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Marshall Islands Introduces Stricter Financial Record-Keeping Requirements

In a move aimed at curbing tax evasion and promoting transparency, the Marshall Islands has passed legislation updating its Associations Law and introducing new financial record-keeping requirements for incorporated companies. The changes, which took effect in March, require non-resident domestic entities to maintain up-to-date records of beneficial owners and bearer share information.

Key Changes

The four key changes regarding record-keeping requirements are as follows:

• Beneficial Owner Records: All non-resident domestic entities must keep records of beneficial owners, including natural persons who exercise control over the entity through direct or indirect ownership of more than 25% of the ownership interests or voting rights. The format of these records is not specified, but entities must be able to present them upon request.
• Record Submission: Entities must provide these records to their registered agent in the Marshall Islands upon demand. Failure to do so within 60 days or wilfully producing false or misleading records may result in penalties.
• Bearer Share Records: Corporations issuing bearer shares must now keep up-to-date records of all holders and beneficial owners, as well as any subsequent transfers. These records must be recorded with the corporation’s registered agent in the Marshall Islands.
• Annual Attestation: Non-resident domestic entities (except publicly traded companies) must make an annual attestation to the Registrar of Corporations that the required records are being maintained.

Phase-in Period

The new requirements have a 360-day phase-in period, which runs until November 2018. During this time, existing entities will need to comply with the new record-keeping requirements. Bearer shares that do not comply with the record-keeping obligations within the prescribed period must be cancelled by the corporation.

Penalties

Entities that knowingly or recklessly fail to keep, retain, or maintain records as required may face penalties under the amendments. Substantial penalties also apply for failing to provide records within 60 days of request or wilfully producing false or misleading records.

The new requirements are designed to promote transparency and good governance in taxation worldwide, in line with EU standards.