|The following submission was
the Isle of Man's Treasury as part of an ongoing process in company law
review. June 2004
The document should be read in conjunction with the Treasury's consultative document.
Firstly, it must be pointed out that the reform is at the behest of a Minister (Mr. Alan Bell MHK) who has been severely criticised in not one but both parts of the Mount Murray Inquiry.
This inquiry has revealed serious shortcomings and Mr. Bell has been identified as the central figure in these shortcomings. He remains, despite the huge amount of impartially scrutinised evidence, in denial of his culpability in the Mount Murray development scandal. He has acknowledged his willingness to do anything to accommodate any scheme purporting to be tourist related and the Mount Murray Part One Report, Part A, 2.6 quotes:
"...the reasons (for Mr. Bell's improper conduct) likely to be a misjudged sense of political and public interest necessity against a background of serious decline in the tourist industry in the Isle of Man."
We now have the same man in the potentially far more damaging position of Treasury Minister, obstinately refusing to acknowledge his shortcomings, facing similar background circumstances (a decline in business due to a host of factors) but in a far more sensitive area.
His comments, quoted in Section One of the Consultative Paper, indicate that his own objectives for the proposed reforms may, yet again, be for reasons likely to be a misjudged sense of political and public interest necessity against a background of serious decline.
Reading between the lines of the Minister's statements, an air of panic can be detected. He has already admitted that he perceives the finance sector to be "hanging by a thread" but, looking at the global situation in the past five years, no great degree of financial expertise is required to understand that company formation would slow up, in the short term at least, no matter what company law and regulation existed.
Knee-jerk reactions with long-term consequences to transient conditions is no way to run a country but Mr. Bell appears to be doing exactly that.
The Minister's perceived need for reform itself is also the result of a situation forecast and warned against by Mec Vannin: The reliance upon incidental revenue from a high level of company formation rather than from the existence of companies in a stable environment means that the Treasury will find itself forever chasing its tail to encourage company formation and finding itself incapable of regulating the situation because of lack of resources.
The zero tax strategy has painted the Treasury into a corner before it has even been implemented!
Notwithstanding the foregoing, Mec Vannin believes that positive reforms could be carried out to Company Law in the Isle of Man provided that good governance and sound law is the guiding principle (as opposed to Mr. Bell's own political agenda, itself likely to be the result of the influence of vested interests) and would advocate pursuing either Option C or Option F of the Consultative Document as the preferable course.
In a more objective environment, Option F may be considered as the best option. Given the concerns expressed above, however, this option is likely to be tainted from the outset by the very nature of the Minister's stated aims. In light of this, Option C gains favour with the party.
Insolvency is a special case for both legal entities and individuals and the Party finds it acceptable to separate insolvency procedure from the law governing a normally functioning company. Whether or not corporate and individual insolvency should be dealt with under the same or separate legislation is a matter for further consideration.
The comments in paragraph 3 of Option C are appreciated. The two ways of addressing this issue are to reform company law and insolvency law in parallel or to provide interim legislation that would interface modified company law with existing insolvency law. Without having had time to study the practicalities of either course, the Party reserves its position at this stage.
This opportunity is taken to reiterate the Party's firm opposition to Options D and E.
Option D, in particular, is an unashamed manifestation of the Minister's desire "to do anything" to accommodate business interests to the detriment of proper regulation and procedure. The lack of enforcement mentioned in the final paragraph is an acknowledgement that the Treasury has allowed company formation to run out of control. The issue to be addressed is the lack of resources to police the law and any move to relax the law to bring it down to the level of available policing is an acknowledgement of regulatory failure.
The fact that the proposed Section 32 was summarily removed from what became the 1992 Act is a clear indication of how commercial gain is given precedent over sound legislation and, particularly in the context of the proposed review, Option D represents an invitation to the finance industry to write its own rules.
As it is, statutory filing requirements are minimal and cannot possibly be seriously raised as an obstacle to the formation of legitimate and properly run companies. The fact that many companies are not achieving this minimal requirement is, in itself, indicative of a cavalier attitude to company law in the Isle of Man.
The pitfalls of Option E are acknowledged in the Consultative Document itself and no advantages in terms of improved regulation are offered.
In summary, the Party advocates Option C and wishes to be included in further consultation.
The following extracts are offered in support of the Party's position. It is by no means a comprehensive list of our statements on the subject.
Mec Vannin Policy Summary:
Mec Vannin remain fundamentally opposed to the presence of the international finance industry in Mann. We believe it to be morally dubious for both ourselves and for its effects upon the Third World.
From an economic standpoint, we do not believe that reliance upon this transient industry will secure our long-term future."
2004 MV AGM Resolution No 7:
"This AGM unreservedly rejects the taxation policies that so obviously pander to business and disproportionately burdens the individual's earning and spending."
2003 MV AGM Resolution no. 7:
"a) rejects the government policy of zero rate income tax as ultimately suicidal, both economically and in relation to achieving genuine independence.
"b) calls for the fundamental VAT / income tax strategy to be overturned."
Yn Pabyr Seyr - July 2002 - "Tax Proposals Unsupportable"
Yn Pabyr Seyr - January 2001 - "OECD"
Yn Pabyr Seyr - July 2000 - "Tax cuts - desperation sets in."
Yn Pabyr Seyr - July 1993 - "MANNIN - The land where companies have more rights than people."
Yn Pabyr Seyr - July 1992 "SIB & BCCI"
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