The Isle of Man offers a comprehensive range of vehicles for use as fund structures, Companies can be established under the more traditional Companies Act 1931 or the more flexible Companies Act 2006, which offers a stand-alone vehicle with minimal administrative requirements, flexible capital structure and limited disclosure requirements.  

Isle of Man limited partnerships offer tax transparency and a flexible legal framework. A limited partnership may return capital prior to the winding up of the partnership. Furthermore, in order to provide comfort to investors, the statute sets out a “whitelist” of activities that will not result in limited partners being regarded as involved in the management of the partnership, thereby prejudicing their limited liability status. 

Isle of Man trust law is similar to that of England and Wales. As a fund vehicle, the unit trust arrangement offers huge flexibility and the security of knowing that the arrangements are not a matter of public record. 

Funds in the Isle of Man are generally subject to regulation commensurate with the category into which they fall. Regulatory requirements may include the need to appoint appropriately licensed functionaries (such as an administrator, custodian and/or auditor) and stipulations regarding the preparation and content of an offering document, investor certification obligations, minimum subscription levels, etc. 

Exempt schemes are an exception to these requirements. If the criteria for exempt scheme status are met, the arrangements are subject to only limited regulation. 

There are two criteria for exempt scheme status: The first relates to the means of distribution; the second relates to the diversity of the investor base. In detail, the criteria is as follows: 

• Interests in the exempt scheme may not be offered to the public or any section of it (i.e. the fund may only be offered on a private ‘friends and family’ basis) and a prohibition to this effect must be included in the constitutional documents of the fund; and; 

• The exempt scheme must have fewer than 50 investors at all times.  

As an exempt scheme grows, there may be good reasons why it would become appropriate to make arrangements for public offerings or to exceed the investor limit. In these circumstances it is a straightforward process to convert an exempt scheme into a higher category of scheme such as a Specialist Fund (see fact sheet: The Specialist Funds). 

As a lightly regulated private vehicle, there is no prescribed regulatory minimum initial investment requirement for an exempt scheme. 

There are no mandatory requirements relating to the audit of the financial statements of an exempt scheme, although the Isle of Man does host offices of all the major accountancy and audit practices should an audit be regarded as appropriate. 

There are no prescriptive requirements for the appointment of a custodian in relation to an exempt scheme. The fund is free to implement whatever arrangements are appropriate for holding its assets, whether through the use of a third party, direct ownership or special purpose vehicles.