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Due Diligence Key in Financial Transactions in Marshall Islands
The Marshall Islands, a popular flag state for international shipping, has established strict requirements for demonstrating title to or legal ownership of vessels registered under its jurisdiction. With the aim of ensuring transparency and accountability in financial transactions, the country has implemented measures to verify the authenticity of vessel owners and their beneficial interests.
Demonstrating Title
To register a vessel in the Marshall Islands, the owner must provide proof satisfactory to the Commissioner or Deputy Commissioner of Maritime Affairs, demonstrating ownership of the vessel. This includes submitting a written oath by sworn affidavit, declaring details such as:
- The name and residence of other owners
- Each owner’s proportion
- The affiant’s citizenship
Liens
Marshall Islands law allows for the recording of preferred mortgage liens against vessels registered in the country. These can be found through a search of the record or by requesting a certificate of ownership and encumbrance from the office of the Deputy Commissioner of Maritime Affairs. However, other maritime liens are not provided for under Marshall Islands law.
Public Registry Searches
The due organisation of an obligor can be determined by reviewing certified copies of its organisational documents and company records. The obligor’s good standing can be verified through a certificate of good standing obtained from the Trust Company of the Marshall Islands, Inc., through International Registries, Inc.
Debt Obligation
Marshall Islands corporations are empowered to guarantee debt obligations unless specifically limited in their articles of incorporation or bylaws. To enter into or guarantee a debt obligation, action by the board of directors may be required, and shareholder approval may also be necessary.
Obligations of Foreign Lenders
Foreign lenders do not need to qualify to do business in the Marshall Islands to extend credit to borrowers organised in the country. However, they must comply with local laws affecting banks and other business operations if lending internally in the territory.