What powers does an Isle of Man company have?

2018 proved a challenging time for big business. New GDPR regulations cracked the whip on data regulation and the eyes of the media were on big corporations to act in the interest of the public. Despite this, we still saw ‘Cambridge Analytica’ and ‘Google+ shutdown’ headlines littering the front pages.

But does this mean that business is inherently evil? And if so, what restrictions exist to keep business directors in line? With so much scrutiny on businesses to do the right thing, now seemed a good time to ask the question: what powers does a business actually have? Particularly one with its roots on the Isle of Man – a crown dependency with a different Government and set of rules to the rest of the UK.

A brief history of memorandum

Any company – whether on the Isle of Man or elsewhere – must have its ‘powers’ set out in a public document known as the Memorandum of Association. This is more commonly known as the Memorandum. In the olden days – to protect the world at large – the memorandum was a much more legally-binding document than the ones we know and use today.

Back then, the powers of a company were set out in the objects clause of the document (this will be important later). A director in breach of its objects was subject to some pretty strict repercussions.

Naturally, this rattled a few cages and lawyers were hired to detect loopholes and get businessmen off the hook.

As time went on, the objects clauses got longer and longer as a means to getting around this problem. In an almost cyclical fashion, this only caused more anguish, as the restrictions on businesses tightened and the list of limitations on what they could not do got longer.

The solution, at least in the Isle of Man, was for Tynwald, the Parliamentary body on the Island, was to turn the whole thing on its head and put the power back in the hands of business.

Enter the Companies Act 1986.

Power to the people (kind of)

Under the Companies Act, objects clauses were switched with restrictions clauses. In other words, rather than telling a company what they could do, businesses were only restricted in what they couldn’t do.  Companies were given the same powers as an individual and then some. This has remained the case even when the new Isle of Man Companies Act was passed in 2006.

But this is not the full story. Whilst a corporation in itself might not be a living, breathing organism, it is full of sentient beings who have the ability to take advantage of this relatively novel power. Of course, this begged the question of how to lawfully control matters of an ethical nature when they did arise.

Tynwald solved this by developing the director’s duties and responsibilities.

These are codified in the UK but in the Isle of Man, they still rest on the maxim that the directors must “…act in…the best interests of a company as a whole”. Directors are considered in a fiduciary relationship with the company. The fiduciary relationship imposes upon directors duties of loyalty and good faith. Whilst a company, as an entity, has the freedom to do what it wants, the director of the company will not get away so lightly and can be charged with a ‘breach of trust’ should they put a foot out of line.

So what can an Isle of Man company do?

Well, in terms of capacity, an Isle of Man company can do as it pleases. Directors, on the other hand, cannot as they must always consider what is in the best interests of the company.


Quinn Legal is a leading law firm on the Isle of Man, working extensively in corporate law. In operation since 2009, Quinn Legal prides itself on its friendliness and approachability. Their fun, smart and imaginative personality separates them from other law firms on the island. Find out more about Quinn Legal corporate law here: https://www.quinnlegal.im/business/isle-of-man-corporate-law/