Ethical Structured Company

Posted on 08 August 2019 in IQE Isle of Man

In response to a growing aspiration for individuals and families to invest and work in an ethical manner, IQE and MannBenham have collaborated to establish a structure which can be used for a range of ethical purposes including Shariah compliance, ‘green’ social impact investment and philanthropy. This is a universally recognised company established for ethical purposes to meet individual principles (none of which are mutually exclusive) and which can be employed where Foundations or Trusts are not accepted to achieve a similar outcome.

The Isle of Man is in a unique position which offers a safe, stable and secure venue, with suitable and enduring legislation which provides for this type of company in a fiscally benign and economically strong environment.

The use of an Isle of Man company, limited by shares and by guarantee has the advantage of being a corporate legal entity.  In addition to the Board of Directors who manage the company and make the decisions there is a Supervisory Board. The company has the benefit that it is universally accepted and endures (subject to remaining solvent) until the shareholders and guarantee members decide it should be wound up.

Isle of Man company law provides for companies limited by both shares and by guarantee and has been available since the 1800s which provides the comfort of proven, effective and reliable legislation, but due to recent updates you can also avail of modern company law.

The company has guarantee members (non-transferrable) and shareholders (transferrable).

Isle of Man companies have full capacity to do anything which allows this unique Ethically Structured Company to be tax neutral and ethically responsible.

The guarantee members' liability is limited to an undertaking to pay a certain amount (say £100) in the event of a winding up.  The guarantee members may be able to receive capital distributions from the Ethical Structured Company during its lifetime and on liquidation.

Shareholders are required to acquire shares and their liability is limited to the value of the shares.

The Board of Directors are the decision makers and manage and control the Ethical Structured Company.  The shareholders' rights and the powers of the Directors combined can be likened to the powers of trustees.

The internal affairs are governed by a tailor made Members Agreement between the shareholders, guarantee members and the Company.  This remains a private document, not available to the public.  The Members Agreement will be drafted to suit your requirements but usually includes:

• A definition of the Ethical Structured Company with any restrictions required;
• Identifying company decisions which would require guarantee member consent;
• Guidelines on how the company's affairs will be run, including procedures in the event of disagreement between the shareholders and the guarantee members;
• Procedures for the appointment or removal of guarantee members;
• Details of the future guarantee members in the event of the death or incapacity of a guarantee member;
• A strategy to ensure that future shareholders and guarantee members agree to the terms of the Members Agreement.

Supervisory Board

The Articles of Association include provision for a separate Supervisory Board which, is not entitled to manage or control the Company in any sense.  The Supervisory Board members provide the Ethical Structured Company's "conscience" as policy advisers and policy compliance auditors to the Board of Directors.  In summary, the Supervisory Board advises the Board of Directors with regard to the purpose whether that be Shariah compliance, green and environmental sustainability or philanthropy.

Shariah Law

The internal documents which provide rules for the Supervisory Board, comply with the well-established and highly respected Guiding Principles on Shariah Governance Systems issued by the Islamic Financial Services Board (IFSB).  It is intended that these be reviewed annually to ensure ongoing compliance.

Green Credentials

These can be tailored to meet the requirements of the individuals or families concerned.  They may choose to restrict investments into certain areas which have a social impact or which focus on environmental sustainability or alternatively avoid certain asset classes such as alcohol, tobacco or fossil fuels.  There are also globally recognised standards in green finance which can be verified by an appropriate third party against a globally recognised standard if required.

Philanthropy

As for Green credentials, the philanthropic aims and objectives can be written in a way which reflects the individual or family's desire to make a difference and support the causes they consider most deserving.

The main message is that the rules for the Supervisory Board whether Shariah, Green or Philanthropic can be customised to meet the ethical beliefs of each client.