If you are an asset manager then the Isle of Man is an excellent place to establish an Investment fund. ‘Closed ended’ funds are actually surprisingly easy to set up, as from a Manx perspective their management is governed by the relevant Companies Act rather than fund Legislation which would only apply to ‘open ended’ funds. You don’t need any approval from the Regulator neither do you need a licensed Fund Administrator to manage and administer it for you.
In addition to time and common sense – all you need is a Corporate Service Provider, an appropriate Fund manager, some willing Investors and a copy of the Companies Act.
We have been involved in many such arrangements – sometimes as the Administrator, sometimes as directors, sometimes as Secretary and sometimes as all three.
Here, in shorthand, is a summary of what we have learned.
1. Fees. Ask the Corporate Service Provider (Administrator) for preferential rates – once it is set up this is routine repeat business for them – any time based charges should reflect that and the standing annual charges for Registered office / Secretary and Registered Agent should be reasonable.
2 Billings. Ask the Corporate Service Provider to bill their charges quarterly (including the standing fees) and insist that they provide a full breakdown of any time charged to timesheet level as a matter of routine.
3. Directors. Generally a majority of Isle of Man resident directors will be required. Do not appoint more than one of the Fund’s board members from employees of the Administrator – also the external non Exec(s) should be sourced independently and not introduced by the Administrator. You can access the Isle of Man NEDS register here. This is to ensure that the director’s act in the best interest of the fund’s shareholders and are not influenced (even unintentionally) by conflicts of interest caused by their relationship with the Administrator.
4. Minute Secretary. Even though most of the day to day Company Secretarial work – except minuting Board meetings – will remain with the Administrator some Boards prefer to have an Independent Secretary appointed by them rather than one from the Administrator. This 3rd party overview serves to keep the Administrator and its staff on their toes and doesn’t generally add to the cost.
5. Guidelines for Management. Where ever possible clear guidelines for management should be set out at the beginning. For example
(i) Set the frequency of main board meetings (usually quarterly) and decide reasonable notice periods.
(ii) Set service levels with relevant parties – e.g. draft Board minutes to be produced within a week.
(iii) Detail which committees to appoint – Audit, Remuneration etc.
(iv) Decide on operational practices – such as the procedure to follow where investments are to be bought and sold.
(v) Decide which aspects of the business require policies to be adopted – eg risk management, dealing with relevant legislation such as the Bribery Act.
Of course, the list goes on – but they key is to anticipate the requirements and act proactively to deal with them as this will save significant cost which is caused by people not really knowing what they should be doing.