Michael Wyler, Managing Director, IRI Corporate and Maritime Services (Switzerland) A G
Michael Wyler outlines the legislative and regulatory framework in place in the jurisdiction, highlighting its position as jurisdiction of choice for initial public offerings for shipping companies.
The Corporate Registry of the Republic of the Marshall Islands (RMI) has witnessed dynamic growth in recent years. Twenty Marshall Islands international business corporations (IBCs) and three limited partnerships (LPs) have gone public to raise capital on exchanges in London, New York and Singapore, with several IBCs in the process of being listed on stock exchanges around the world. Moreover, the Marshall Islands has been the jurisdiction of choice for virtually all international shipping companies that have applied for initial public offerings (IPOs) on the world’s leading stock exchanges. This success can be largely attributed to the Marshall Islands’ modern and responsive corporate laws (first enacted in 1990) and to the customer service philosophy of the Registry’s administrator, International Registries Inc (IRI).
The Marshall Islands is a zero-tax jurisdiction for all non-resident business entities. Its Associations Law is modelled on the corporate laws of the US state of Delaware and includes the Business Corporations Act (BCA), the Revised Partnership Act, the Limited Partnership (LP) Act and the Limited Liability Company (LLC) Act.
The IBC is one of the most widely used business vehicles. Marshall Islands IBCs are low cost and easy to form and administer. Marshall Islands law allows an IBC to be organised in accordance with the UK system, with a managing director and corporate secretary, or the US system, with a president, secretary and treasurer. Only one director is necessary and the only officer required is a secretary. A person and/or entity can hold more than one office and/or directorship. Officers and/or directors may be of any nationality and may be corporations or individuals. Meetings of the officers or directors may be held anywhere in the world. The names of officers and directors are not required to be filed with the registry, but may be filed on a voluntary basis.
The Articles of Incorporation may include special provisions regarding the scope of activities or the conduct of the affairs of the IBC. Optional purpose and power clauses may also be included in the Articles of Incorporation. The only restrictions on the activities of a corporation are that the corporation may not offer banking or insurance services.
Partnerships and Limited Partnerships
Partnerships and LPs offer excellent alternatives to the standard IBC, thanks to their flexible management control. To form a Marshall Islands partnership, a Certificate of Partnership Existence must be filed, which includes: the partnership’s name; the name and address of the registered agent in the Marshall Islands; a statement that the partnership’s registered agent is to be its agent upon whom process against it may be served; and a statement that the partnership will file a Certificate of Cancellation upon the dissolution and completion of the winding up of the partnership.
For an LP, a Certificate of Limited Partnership must be filed, including the same information as above, as well as the name of each general partner and the business, residence or mailing address of each general partner. No information regarding the identity of the limited partners is required to be filed, but may be filed voluntarily.
Limited Liability Companies
An LLC mixes the best elements of an IBC and a partnership, as it allows for the liability protection of a corporation as well as the flexible management system of a partnership. It is a cost-effective way to maximise profits while minimising liability and is an excellent vehicle for transactions requiring a considerable degree of passive investment, such as venture capital projects, investments in real estate, oil or technology, and research and development businesses.
To form a Marshall Islands LLC, a Certificate of Formation must be filed setting forth the LLC name, the name and address of the registered agent, and a specific date of dissolution (if applicable). An LLC, just like any other Marshall Islands business entity, can be formed in one business day.
Marshall Islands law also permits redomiciliation of a foreign IBC, LP, partnership or LLC into the Republic. A foreign business entity can redomicile to the Marshall Islands if transfer of domicile is not expressly prohibited under the laws of the foreign jurisdiction. Once an IBC, partnership, LP or LLC has redomiciled, annual fees are not due until one year after the entity has transferred into the Marshall Islands.
Non-Marshall Islands business entities may also apply for registration as a foreign maritime entity under the provisions of section 119 of the Marshall Islands BCA for the purpose of owning and operating vessels under the Marshall Islands flag. This vehicle allows the entity to remain registered in its current jurisdiction, while becoming qualified to own a vessel in the Marshall Islands.
The choice of the Marshall Islands as a jurisdiction from which to take an IBC public has become increasingly popular. Attorneys, fiduciaries and financial institutions have embraced the Marshall Islands Corporate Registry because of its high level of confidentiality, modern and flexible laws, and customer service oriented philosophy.
The Marshall Islands legislation is exemplary in allowing for the formation of sophisticated but flexible IBCs for IPOs. Shares of a corporation may be in registered and/or bearer form. There are no minimum capital requirements and no required annual filings. Shareholder meetings may also be held anywhere in the world. Flexibility to structure the operations of the IBC and the option to give minority interests a voice in management provide the opportunity to tailor the IBC to the needs of the participants and investors.
In contrast to some other jurisdictions, there are no onerous reporting requirements in the Marshall Islands. A Marshall Islands publicly traded IBC does not have to submit a registry of shareholders or accounts to the registered agent or registrar of corporations. This allows the IBC to focus on the mandatory reports required by the stock exchange and/or securities laws.
Ease of Formation and Maintenance
Marshall Islands IBCs are easy to form and administer and require little resources to maintain. If standard Articles of Incorporation are used, a company may be formed in as little as one business day. Ready-made shelf corporations are also available through any one of IRI’s offices. All filed documents must be in English but may be accompanied by a translation in any foreign language. The name of a Marshall Islands entity can also be in any language, as long as Roman characters are used, and may include any internationally recognised corporate suffix. In addition, corporate names may be instantly reserved up to six months before incorporation.
Subsequent filings are also made easy. For example, the Registry accepts facsimile filings. Moreover, no time-consuming and costly legalisation or consularisation is required in filing corporate documentation.
Political and Financial Stability
The political and financial stability of the jurisdiction, along with the Maritime Registry’s ranking as the fourth largest in the world, serves as additional impetus for choosing the Marshall Islands. A stable jurisdiction ensures that the legal system will function in a proper manner and is also a key factor in being recognised by both the public and private international business community.
The Marshall Islands has an effective anti-money laundering system that is Financial Action Task Force (FATF) compliant. Moreover, the Republic is not an offshore banking jurisdiction and, thus, not subject to the potential regulatory and criminal implications stemming from such operations. The Marshall Islands is also listed as a co-operative jurisdiction by the Organisation for Economic Co-operation and Development (OECD).
Customer Service and Decentralisation
IRI has invested in providing the Registry with an infrastructure that is large enough and has sufficient global presence to adequately service international clientele. This concept of decentralisation has resulted in a network of 17 full-service offices able to form business entities and file corporate documentation in virtually any time zone. Moreover, IRI employs lawyers and other knowledgeable personnel who can provide answers to most questions without delay and without charge.
The Marshall Islands Corporate Registry is a privatised government function. Privatisation means that a non-governmental body administers the corporate programme, resulting in reduced bureaucratic red tape, a faster and more expedient incorporation process, and better overall service.
The flexibility, sound corporate legislation and customer service philosophy of the Corporate Registry, along with the ability to aggressively and efficiently address the key issues facing the corporate industry, have proven to be a winning combination in recent years for the Marshall Islands. As governments and international organisations join forces to impact offshore entities, it has become increasingly difficult for a jurisdiction to retain the elements that make an offshore corporate programme successful. The Marshall Islands, however, has met these challenges head-on while conserving its fundamental elements, and is well poised to continue its impressive growth while maintaining its reputation as the corporate jurisdiction of choice for many professionals using IBCs to go public.
Michael Wyler, Managing Director, IRI Corporate and Maritime Services (Switzerland) A G