes
any material omission in any statement made to the liquidator of the company
relating to the affairs of the company; or
(g) knowing or
believing that a false debt has been proved by any person under the winding up,
fails for the period of one month to inform the liquidator thereof; or
(h) after the
commencement of the winding up prevents the production of any book or paper
affecting or relating to the property or affairs of the company; or
(i) within
12 months next before the commencement of the winding up or at any time
thereafter, conceals, destroys, mutilates, or falsifies, or is privy to the
concealment, destruction, mutilation, or falsification of, any book or paper
affecting or relating to the property or affairs of the company; or
(j) within
12 months next before the commencement of the winding up or at any time
thereafter makes or is privy to the making of any false entry in any book or
paper affecting or relating to the property or affairs of the company; or
(k) within 12
months next before the commencement of the winding up or at any time thereafter
fraudulently parts with, alters, or makes any omission in, or is privy to the
fraudulent parting with, altering, or making any omission in, any document
affecting or relating to the property or affairs of the company; or
(l) within
12 months next before the commencement of the winding up or at any time
thereafter attempts to account for any part of the property of the company by
fictitious losses or expenses; or
(m) has within 12
months next before the commencement of the winding up or at any time
thereafter, by any false representation or other fraud, obtained any property
for or on behalf of the company on credit which the company does not
subsequently pay for; or
(n) within 12
months next before the commencement of the winding up or at any time
thereafter, under the false pretence that the company is carrying on its
business, obtains on credit, for or on behalf of the company, any property
which the company does not subsequently pay for; or
(o) within 12
months next before the commencement of the winding up or at any time thereafter
pawns, pledges, or disposes of any property of the company which has been
obtained on credit and has not been paid for, unless such pawning, pledging, or
disposing is in the ordinary way of the business of the company; or
(p) is guilty
of any false representation or other fraud for the purpose of obtaining the
consent of the creditors of the company or any of them to an agreement with
reference to the affairs of the company or to the winding up,
he shall be
guilty of an offence and shall be liable -
(a) on
conviction on information to custody for a term not exceeding 5 years or to a
fine, or to both;
(b) on summary
conviction to custody for a term not exceeding 12 months or to a fine not
exceeding £5,000, or to both.
(2) It shall be a
good defence -
(a) to a charge
under sub-paragraph (1)(a), (b), (c), (d), (f), (n), or (o), if the accused
proves that he had no intent to defraud, and
(b) to a charge
under sub paragraph (1)(h), (i) or (j), if he proves that he had no intent to
conceal the state of affairs of the company.
Penalty
for falsification of books.
2. If
any member, manager or registered agent of any limited liability company being
wound up destroys, mutilates, alters, or falsifies any books, papers, or
securities, or makes or is privy to the making of any false or fraudulent entry
in any register, book of account, or document belonging to the company with
intent to defraud or deceive any person, he shall be guilty of an offence, and
be liable to custody for a term not exceeding 2 years or to a fine, or to both.
Frauds by
members etc. of companies which have gone into liquidation.
3. If any
person, being at the time of the commission of the alleged offence a member,
manager or registered agent of a limited liability company -
(a) has by false
pretences or by means of any other fraud induced any person to give credit to
the company; or
(b) with intent
to defraud creditors of the company, has made or caused to be made any gift or
transfer of or charge on, or has caused or connived at the levying of any
execution against the property of the company; or
(c) with
intent to defraud creditors of the company, has concealed or removed any part
of the property of the company since or within 2 months before the date of any
unsatisfied judgement or order for payment of money obtained against the
company;
he shall be
guilty of an offence and shall be liable -
(a) on
conviction on information to custody for a term not exceeding 2 years or to a
fine, or to both;
(b) on summary
conviction to custody for a term not exceeding 12 months or to a fine not
exceeding £5,000, or to both.
Responsibility
for fraudulent trading.
4.(1) If in the course of the
winding up of a limited liability company it appears that any business of the
company has been carried out with intent to defraud creditors of the company or
creditors of any other person or for any fraudulent purpose, the High Court, on
the application of the liquidator, or any creditor of the company, may, if it
thinks proper so to do, declare that any of the members, managers or registered
agents, whether past or present, of the company who were knowingly parties to
the carrying on of the business in manner aforesaid shall be personally
responsible, without any limitation of liability, for all or any of the debts
or other liabilities of the company as the court may direct.
(2) Where the
High Court makes any such declaration, it may give such further directions as
it thinks proper for the purpose of giving effect to that declaration and in
particular may make provision for making the liability of any such person under
the declaration a charge on any debt or obligation due from the company to him,
or on any mortgage or charge or any interest in any mortgage or charge on any
assets of the company held by or vested in him, or any company or person on his
behalf, or any person claiming as assignee from or through such person or
company, and may from time to time make such further order as may be necessary
for the purpose of enforcing any charge imposed under this sub-paragraph.
(3) For the
purposes of this sub-paragraph the expression "assignee" includes any person to
whom or in whose favour, by the directions of the member, manager or registered
agent, the debt, obligation, mortgage or charge was created, issued or
transferred or the interest created, but does not include an assignee for
valuable consideration (not including consideration by way of marriage) given
in good faith and without notice of any of the matters on the ground of which
the declaration is made.
(4) Where any
business of a company is carried on with such intent or for such purpose as is
mentioned in sub-paragraph (1), every member, manager or registered agent of
the company who was knowingly a party to the carrying on of the business in
manner aforesaid, shall be liable -
(a) on
conviction on information to custody for a term not exceeding 2 years or to a
fine, or to both;
(b) on summary
conviction to custody for a term not exceeding 6 months or to a fine not
exceeding £5,000, or to both.
(5) The court
may, in the case of any person in respect of whom a declaration has been made
under sub-paragraph (1) or who has been convicted of an offence under
sub-paragraph (4), order that such person shall not, without the leave of the
court, be a registered agent or manager of or in any way, whether directly or
indirectly, be concerned in or take part in the management of a company for
such period, not exceeding 5 years, from the date of the declaration or of the
conviction, as the case may be, as may be specified in the order, and if any
person acts in contravention of an order made under this paragraph he shall, in
respect of each offence, be liable -
(a) on
conviction on information to custody for a term not exceeding 2 years or to a
fine, or to both;
(b) on summary
conviction to custody for a term not exceeding 6 months or to a fine not
exceeding £5,000, or to both.
(6) In
sub-paragraph (5) the expression "the court" in relation to the making of an
order, means the court by which the declaration was made or the court before
which the person was convicted as the case may be, and in relation to the
granting of leave means the High Court.
(7) The
provisions of this paragraph shall have effect notwithstanding that the person
concerned may be criminally liable in respect of the matters on the ground of
which the declaration is to be made, and where the declaration under
sub-paragraph (1) is made in the case of a winding up the declaration shall be
deemed to be a final judgment within the meaning of the Bankruptcy Acts.
(8) It shall be
the duty of the liquidator to appear on the hearing of an application for leave
under sub-paragraph (5), and on the hearing of an application under that
sub-paragraph or under sub-paragraph (1) the liquidator may himself give
evidence or call witnesses.
Power of
court to assess damages against delinquent members etc.
5.(1) If in the course of winding
up a limited liability company it appears that any person who has taken part in
the formation or promotion of the company, or any past or present member,
manager, registered agent or liquidator of the company, has misapplied or
retained or become liable or accountable for any money or property of the
company, or been guilty of any misfeasance or breach of trust in relation to
the company, the High Court may, on the application of the liquidator or of any
creditor or member, examine into the conduct of the promoter, member, manager,
registered agent or liquidator, and compel him to repay or restore the money or
property or any part thereof respectively with interest at such rate as the
court thinks just, or to contribute such sum to the assets of the company by
way of compensation in respect of the misapplication, retainer, misfeasance, or
breach of trust as the court thinks just.
(2) The provisions of
this paragraph shall have effect notwithstanding that the offence is one for
which the offender may be criminally liable.
(3) Where in
the case of a winding up an order for payment of money is made under this
paragraph, the order shall be deemed to be a final judgment within the meaning
of the Bankruptcy Acts.
Definition
6. In
this Schedule, "liquidator" includes provisional liquidator.