Marshall Islands offshore company formation remains a popular choice for businesses. This is due to flexible legal regulations, easy offshore administration, and stable corporate laws.
General Information about the Jurisdiction
The Republic of the Marshall Islands is in the Pacific Ocean and is part of Micronesia. The country consists mainly of atolls and islands, with its capital in Majuro.
The Marshall Islands became independent in 1986. Today, the Islands are in a ‘free association’ with the United States. This means that while the Marshall Islands control their internal affairs, some powers are given to the United States. The United States:
- provide defence for the country,
- offer financial help, and
- give access to some social programmes.
The legal system of the Marshall Islands is influenced by the United States. It combines American and English common law with local customs.
The main law for registering and running a Marshall Islands offshore company is the Business Corporations Act of 1990, as amended in 2020.
General Features of Marshall Islands Offshore Companies
A Marshall Islands offshore company is set up as an International Business Company (IBC) or a non-resident domestic corporation. These companies face certain restrictions. They cannot:
- trade with Marshall Islands residents,
- carry out banking or other regulated activities in the Marshall Islands,
- offer insurance services.
Key features of IBC companies:
| Criterion | Feature |
|---|---|
| Name |
The company name must be unique and must not include certain words (like “bank”, “fund”, etc.). It must also show the company’s legal form. |
| Company Structure |
A company can have just one shareholder. There must be at least one director. A secretary is required. Both individuals and legal entities can be directors or secretaries. There are no residency requirements for these roles. |
| Share Capital |
No minimum share capital is required, but at least one share must be issued and paid. The standard share capital is 50,000 US dollars. |
| Registered Agent |
IBC companies must have a registered agent in the Marshall Islands. Usually, this is a licensed local company acting as a link with government authorities. |
| Taxation |
The company does not pay tax on income earned outside the Marshall Islands. Offshore companies must pay an annual government fee for registration and renewal. The cost of registration and maintenance depends on the company structure. |
Financial Reporting and Company Records in the Marshall Islands
Every Marshall Islands company must keep proper and complete accounting records. These records must:
- explain the company’s transactions,
- show the company’s financial position at any time,
- allow financial statements to be prepared if needed.
Companies must also keep original documents and supporting records. These should be enough to explain and justify every financial operation. Examples include:
- invoices,
- contracts,
- other documents that show all company income and expenses.
Offshore companies can store these documents outside the Marshall Islands, but they must provide them if a government authority asks.
So, every Marshall Islands offshore company must keep accounting records and make sure documents are available. However, companies do not have to submit financial statements to government authorities. Still, having up-to-date financial records builds trust with banks and potential business partners.
In addition to accounting records, companies registered in the Marshall Islands must keep:
- minutes of directors’ meetings,
- minutes of shareholders’ meetings,
- registers of shareholders, and
- registers of beneficial owners (see more in the section below).
These documents must be kept for at least five years, even if the company closes before that period ends.
Registers of Beneficial Owners
To support global trends for transparency in international business, the Marshall Islands now require all companies to keep a register of beneficial owners. Every Marshall Islands offshore company must:
- keep an internal register of individuals who own more than 25% of shares or voting rights, or who control the company in another way, including their names and addresses,
- keep this information up to date,
- provide these details if a government authority requests them.
Unlike some other traditional offshore jurisdictions, Marshall Islands law does not require companies to automatically send beneficial ownership information to the authorities or to create a central public register. This information is given to the registered agent but is not available to the public.
Economic Substance Requirements
In recent years, offshore jurisdictions, including the Marshall Islands, have introduced economic substance rules for companies registered in their territory. These requirements apply only to companies involved in certain activities, such as:
- distribution and service centres,
- financing and leasing services,
- fund management,
- head office activities,
- holding company activities,
- intellectual property business,
- shipping business,
- banking, and
- insurance.
The substance requirements for such Marshall Islands offshore companies are as follows:
| Criterion | Explanation |
|---|---|
| Management and control are based in the Marshall Islands |
This criterion is met if:
|
| Relevant activities are carried out to a sufficient extent |
This criterion means:
|
| The company carries out core income-generating activities in the Marshall Islands | Core income-generating activities are defined separately for each business sector. |
Sanctions for not meeting substance requirements include:
- a fine of up to 50,000 US dollars for each financial period,
- revocation of the company’s incorporation and dissolution, or
- both sanctions.
If the company fails to comply in the next financial period, the maximum fine increases to 100,000 US dollars.
Bank Account for a Marshall Islands Offshore Company
Opening a corporate bank account is a key issue for owners of a Marshall Islands offshore company. In recent years, foreign banks have tightened compliance requirements, especially for offshore companies.
Banks want to make sure that the company:
- has real economic substance,
- carries out its stated business activities, and
- has real, identifiable owners.
Because of this, banks usually ask for a detailed set of documents about both the company and its key individuals. These may include:
- main corporate documents,
- a business plan,
- information about the company’s business partners,
- reasons for payments (usually contracts and invoices),
- details of the company’s assets,
- identification documents for directors, shareholders, and beneficial owners,
- information about the source of funds for shareholders and beneficiaries,
- whether any individuals managing or owning the company are Politically Exposed Persons (PEPs), are on sanctions lists, or have links to sanctioned persons,
- details about the tax residency of beneficiaries, to meet automatic financial information exchange rules.
Despite these challenges, some banks and payment systems are still willing to open accounts for offshore companies, as long as all requirements are met and company owners are open and ready to cooperate.