A potential major flaw has been discovered in the Verification of Entity Registration Bill 2026, a piece of legislation that has already passed through the House of Keys, the Legislative Council and is now awaiting Royal Assent.
The Bill, intended to modernise the Island’s company registration framework and strengthen beneficial ownership oversight, appears to contain a contradiction so severe that experts say it may be impossible to implement.
Clause 142 – a Legal Loop
The issue centres on Clause 142, which inserts a new Section A9 into the Beneficial Ownership Act 2017. The new section attempts to introduce a requirement that beneficial ownership information must be submitted before a company can be incorporated. On paper, it looks like a tightening of transparency rules. Local professionals claim that in practice, it creates a legal loop that cannot be satisfied.
Under the existing Beneficial Ownership Act, the law only applies once a legal entity has been incorporated. A nominated officer (the person responsible for submitting beneficial ownership information) can only be appointed once the entity exists. Yet Section A9 demands that this nominated officer must submit beneficial ownership details before incorporation, and that the Companies Registry must refuse incorporation until those details have been recorded.
Experts in the industry say the law now requires a nominated officer to act on behalf of a company that does not yet exist. It also requires the Registry to block incorporation until information is provided by an officer who cannot legally exist until incorporation. The Act, in effect, has been rewritten to require compliance from a legal entity that has not yet come into being.
Astonishing
The individual who spoke to Manx.News about this described the flaw as “astonishing”, noting that neither chamber of Tynwald amended Clause 142 despite the contradiction being obvious to anyone familiar with the structure of the Act. Their concern is shared by other locally based industry professionals who have reviewed the text. One accountant who examined the issue said simply that it was impossible to appoint an officer to a company that does not legally exist, adding that the Island’s incorporation process is already far more burdensome than the UK’s. They pointed out that forming a UK company now takes around five minutes using electronic verification, while an Isle of Man incorporation he completed this week took four days due to extensive paperwork. The Isle of Man is fast becoming a problematic place to do business, they told Manx.News.
forming a UK company now takes around five minutes using electronic verification, while an Isle of Man incorporation he completed this week took four days due to extensive paperwork.
Isle of Man based CSP
The implications of this legislative error are significant. If Section A9 becomes law in its current form, the Island could face a freeze on new incorporations because the Registry would be legally prohibited from registering any entity without pre‑incorporation beneficial ownership data. At the same time, no nominated officer could legally exist to provide that data. The result would be a regulatory deadlock at the very moment the Island is preparing for heightened scrutiny under MONEYVAL.
The Bill’s stated purpose is to strengthen public registers, improve oversight and reinforce the Island’s reputation as a responsible international financial centre. Instead, Section A9 risks undermining that reputation by introducing a requirement that cannot be met and a process that cannot function.
Royal Assent Pending
Royal Assent is still pending, leaving the Government with limited time to acknowledge and correct the flaw. If it is not addressed before Assent, the Island may be forced into emergency amendments or temporary suspensions to prevent the legislation from paralysing company formation.
For now, the local CSP is aksing: how did such an unworkable clause pass through every stage of scrutiny without a single amendment?
Keys Consumed By Theatrics
The deeper question this exposes is whether the Island’s elected representatives are truly applying meaningful scrutiny to the laws they pass. Recent months have seen the Keys consumed by theatrics over trivial matters, including the censure saga surrounding Kate Lord‑Brennan, while genuinely complex legislation has sailed through with barely a raised eyebrow. When members devote more energy to political point‑scoring than to line‑by‑line examination of Bills, it is hardly surprising that defective laws like the assisted dying legislation and now the Verification of Entity Registration Bill reach the final stage riddled with contradictions. It raises an uncomfortable but unavoidable issue: are our lawmakers actually capable of doing the job the public expects of them?
