IN445 - Isle of Man Exempt Schemes: A Flexible Solution for Family Offices and High Net Worth Indivduals
Isle of Man Exempt Schemes are a flexible and attractive option for Private Client Family Offices and high net worth individuals. The Isle of Man has a long established fund sector and the latest Fund Statistical Data (published by the Isle of Man Financial Services Authority for the quarter ended June 2016) recorded 130 Exempt Schemes registered in the Isle of Man, with a combined net asset value of $4.42bn.
What is an Isle of Man Exempt Scheme?
Isle of Man Exempt Schemes are private arrangements which are outside the scope of fund regulation in the Isle of Man. However, they can operate in the same way as a fund issuing unit prices based on the Schemes Net Asset Value (“NAV”), which enables a Family Office to quantify and track performance.
Flexibility of Type of Entity
Isle of Man Exempt Schemes can be structured in a number of different ways to suit the client’s individual needs and circumstances. These structures include:
- Isle of Man Companies, 1931 Act and 2006 Act
- Isle of Man Limited Partnerships
- Isle of Man Unit Trusts
Flexibility of Investments
As an unregulated fund, the investment objectives and asset classes of an Exempt Scheme are entirely flexible and dictated by the specific terms of the Scheme’s Private Placement Memorandum. This Memorandum is the responsibility of the Governing body to prepare and it is not subject to regulatory approval.
The Governing body may take investment advice from any source.
Investors therefore benefit from an increased level of flexibility in terms of asset classes and investment strategies. In addition to the traditional asset classes of cash and equities, Exempt Schemes can be used to hold bespoke and non-financial assets, fine art and antiques, intellectual property and real estate.
In addition, unless mandated by the Scheme’s Private Placement Memorandum, Exempt Schemes are not subject to minimum subscription levels.
Additional Characteristics of an Isle of Man Exempt Fund
An Exempt Scheme is not required to appoint a custodian or have its financial statements audited, although it may do so if it so elects.
In addition, as an unregulated entity an Exempt Scheme does not need to appoint a Regulated Fund Administrator, although in practice many clients prefer to do so.
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 via special purpose vehicles to segregate separate asset classes.
Advantages in Terms of Control and Privacy
Isle of Man Exempt Schemes are attractive to Family Offices and high net worth individuals for a number of reasons, one of which is the ability to retain control of the assets themselves (or through their trusted professional advisers).
In order to qualify for exempt status, and therefore fall outside the Isle of Man Funds Regulatory Regime, an Exempt Scheme must meet two criteria:
- Investment in an Exempt Scheme cannot be offered to the public. An Exempt Scheme must be a purely private arrangement.
- The maximum number of investors cannot exceed 49 at any one time.
Key Benefits of an Isle of Man Exempt Scheme Summarised
- Flexibility of asset classes and investment strategy
- Cost efficient administration
- Control of assets, and
- The Isle of Man holds an Aa1 Moody’s rating, has strong international relationships and is highly regarded as a jurisdiction.
How Does an Isle of Man Exempt Fund Work?
The diagram below illustrates how an Isle of Man Exempt Scheme structure operates:
If you require any additional information on this topic, please speak to Simon Kelly at the Dixcart offices in the Isle of Man: firstname.lastname@example.org.
Dixcart Management (IOM) Limited is Licensed by the Isle of Man Financial Services Authority.
Dixcart Global Fund Managers Limited is Licensed by the Isle of Man Financial Services Authority.