Middleton Katz incorporates and administers Isle of Man Companies as a professional Registered Agent / Corporate Service Provider (CSP). Here are 5 key areas that we would definitely ask a prospective service provider if we were sitting on the other side of the desk.
(i) Test their technical knowledge.
One of the key roles of a registered agent is to ensure that your company is administered in accordance with the law. To this effectively, they will need a pretty good gasp of the relevant Companies Act. So, we would recommend asking them a few technical questions to test their knowledge. Of course you don’t necessarily need to know the answers yourself – just watch to see how confidently they address your queries.
Here are a couple of examples:
Under the relevant Isle of Man Companies Acts- What powers do the shareholders have to remove the directors and in practice how can they exercise those powers ? (see answer here)
What are the rules concerning the Isle of Man company buying back its own shares from the shareholders ?
If they can’t confidently address the questions then – we’d suggest you move on to looking for another provider.
(ii) Find out who the directors of your company will be.
Of course, once it has been incorporated, it is sensible for the day to day work on a particular company file to be taken care of by an administrator. Hopefully, you will form a good relationship with the administrator which will help matters to run smoothly and their lower charge out rate will save you money but it is vital to maintain a close relationship with the parties who actually serve as board members in your fiduciary structure. These are actually the people who have control of your assets and make the decisions as to how they are dealt with. Make sure you know exactly who they are, what their background is and that you have access to them whenever you need it. If the board members are Principals of the firm who have little contact with clients and even less to do with the day to day management of the companies to which they are appointed then this can lead to time consuming internal correspondence which can be frustrating and costly for the client.
(iii) Ask about arrangements for time charging.
Sometimes clients are over charged by their Corporate Service Provider. It is a danger as the Service Provider often has control of the assets within the fiduciary structure which are used to pay them. The main issue, generally, is inflated time charges. If your client entity is fairly inactive ask to negotiate a ‘fixed inclusive fee’ – which should remove this as an issue. If the structure is active then ask for detailed timesheets to be sent to you monthly so you can monitor the situation – and then review the time records asking for justification of the time spent. If you aren’t satisfied by the arrangements put in place then you should consider appointing for an alternative service provider. See Middleton Katz Time Charge policy.
(iv) Ask for the Terms of Business – and read it.
Registered Agents in the Isle of Man are legally obliged to provide their clients with a written agreement which details their terms of business. This is the contract that sits between the Fiduciary Service Provider and the client company and it contains details of the fees payable, the indemnities given, fee guarantees provided by the beneficial owners (if any) and the arrangements for the termination of the contract – should it be required. Ask for it and read it. If there are matters in there that give you serious cause for concern then you should say so and ask for an explanation and even to have them changed. You should find that the registered agent is cooperative in this regard.
(v) Agree arrangements of transferring the structure to a new agent.
It may seem strange to address transfer arrangements at the beginning of a business relationship but, sometimes it is necessary to change registered agent and it’s often an awkward transaction which invariably leaves the client out of pocket and feeling a little battered and bruised. It’s best dealt with at this stage as your negotiation position is at its strongest which perversely is before you are a client. We suggest that you either ask the provider to agree a fixed fee for arranging a transfer or ask them to agree to waive any transfer fees on the understanding that the new provider will undertake any work involved in preparing the documentation.
Further, clients generally pay in advance, so you should ask them to confirm that un-expended fees are refunded on a pro-rate basis. They probably won’t agree to this but it’s worth asking. In all events, ask for them to detail the arrangements in writing and to confirm that it overrides any standard provisions contained within the standard terms of business agreement.