Jurisdiction of the month: the Marshall Islands

2013 12 23 | Category: News

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Geography, Population, Languages

Located midway between Indonesia and Hawaii, the Marshall Islands are the easternmost island group in Micronesia. The Marshall Islands are spread over approximately 2 million sq. km in the Central Pacific, with two 1,280 km long parallel chains of atolls and volcanic islands separated by 179 km of sea. The islands have a population of just over 65,000, most of whom live in the capital, Majuro. The languages spoken are Marshallese and English. English is the official language.

History, Political Structure and Law

The islands were first settled 4,000 years ago. In the 16th century, the Spanish were the first in a long series of visitors. Later, Russian navigators explored the islands more extensively. In the 18th century the British naval officer John Marshall rediscovered and gave his name to the islands. Germany annexed the Marshall Islands in 1885. After World War I, the islands were administered by the Japanese under a League of Nations mandate. After World War II, the Marshall Islands became a United Nations Trust Territory of the Pacific Islands under United States administration. The Republic of the Marshall Islands gained independence in 1986. It became a full member of the United Nations in 1991.

The Republic of the Marshall Islands signed its Constitution in 1979, the Constitution is based on American and British models of government. Under the parliamentary system, the legislature (Nitijela) elects a president from among its members. The President nominates a Cabinet of 6-10 members. Courts whose judges are appointed by the Cabinet administer the legal system.

Marshallese Common Law is based on Anglo-American Common Law.

Economy and Infrastructure

The two islands where most of the population live, Majuro and Ebeye, both have reliable power plants and water systems. There are two international airports and 26 airstrips scattered throughout the larger islands. There are also 12 deep-water docks for large ocean-going ships.

There are excellent international satellite communications on Majuro and Ebeye for telephone and fax services. Large-scale commercial fishing is an important industry. Japanese fishermen, who are licensed to fish Marshallese waters, haul in roughly 42 million pounds of tuna each year. The export of coconuts (copra) is also important to the islands’ economy.

The Marshall Islands ship registry program was initiated by the Marshall Islands Government in 1988 and is now the fifth largest and fastest growing open registry in the world. Vessel types include, but are not limited to, oil tankers, LNG/gas carriers, bulk carriers, offshore exploration, production, construction and pipe laying vessels, container ships and yachts.

The currency is the United States Dollar. There is no exchange control.

Company Incorporation

The principal corporate legislation is the Associations Law of the Republic of the Marshall Islands 1990, which incorporates the Business Corporations Act (BCA), the Limited Liability Company Act, the Limited Partnership Act and the Revised Partnership Act. Although the Marshall Islands BCA is modelled on the corporate laws of the United States, certain provisions have also been borrowed from British law. A Company incorporated in the Marshall Islands has the same powers as a natural person. The language of legislation and corporate documents is English.

Incorporation procedure: the Marshall Islands have an exclusive franchise with one company that is licensed to incorporate all non-resident companies. After the name is approved, companies can be incorporated using standard Articles of Incorporation, (Certificate of Formation for LLC, Certificate of Partnership Existence for Partnership, Certificate of Limited Partnership for Limited Partnership). With standard Articles, the request to incorporate must contain the following information:
• Company name.
• Number of shares.
• Whether shares are with or without par value (if with par value, the amount per share).
• Whether the shares are to be in bearer and/or registered form.
• If clients’ own Articles of Incorporation are to be used, they must be prepared in accordance with the Marshall Islands BCA.

Trading activity is subject to the following restrictions:
• A Company cannot trade within the Marshall Islands.
• A Company cannot engage in the business of banking, trust services, or insurance.

Company names are subject to the following requirements and restrictions:
• A name can be in any language as long as Roman letters are used. The Registrar may however require an English translation if a foreign language is used to ensure that the proposed name is not a restricted name.
• A name cannot be identical or similar to that of an existing company.
• The following words or their derivatives may not be used: bank, chartered, establishment, foundation, insurance, partnership or trust.
• A standard corporate suffix or its abbreviation, for example Corporation, Incorporated, Limited, Gesellschaft mit beschrankter Haftung, Aktiengesellschaft, Societe Anonyme, Sociedad Anonima, must be used to denote limited liability.

Corporations require at least one director and a company secretary. The directors may be natural persons or corporate bodies. They can be of any nationality and need not be Marshall Islands residents. The minimum number of shareholders is one. Partnership requires at least two partners, LLC – one member.

The standard authorised share capital is 500 shares without par value or a capital with par value of up to US$ 50,000. The authorised share capital may be in any currency. The minimum issued share capital is either one share without par value or one share with par value.

Marshall Islands corporations may have the following classes of shares: registered shares, bearer shares, preference shares, redeemable shares, shares with or without par value and shares with or without voting rights.

Annual Taxation

Non-resident Marshall Islands companies are exempted from taxes. There is no requirement to file financial statements, but records should be maintained internally by the company to reflect its financial status.

EditorJurisdiction of the month: the Marshall Islands