Associations Law Updates

2020 – 41st Constitutional Regular Session

The December 2020 amendments to the RMI Associations Law prohibit non-resident domestic entities from operating as virtual asset service providers.

2019 – 40th Constitutional Regular Session

The April 2019 amendments to the RMI Associations Law clarified that the duty to keep, retain, or maintain records remains in effect for five years regardless of whether a corporation, partnership, limited partnership, or limited liability company has been dissolved or annulled or otherwise ceased to exist.

2018 – 39th Constitutional Regular Session

The March 2018 Amendments to the Business Corporations Act returned the default requirement for action by shareholders without a meeting to unanimous consent, as it was prior to the Associations Law (Amendment) Modernization and Improvement Act, 2017.

The November 2018 amendments to the RMI Associations Law specified that every non-resident domestic corporation, partnership, limited partnership, or limited liability company that carries out activities without the RMI which would be regulated under the RMI Banking Act 1987 or regulations promulgated thereunder if carried out within the RMI shall be regulated by the relevant authorities in the jurisdictions in which the corporation, partnership, limited partnership, or limited liability company carries out these activities and shall comply with the laws, regulations, and licensing requirements of such jurisdictions.

The November 2018 amendments further amended the Business Corporation Act to clarify the meaning of “majority” and the procedure for amendment, and to expressly grant to the Registrar the power to promulgate rules and regulations implementing economic substance requirements for non-resident domestic corporations, partnerships, limited partnerships, and limited liability companies and provide for reporting requirements and other enforcement mechanisms related thereto.

2017 – 38th Constitutional Regular Session

New Requirements Under the Fall 2017 Amendments to the RMI Associations Law

The parliament of the RMI recently passed legislation updating the RMI Associations Law. Although the amendments appear extensive, the overall effect on most clients will be minimal. The following summarizes the four key changes regarding recordkeeping requirements.

1. Information to be kept in the entity’s internal records:

In addition to records already required to be kept under the law, the 2017 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, which runs until November 2018. Penalties for knowingly or recklessly failing to keep, retain, or maintain records as required have been increased by the amendments.

2. Records that must be provided to the registered agent, but only on demand:

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 limited 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.

3. Corporations now must record bearer share information:

A significant new change under the amendments is that corporations issuing bearer shares must now 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. Bearer share information may be recorded with the registered agent by completing the Declaration of Holders and Beneficial Owners of Bearer Shares or Declaration of Transfer of Bearer Shares.

A 360-day phase-in period is provided for existing bearer shares, which runs until November 2018. 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.

4. Annual Attestation:

The amendments also obligate non-resident domestic entities, except publicly traded companies, to make an annual attestation to the Registrar of Corporations that the records above 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.