The Isle of Man: debasing its regulation in the race to the bottom

Posted on

I note that TaxNews.com reported last week that:

The Isle of Man parliament last week approved two separate sets of regulations modernizing the island’s company law.

Firstly, the company law was amended to change the obligation on private companies to hold annual general meetings; and to change the types of business that can be conducted by Protected Cell Companies (PCCs).

I admit, I am well aware that most AGMs are a farce, involving the initialling of a pre-prepared minute. But in the Isle of Man this does, of course, create another degree of separation between the reality of control and the veneer of presence that underpins the whole essence of a secrecy jurisdiction. And so this is, for that reason, another retrograde step in the debasement of Isle of Man regulation.

I am much more worried about the second change, about which it is noted:

The Protected Cell Companies (Eligibility) Regulations 2010 allow PCCs incorporated under the Companies Act 1931 to 1993 to conduct any class of business, the same as PCCs incorporated under the Companies Act 2006. The former category of PCC was previously restricted to insurance and collective investment business.

When protected cell companies were introduced they were to supposedly support the insurance industry. But there were those who sought to abuse them from the outset. As is noted in the TJN briefing on the subject, it has been said of them:

The structure of PCCs has been compared to a house with a lock at the entrance and many rooms inside, each room locked separately with its own door, but also with an escape tunnel only accessible from inside the room. If an investigator seeks to find out what is going on in one room inside the house, she first needs to unlock the main outer door. But imagine that by opening that first door everybody inside the building is alerted to the fact that someone has entered the house. Anybody seeking to flee the investigator will be given enough time to do so thanks to the second lock at the individual room door. While the investigator tries to unlock the second door (by filing a second costly information request), the perpetrator has enough time to erase all traces of guilt and escape through the secret tunnel. This colourful metaphor neatly illustrates how a PCC might work in practice.

This is the reality of what the Isle of Man is promoting, shamelessly.

And that is why we oppose the abuse it promotes.