The parliament of the Republic of the Marshall Islands (RMI) recently enacted amendments to the RMI Associations Law (the “Associations Law”). These amendments, available here, bring further modernizations and enhancements to the Associations Law, including expanding the ability to use electronic transmission and easing the thresholds for actions without a meeting. The amendments also include changes in furtherance of the RMI’s commitment, as a member of international organizations such as the Asia/Pacific Group on Money Laundering and the Organization for Economic Cooperation and Development (OECD) Global Forum on Transparency and Exchange of Information for Tax Purposes, to internationally agreed standards on exchange of information. In line with these standards and with similar obligations in other leading corporate jurisdictions, the amendments enact additional recordkeeping requirements for RMI entities as detailed below.
In addition to the reliable and complete accounting records and the up-to-date legal ownership records already required under the Associations Law, the amendments add a requirement for non-resident domestic entities to use all reasonable efforts to obtain and maintain an up-to-date record of the names and addresses of their beneficial owners. Beneficial owners include the natural persons who exercise control over the entity through direct or indirect ownership of more than 25% of the ownership interests or voting rights in the entity. Publicly traded companies are exempted from this requirement, and for existing entities, there is a 360-day phase-in period. Penalties for knowingly or recklessly failing to keep, retain, or maintain records as required have been increased by the amendments.
While the accounting, legal ownership, and beneficial ownership records required under the Associations Law generally are to be kept by the entity, the amendments require non-resident domestic entities, under certain circumstances, to provide these records to their registered agent in the RMI upon request. Failing to provide records within 60 days of such a request, or willfully producing false or misleading records, may result in substantial penalties under the amendments. The amendments also obligate non-resident domestic entities, except publicly traded companies, to make an annual attestation to the Registrar of Corporations (the “Registrar”) that these records are being maintained as required. The attestation will be integrated into the Registrar’s invoicing process and, once implemented, is expected to be effortless for most clients.
Under the amendments, bearer shares are subject to recordkeeping requirements beyond those outlined above. Corporations issuing bearer shares are required to use all reasonable efforts to keep up-to-date records of all holders and beneficial owners of bearer shares, as well as any subsequent transfers. In order to maintain the validity of bearer shares, including any and all rights and privileges of a holder of such shares, these records must be recorded with the corporation’s registered agent in the RMI. A 360-day phase-in period is provided for existing bearer shares. Bearer shares that do not comply with the recordkeeping obligations within the prescribed period must be cancelled by the corporation within the timeframe specified in the amendments.
The summary above is provided as a courtesy for general information purposes only and should not be construed as legal advice or a substitute for legal counsel. For legal advice or a legal opinion regarding the amendments, please consult independent counsel. A partial list of RMI licensed attorneys is available here.