International Registries, Inc. and its affiliates (IRI) recently sat down with Jonathan Silver, Partner at Watson Farley & Williams LLP (WFW) to discuss redomiciliation to the Republic of the Marshall Islands (RMI). An RMI Licensed Attorney, Jonathan is also an expert in assets and structured finance.
IRI: The RMI Corporate Registry is currently offering free redomiciliation, have you taken advantage of this offer?
Jonathan: Yes, we have helped clients take full advantage of this offer in order to save on the overall cost of the transfer. In my experience, the fact that the Marshall Islands doesn’t charge any extra fee for the redomicile process itself will be a welcome tonic and certainly makes the Marshall Islands more attractive than other offshore jurisdictions where there can be fairly significant fees for transfer in (and out).
IRI: What was the process for redomiciliation? What is the typical time frame for redomiciling?
Jonathan: Transferring a foreign business entity to the RMI is very straightforward. Section 15(p) of the RMI Business Corporations Act allows an RMI entity to “domicile, redomicile, domesticate, file or register itself, or move or transfer its place or situs of initial or subsequent registration, domicile, siege social or sitz or any other equivalent thereto from or to any place and to continue as a corporation of any place.” Sections 126-129 cover redomicile to the RMI. The RMI Corporate Registry will ask for (prescribed) articles of domestication, underlying articles of incorporation (in English), standard (i.e., standard for the Marshall Islands) articles of incorporation, evidence of corporate existence, and lastly proof of appointment of the registered agent (always The Trust Company of the Marshall Islands, Inc.). The articles of domestication must certify various factual matters (e.g., date of first incorporation, name, original domicile, place of business, transfer is not prohibited and made in good faith, etc.). None of these requirements are overly complex or time consuming to satisfy.
It is important to remember that redomicile does not affect prior obligations of the (foreign) corporate entity which is redomiciling to the RMI (which will almost always carry over unaffected by the redomicile process – although it is very important to remember that only mortgage security can be registered at the RMI Registry) and all previous property remains vested. RMI law takes effect from the date the domestication becomes effective, i.e., the registration as a redomiciled RMI entity. When a foreign entity redomiciles to the RMI, the entity is only changing corporate jurisdictions so the parties can take comfort in the fact that a new and separate entity is not created. Therefore, the name and the date of existence will remain unchanged. However, the RMI Associations Law will govern the entity after the entity has redomiciled to the Marshall Islands.
Requests for redomicile must be made through a qualified intermediary who is obligated to perform due diligence. Qualified intermediaries usually include us (as RMI licensed attorneys), accountants, corporate service companies, and qualified shipping companies.
Almost any foreign business entity may redomicile to the RMI, including foreign corporations, partnerships, limited partnerships (LPs), and limited liability companies provided that redomicile is not expressly prohibited by the original foreign jurisdiction of that foreign business entity.
For an LP, a certificate of limited partnership domestication and certificate of limited partnership (which has to have been pre-cleared by the RMI Corporate Registry) should be signed by the person authorised to sign on behalf of the non-RMI entity (a clear scanned copy will suffice for the RMI Registry’s purposes) and the application should include a certified copy of the previous jurisdiction’s certificate of formation, charter, or other document upon which the existence of that foreign entity is based, issued by the appropriate government agency and a recent government-issued certificate confirming that foreign entity’s current existence (e.g., certificate of good standing) or, if government certification is not possible, certification by a lawyer of the jurisdiction that, to their knowledge, the foreign entity has current legal existence. Once the required documents are received and the RMI Registry has finished its compliance checks, filing will be done within one business day of remittance. When the process is complete, a duplicate copy of these certificates, as filed, will be returned to the client (typically within four business days).
On the most recent redomicile that I handled, our client was keen to redomicile from another offshore jurisdiction to the Marshall Islands. This was for a number of very sound business reasons, particularly business efficacy. More generally though, we see requests for redomicile to the RMI happen because of the geographical relocation of regional headquarters and/or for other tax efficient strategy planning reasons, including choice of flag (and flag State) in a shipping/transport context. Redomicile allows a client to continue their corporate history and branding without having to start over from scratch.
On the deal I’ve mentioned, after some due diligence to ensure that the Marshall Islands was the right jurisdiction for the client (including an analysis of its tax position, its activities and undertakings and economic substance regulations) we implemented the redomicile (or “transfer in”) to the Marshall Islands after consultation with the Marshall Islands Registry. The process, which was very straightforward and took less than two weeks from beginning to end, was extremely smooth due to the superb assistance and support from the Marshall Islands Registry here in Hong Kong. The fastest redomicile I have seen took just a few days.
IRI: How did redomiciliation impact an entity’s operations?
Jonathan: Because the entity’s operations are in the shipping sector, the redomicile was beneficial to its operations (in that the Marshall Islands is a seamless fit for shipping business). On a practical level, the directors and officers of the entity are appreciative of the fact that the Marshall Islands, as a jurisdiction, is designed to accommodate their business aspirations. There was absolutely no negative impact on their day-to-day operations, although certain matters pertaining to their existing corporate structure (such as share pledges) had to be addressed to that’s something a client should be aware of, particularly where there are financiers and share security in place prior to the redomicile.
IRI: What are the advantages for business entities to (re)domicile with the Marshall Islands?
Jonathan: There are multiple advantages; ease of doing business, advantageous tax concessions, no withholding tax, “light touch” and straightforward (although rigorous) ongoing corporate filing requirements, which are very cost effective too. Responsiveness – the RMI Registry has offices globally and when one is shut, another in the next time zone takes over, so a client always has 24 hour coverage, anywhere in the world. I have never had a client say to me “I wish I had not used the Marshall Islands for my corporate entity structures.”
IRI: Which RMI offices do you work with most often?
Jonathan: Mostly Hong Kong, Seoul, Singapore and London although sometimes Hamburg. I do a lot of work with the on-island High Court litigation search teams too.
IRI: How long have you been an RMI licensed attorney?
Jonathan: I’ve been working with the Marshall Islands (as a flag State) since around 2003/4 although we saw a massive leap in the use of RMI flag around a decade ago. We always worked with Ray Simpson in the early days – back then, I think Ray had (more or less) exclusivity in the RMI ship finance opinion market, although that has of course changed over time. Ray was a legend and I really enjoyed working with him. I’ve been qualified as an RMI licensed attorney in my own right for some five years now.
IRI: What has changed since you started working with the RMI Corporate Registry?
Jonathan: I’ve always found the RMI Corporate Registry to be very responsive, and extremely time cost effective. On some very difficult sale-and-purchase using RMI flag, the RMI Corporate Registry here in HK, working with its overseas office (where the closing/delivery were taking place), were lifesavers – basically saving the deal so that there was a clean delivery and so no litigation/dispute due to last minute unexpected issues. As time goes on, the RMI Corporate Registry has ‘fined tuned’ its service offering – they are exemplary!
IRI: As the world continues to change, what do you see as the most important aspects of a Corporate Registry for the future?
Jonathan: As the OECD and EU level up the playing field to address and ultimately abolish harmful tax practices, I definitely see a role for the RMI Corporate Registry as a gatekeeper. Their implementation of the ESRs (Economic Substance Regulations) as they pertain to the RMI was both timely and justified. I think we’ll also see the RMI Corporate Registry spend significant time addressing issues pertaining to Environmental, Social and Governance (ESG) and carbon zero as they relate to the Marshall Islands flag and jurisdiction.
IRI: As an RMI licensed attorney, you are a qualified intermediary. What responsibilities and obligations do you have as an intermediary?
Jonathan: I don’t see my duties, responsibilities and obligations as any different to those of a solicitor, lawyer or attorney in other jurisdictions. It is my responsibility to ensure that the transactions that our clients enter into adhere to the statutes, rules, and regulations as the same are passed by the Nitijela and implemented under law and regulation. I see my role as that of a trusted advisor. If I don’t know the answer to a question, I will do my utmost to research it so I can advise our clients properly on RMI matters as they may pertain to their corporate structure, finances, business, and operations.
IRI: What haven’t we asked that you want us to know?
Jonathan: I think I’d just like to let you know that we are not just limited to shipping, when it comes to what we can advise on, as a matter of Marshall Islands law. There are multiple sectors that we are able to provide legal advice on, in terms of the laws of the Marshall Islands. Whilst I cover transactional finance work (including ESRs) albeit by-in-large in the shipping space, it’s worth bearing in mind that we have RMI licensed attorneys in our midst covering almost every field of business – from Initial Public Offerings (IPOs), to corporate mergers and acquisitions (M&As) through corporate finance, regulatory, etc. Just ask and I’ll find the right RMI licensed attorney for your legal requirement – even if it’s not me!