State-Owned Enterprises Act, 2015
TITLE 52 - ASSOCIATIONS LAW
CHAPTER 6 - STATE-OWNED ENTERPRISES
sRepublic of the Marshall Islands
Jepilpilin Ke Ejukaan
STATE-OWNED ENTERPRISES ACT, 2015
Index
Section Page
DIVISON 1 - PRELIMINARY 3
§601. Short title ............................................................................................................................... 3
§602. Definitions ............................................................................................................................. 3
§603. Act binds Republic ............................................................................................................... 6
§604. Relationship with Business Corporations Act and other laws ...................................... 6
DIVISION 2—FORMATION, OWNERSHIP AND POWERS OF STATE-OWNED
ENTERPRISES 6
§605. Formation of State-owned enterprises .............................................................................. 6
§606. Determination of assets and liabilities etc transferred to new State-owned
enterprises ............................................................................................................................. 7
§607. Powers of Minister ............................................................................................................... 7
§608. Shares not transferable etc without prior Cabinet approval .......................................... 8
§609. Powers of State-owned enterprises .................................................................................... 9
DIVISION 3 —COMMERCIAL OBJECTIVES AND PLANNING 9
§610. Primary objectives of State-owned enterprises ................................................................ 9
§611. Statements of corporate intent ............................................................................................ 9
§612. Business plans ..................................................................................................................... 11
§613. Subsidiaries ......................................................................................................................... 12
§614. Certain activities require Minister’s approval ................................................................ 13
§615. Provision of community services by State-owned enterprises .................................... 13
DIVISION 4—GOVERNANCE OF STATE-OWNED ENTERPRISES 15
§616. Articles of State-owned enterprises ................................................................................. 15
§617. State-owned enterprises to be governed by boards of directors. ................................ 15
§618. Directors—appointment and qualifications ................................................................... 15
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§619. Period of office for directors ............................................................................................. 16
§620. General duties of directors, etc ........................................................................................ 17
§621. Directors’ indemnities ....................................................................................................... 18
§622. Remuneration and other terms of appointment ............................................................ 20
§623. Board meetings ................................................................................................................... 20
§624. Disclosure of interests ....................................................................................................... 21
§625. Board committees .............................................................................................................. 23
§626. Staff etc ................................................................................................................................ 23
§627. Chief executive officers ..................................................................................................... 23
§628. Codes of conduct ................................................................................................................ 24
DIVISION 5—FINANCES OF AND REPORTS BY STATE-OWNED ENTERPRISES25
§629. Acquisition of shares etc in State-owned enterprises ................................................... 25
§630. Government credit support for State-owned enterprises ............................................ 25
§631. Financial records ................................................................................................................ 25
§632. Financial statements .......................................................................................................... 25
§633. Audits of State-owned enterprises .................................................................................. 26
§634. Annual reports and other reports by State-owned enterprises ................................... 27
DIVISION 6—MISCELLANEOUS 28
§635. Status of State-owned enterprises.................................................................................... 28
§636. Disclosure ............................................................................................................................ 29
§637. Delegations ......................................................................................................................... 29
§638. Transition ............................................................................................................................ 30
§639. Regulations ......................................................................................................................... 30
§640. Effective date ...................................................................................................................... 30
SCHEDULE 31
STATE-OWNED ENTERPRISES 31

TITLE 52 - ASSOCIATIONS LAW
CHAPTER 6 - STATE-OWNED ENTERPRISES
sRepublic of the Marshall Islands
Jepilpilin Ke Ejukaan
STATE-OWNED ENTERPRISES ACT, 2015
AN ACT to create Part VI, under Association of Laws, Title 52 of the MIRC, in order
to make comprehensive provision for the governance and operation of State-owned
enterprises in the Republic of the Marshall Islands and to amend certain laws
relating to State-owned enterprises.
Commencement: October 19, 2015
Source: P.L. 2015-45
Amended By: P.L 2016-04
DIVISON 1 - PRELIMINARY
§601. Short title
This Act may be cited as the State-Owned Enterprises Act, 2015.
§602. Definitions
(1) In this Act:
(a) “articles”, for a State-owned enterprise that is a corporation or
an LLC, means the articles of incorporation, by-laws and
similar documents for the corporation or an LLC;
(b) “board”, of a State-owned enterprise, means the directors of
the State-owned enterprise acting together;
(c) “Business Corporations Act” means 52 MIRC Part I;
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(d) “Chairman”, of a State-owned enterprise, means the director
of the State-owned enterprise holding office as Chairman
under subSection 618(5);
(e) “chief executive officer”, of a State-owned enterprise, means
the person for the time being holding or acting in the office of
chief executive officer of the State-owned enterprise;
(f) “corporation” means a body corporate incorporated or
organized under the Business Corporations Act;
(g) “CSO agreement” means an agreement referred to in
Section 615;
(h) “CSO proposal” means a proposal referred to in Section 615;
(i) “Deputy Chairman”, of a State-owned enterprise, means the
director of the State-owned enterprise holding office as Deputy
Chairman under subSection 618(5);
(j) “director” means:
(i) for a corporation or an LLC—a person who is a director
of the corporation or the company for the purposes of
the Business Corporations Act or the LLC Act;
(ii) for a body(not a corporation or an LLC) —a member of
its council or governing body;
(k) “enabling law”, for a State-owned enterprise incorporated by
or under an Act, means the Act by or under which it is brought
into existence (but not the Business Corporations Act or the
LLC Act);
(l) “executive officer”, of a body corporate, means:
(i) the chief executive officer of the body corporate
(however described); and
(i) any other employee of the body corporate involved in
the management of the body corporate;
(m) “financial year”, for a State-owned enterprise, means a period
that is a financial year for accounting purposes for the State-
owned enterprise;
(n) “LLC” means a limited liability company under the LLC Act;
(o) “LLC Act” means the Limited Liability Companies Act 1996 (52
MIRC Part IV);
(p) “Minister” means the Minister to whom this Act is allocated;
(q) “primary objectives”, for a State-owned enterprise, means the
objectives set out in Section 610;
(r) “principal business”, of a State-owned enterprise, means the
business or undertaking identified as the State-owned
enterprise’s principal business in:
(i) the written law incorporating the State-owned
enterprise; or
(ii) the State-owned enterprise’s articles; or
(iii) the regulations;
(s) “public official” means each of the following:
(i) a member of the Nitijela or a member of the Council of
Iroij;
(ii) a Minister;
(iii) an employee of the Public Service;
(t) “share”, in relation to a State-owned enterprise that is a
corporation or a company, means a share in the capital of the
State-owned enterprise;
(u) “State-owned enterprise” means a body listed in Schedule 1,
so long as it is controlled by the Government;
(v) “subsidiary”, of a State-owned enterprise, means:
(i) a corporation or LLC that is controlled by the State-
owned enterprise; or
(ii) a joint venture or similar enterprise to which the State-
owned enterprise is a party (whether incorporated
or not).
(2) For this Act, a person (including, for this purpose only, the
Government) controls a corporation or an LLC if the person:
(a) holds at least 50% of the shares of the corporation or LLC; or
(b) has the power to exercise, or control the exercise, of voting
rights attached to, or has the power to dispose of, or control
the disposition of, at least 50% of the shares of the corporation
or LLC; and in applying this definition, have regard to the
practical effect, rather than the legal form, of the arrangements
concerned.
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(3) The Government controls a body corporate created by a written law
in respect of which there are no shares if:
(a) the Government or a Minister has power to appoint a person
to be a member or director of the body corporate; or
(b) the consent or approval of the Government or a Minister is
needed for the appointment of a person to be a member or
director of the body corporate; or
(c) the Government or a Minister otherwise has the capacity to
determine the outcome of decisions about the body corporate’s
management or its financial and operating policies.
§603. Act binds Republic
(1) This Act binds the Government and the Republic of the
Marshall Islands.
(2) This Act binds each State-owned enterprise.
§604. Relationship with Business Corporations Act and other laws
(1) This Act applies in addition to the Business Corporations Act, the
LLC Act and any other written law (including, for a State-owned
enterprise, its enabling law).
(2) If there is an inconsistency between a provision of this Act and a
provision of the Business Corporations Act, the LLC Act or another
written law, then, unless the written law expressly says to the
contrary, the provision of this Act prevails.
(3) A reference in the enabling law for a State-owned enterprise to the
Minister is to be read as a reference to the Minister for the purpose of
this Act, not the enabling law.
DIVISION 2—FORMATION, OWNERSHIP AND POWERS OF STATE-OWNED
ENTERPRISES
§605. Formation of State-owned enterprises
(1) A State-owned enterprise may be incorporated by an Act.
(2) The Minister, or a person authorized by the Minister in writing, may
incorporate a corporation under the Business Corporations Act or a
limited liability company under the LLC Act, with a view to the
corporation or company becoming a State-owned enterprise.
(3) If a corporation or company is incorporated as mentioned in
subsection (2), the Minister may, by notice pursuant to the
Administrative Procedures Act, amend Schedule 1 to include the
name of the corporation or company.
(4) If a State-owned enterprise ceases to be controlled by the
Government, the Minister must, as soon as practicable, by notice
pursuant to the Administrative Procedures Act, amend Schedule 1 to
omit the name of the enterprise.
§606. Determination of assets and liabilities etc transferred to new State-
owned enterprises
(1) If a State-owned enterprise (a “new enterprise”) is incorporated,
whether by an Act or as mentioned in subSection 605(2), the Minister
may, with the approval of the Cabinet, determine in writing that
specified assets and liabilities of the Republic, or of another State-
owned enterprise, vest in the new enterprise on the date specified in
the determination.
(2) The Minister may make more than one (1) determination under this
section in respect of a new enterprise.
(3) A determination under this section has effect to vest the assets and
liabilities concerned in the new enterprise, as set out in the
determination, without the need for any further assurance.
(4) All registrars and other persons responsible for registers of
ownership of assets or of liabilities must give effect to a
determination under this section on application by the new
enterprise.
§607. Powers of Minister
(1) Subject to this Act, for each State-owned enterprise that is a
corporation or a company, the Minister, in his or her capacity as
Minister, may exercise all the powers and rights that shareholders
have in relation to the State-owned enterprise under the law or the
State-owned enterprise’s articles.
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(2) The Minister must not exercise any of the following powers without
the prior approval of the Cabinet:
(a) a power to appoint a director to, consent to the appointment of
a director to or remove a director from, a State-owned
enterprise;
(b) a power to amend the articles of a State-owned enterprise;
(c) a power to sell, otherwise dispose of or create an interest in
shares of a State-owned enterprise;
(d) a power to start the dissolution of a State-owned enterprise or
the merger of a State-owned enterprise with another body
corporate;
(3) Despite the Business Corporations Act and the LLC Act:
(a) the members of a State-owned enterprise pass a resolution for
the purposes of the State-owned enterprise’s articles or any
written law by the Minister recording the terms of the
resolution in a document and signing the document; and
(b) any requirement of a written law that the resolution be lodged
with a body or officer is satisfied by lodging the signed
document; and
(c) any requirement of the State-owned enterprise’s articles or any
written law for the giving of notice of the resolution does not
apply.
§608. Shares not transferable etc without prior Cabinet approval
(1) A share in or other security of a State-owned enterprise cannot be
assigned or transferred without the prior approval of the Cabinet.
(2) A security interest (as defined in the Secured Transactions Act of
2007) cannot be created in a share in or other security of a State-
owned enterprise.
(3) A security interest (as defined in the Secured Transactions Act of
2007) cannot be created in property of a State-owned enterprise
unless:
(a) it is created in the ordinary course of the State-owned
enterprise’s ordinary business; or
(b) the Minister agrees in writing.
(4) A share in or other security of a State-owned enterprise cannot be the
subject of a trust unless the Minister agrees in writing.
(5) This section applies only to shares and securities of State-owned
enterprises that are owned by the Republic or the Government.
§609. Powers of State-owned enterprises
Subject to any limitation or restriction in this or another Act, or in the
articles of the State-owned enterprise, a State-owned enterprise has the legal
capacity and powers of an individual, and the powers of a body corporate,
both in and outside the Republic of Marshall Islands.
DIVISION 3 —COMMERCIAL OBJECTIVES AND PLANNING
§610. Primary objectives of State-owned enterprises
(1) The primary objectives of each State-owned enterprise are:
(a) to be a successful business and, to this end, to be at least as
profitable and efficient as comparable businesses; and
(b) to maximize the net worth of the public investment in the
State-owned enterprise.
(2) Each State-owned enterprise must conduct its business and
operations with a view to achieving its primary objectives.
(3) Non-compliance with subsection (2) does not affect the validity or
enforceability of a contract or other transaction.
§611. Statements of corporate intent
(1) The board of each State-owned enterprise must develop and adopt a
statement of corporate intent by the start of each financial year. The
statement of corporate intent must cover the financial year and
provide indicative financial and operational information in respect of
the next 2 financial years.
(2) A board must not adopt a statement of corporate intent unless:
(a) it has given the Minister a draft of the statement, no later than
2 months before the start of the financial year to which the
statement relates; and
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(b) it has taken into account any comments made by the Minister
in relation to the draft statement.
(3) A State-owned enterprise’s statement of corporate intent for a
financial year must include the following matters:
(a) a description of the principal business of the State-owned
enterprise;
(b) a statement of the commercial objectives of the State-owned
enterprise, demonstrating how those objectives are consistent
with the primary objectives;
(c) a description of the nature and scope of the activities that the
State-owned enterprise intends to undertake;
(d) a summary of the strategies that the State-owned enterprise
will adopt to achieve its commercial objectives and the
primary objective; and
(e) a statement or summary of the targets or benchmarks to be
used to measure the State-owned enterprise’s performance
(including in respect of revenue, net profit after tax and return
on equity) against its commercial objectives and the primary
objective;
(f) a statement of any current and anticipated borrowing by the
State-owned enterprise or a subsidiary of the State-owned
enterprise;
(g) a statement of the accounting policies to be applied by the
State-owned enterprise in its financial records and reports;
(h) a summary indicative balance sheet and profit and loss
statement for the group consisting of the State-owned
enterprise and its subsidiaries, reflecting the directors’
expectations for the financial year;
(i) a statement of the proposed dividend and distribution policy
of the State-owned enterprise;
(j) a description of any applicable CSO agreement and the impact
of that agreement on the financial returns expected to be
achieved by the State-owned enterprise during the period to
which the statement relates;
(k) a description of the kind of information to be provided to the
Minister, including under Section 606; and
(l) any other matter that the Minister directs be included in the
statement.
(4) If the State-owned enterprise has a subsidiary, the statement of
corporate intent must include corresponding information about the
operations of the subsidiary, and the operations of the group
comprising the State-owned enterprise and all its subsidiaries.
(5) Without limiting paragraph (3)(l), the Minister may require that a
statement of corporate intent for a State-owned enterprise or a
subsidiary of a State-owned enterprise include specified
provision for:
(a) complying with an obligation arising from any international
agreement or arrangement binding on the Republic of the
Marshall Islands; or
(b) to implement any policy of the Cabinet in relation to
international relations, but the Minister must consult the board
of the State-owned enterprise before giving the direction.
(6) A State-owned enterprise may amend its statement of corporate
intent for a financial year at any time during the year, but must give
the Minister a draft of the amendment at least 2 months before it is
adopted, and take into account any comments made by the Minister
in relation to the proposed amendment.
(7) A State-owned enterprise must give the Minister a copy of its
statement of corporate intent, and of any amendment to its statement
of corporate intent, within 14 days after the board adopts or makes it.
(8) The Minister must table in the Nitijela a copy of each statement of
corporate intent, and each amendment to a statement of corporate
intent, within 15 sitting days after the Minister receives it.
(9) Each State-owned enterprise and each subsidiary of a State-owned
enterprise must strive to give effect to, and act consistently with, its
current statement of corporate intent.
§612. Business plans
(1) The board of each State-owned enterprise must develop and adopt a
business plan by the start of each financial year. The business plan
must cover the financial year.
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(2) A board must not adopt a business plan unless:
(a) it has given the Minister a draft of the plan, no later than 3
months before the start of the financial year to which the
statement relates; and
(b) it has taken into account any comments made by the Minister
in relation to the draft plan.
(3) A draft business plan must contain information on the operations,
future strategic direction and financial projections of the State-owned
enterprise sufficient to enable the Minister to form a view that the
business plan demonstrates that the State-owned enterprise will
achieve the primary objectives.
(4) If the State-owned enterprise has a subsidiary, the business plan must
include information about the operations of the subsidiary, and the
operations of the group comprising the State-owned enterprise and
all its subsidiaries.
(5) A State-owned enterprise must give the Minister a copy of its
business plan within 14 days after the board adopts it.
§613. Subsidiaries
(1) A State-owned enterprise must not incorporate a subsidiary without
the approval of the Minister.
(2) A State-owned enterprise must not be party to an agreement to form
a joint venture without the approval of the Minister.
(3) The articles of a subsidiary of a State-owned enterprise must not be
inconsistent with this Act or the State-owned enterprise’s articles.
(4) A State-owned enterprise must not be party to an agreement in
relation to a joint venture that is inconsistent with this Act or the
State-owned enterprise’s articles.
(5) Despite any provision in the articles of a subsidiary of a State-owned
enterprise, a director of the subsidiary may be removed from office
by the State-owned enterprise at any time.
(6) A subsidiary of a State-owned enterprise must provide the State-
owned enterprise with:
(a) all information and documents as are necessary or desirable to
enable the State-owned enterprise to comply with its
obligations under this Act in relation to the subsidiary; and
(b) any other information that the State-owned enterprise request
in writing.
§614. Certain activities require Minister’s approval
A State-owned enterprise must not do any of the following without the
Minister’s approval:
(a) incur a liability (the “relevant liability”) such that the total
value of the State-owned enterprise’s liabilities (including the
relevant liability) would exceed 50% of the net value of the
State-owned enterprise’s assets as set out in the most recent
audited accounts of the State-owned enterprise;
(b) make an investment, or 2 or more related investments, of an
amount that would or would in total exceed 50% of the net
value of the State-owned enterprise’s assets as set out in the
most recent audited accounts of the State-owned enterprise;
(c) make an investment (of any amount) outside the Republic of
the Marshall Islands;
(d) anything prescribed by regulations for the purposes of this
section.
§615. Provision of community services by State-owned enterprises
(1) The Minister may, with the approval of the Cabinet, give a State-
owned enterprise a written proposal (a “CSO proposal”) that the
State-owned enterprise:
(a) provide a specified service, or perform specified activities; or
(b) cease providing a specified service, or cease performing
specified activities.
(2) The State-owned enterprise must, within 1 month after receiving a
CSO proposal, give the Minister a notice:
(a) agreeing to give effect to the proposal; or
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(b) stating that giving effect to the proposal would be inconsistent
with the primary objectives of the State-owned enterprise, and
setting out why.
(3) If the State-owned enterprise gives the Minister a notice under
paragraph (2)(b), the Minister and the State-owned enterprise must
enter into good faith negotiations with a view to agreeing
arrangements under which the State-owned enterprise can give effect
to the CSO proposal without acting inconsistently with its primary
objectives (a “CSO agreement”). The arrangements may include the
provision of funding or other resources by the Government to the
State-owned enterprise.
(4) A CSO agreement must:
(a) if it provides for the State-owned enterprise to provide goods
or services:
(i) specify the goods or services, including any particular
quantities; and
(ii) include an estimate of the total cost to the State-owned
enterprise of providing the goods or services, and an
estimate of the revenues to be received by the State-
owned enterprise for doing so, each on an annual basis;
and
(iii) specify how the performance of the State-owned
enterprise in providing the goods or services will be
monitored and assessed; and
(b) specify the funding and other resources to be provided by the
Government under the agreement.
(5) A CSO agreement may include any other provision, not inconsistent
with this Act, agreed between the Minister and the State-owned
enterprise.
(6) A CSO agreement must not be inconsistent with the Procurement
Code (Act) 1988 (44 MIRC Chapter 1).
(7) A CSO agreement is not effective unless it is in writing and has been
approved by the Cabinet.
(8) Money payable by the Government under a CSO agreement is
payable out of funds appropriated by the Nitijela for the purpose.
(9) Subject to subsection (8), the Government and the State-owned
enterprise must comply with their obligations under a CSO
agreement.
(10) To avoid doubt, if a State-owned enterprise gives the Minister a
notice under paragraph (2)(b) in respect of a CSO proposal, the State-
owned enterprise is not required to give effect to the proposal unless
a CSO agreement in respect of the proposal is in effect.
DIVISION 4—GOVERNANCE OF STATE-OWNED ENTERPRISES
§616. Articles of State-owned enterprises
Any provisions of the articles of a State-owned enterprise that are
inconsistent with this Act or the regulations are void to the extent of the
inconsistency.
§617. State-owned enterprises to be governed by boards of directors.
There is to be, for each State-owned enterprise, a board consisting of at least
3, but not more than 7, directors, appointed by the Minister under this Act.
§618. Directors—appointment and qualifications
(1) Subject to this section, the Minister may appoint a person to be a
director of a State-owned enterprise if satisfied that the appointment
will assist the State-owned enterprise to conduct its principal
business and achieve its primary objectives.
(2) The Minister is not to appoint a person to be a director of a State-
owned enterprise unless the Minister has no reason to believe that the
person is not a fit and proper person to be a director of the State-
owned enterprise.
(3) The Minister may appoint a public official to be a director of a State-
owned enterprise but only for a term, by merits, at least one (1) but
not more than three (3) public officials with the approval of Cabinet,
whose experience, education and qualifications shall have significant
contributions to the economic and general well-being of the people of
the Republic.
(4) The Minister must not appoint an employee of the Public Service to
be a director of a State-owned enterprise if the employee is employed
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in the department or ministry of the Public Service with policy or
operational responsibility for the principal business of the State-
owned enterprise.
(5) The Minister is to appoint 1 of the directors of a State-owned
enterprise to be Chairman of the Board of the State-owned enterprise.
The directors must appoint 1of their number to be the Deputy
Chairman. A public official cannot be appointed under this
subsection.
(6) Anything done by or in relation to a person purporting to act under
an appointment as director of a State-owned enterprise is not invalid
merely because:
(a) the occasion for the appointment had not arisen; or
(b) there was a defect or irregularity in connection with the
appointment; or
(c) the appointment had ceased to have effect; or
(d) the occasion to act had not arisen or had ceased. [Subsection 3 isamended by P.L 2016-04.]
§619. Period of office for directors
(1) A director of a State-owned enterprise holds office for:
(a) 3 years from the date of his or her appointment; or
(b) if a shorter period is specified in the instrument of
appointment—that shorter period;
but may be reappointed in accordance with this Act.
(2) A director of a State-owned enterprise may resign office by giving a
written resignation to the Minister.
(3) A director of a State-owned enterprise ceases to hold office
immediately if he or she:
(a) is convicted or found guilty of an offence punishable by
imprisonment of 12 months or more;
(b) is convicted or found guilty of an offence involving
dishonesty; or
(c) is, in any jurisdiction, disqualified from acting as a director of
a body corporate under a law relating to companies.
(4) A director of a State-owned enterprise ceases to hold office
immediately if he or she becomes a public official. This subsection
comes into effect at the end of 3 years after the other provisions of
this Act take effect.
(5) The Minister may, at any time, by written instrument, remove a
director of a State-owned enterprise from office for any reason.
(6) The Minister must table in the Nitijela notice of each appointment of
a director of a State-owned enterprise, and of a director ceasing to
hold office as a director of a State-owned enterprise. The notice must
be tabled within 15 sitting days after the event to which it relates
occurs.
§620. General duties of directors, etc
(1) A director of a State-owned enterprise, or of a subsidiary of a State-
owned enterprise, has the following duties, in addition to his or her
other duties—
(a) to act honestly in all matters related to his or her functions;
(b) to exercise his or her powers, and discharge his or her duties,
in good faith and for a proper purpose;
(c) to exercise his or her powers, and discharge his or her duties,
with the degree of care and diligence that a reasonable person
in the director’s position would exercise;
(d) to comply with the State-owned enterprise’s code of conduct.
(2) Without limiting paragraph (1)(b), in exercising his or her powers,
and discharging his or her duties, a director of a State-owned
enterprise must take reasonable steps to ensure that:
(a) the State-owned enterprise complies with Section 610; and
(b) the State-owned enterprise, and each subsidiary of the State-
owned enterprise, complies with applicable law and its
articles.
(3) A director of a State-owned enterprise contravenes this subsection if:
(a) the State-owned enterprise, or a subsidiary of the State-owned
enterprise, incurs a debt; and
(b) either:
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(i) the State-owned enterprise or subsidiary is not able to
pay all its debts as and when they fall due; or
(ii) incurring the debt creates or is likely to create a
substantial risk that the State-owned enterprise or
subsidiary will not be able to pay all its debts as and
when they become due.
(4) If a director of a State-owned enterprise contravenes subsection (3),
the director is jointly and severally liable, with the State-owned
enterprise or subsidiary, for the payment of the debt unless he or she
establishes that:
(a) the debt was incurred without his or her express or implied
authority or consent; or
(b) at the time when the debt was incurred, the director, after due
inquiry, did not have reasonable cause to suspect that
paragraph (3)(b) applied.
(5) A director or employee of a State-owned enterprise, or of a subsidiary
of a State-owned enterprise, must not:
(a) improperly use his or her position; or
(b) without limiting paragraph (a)—improperly use information
that he or she has because of his or her position;
to gain an advantage for himself or herself, or for someone else, cause
a detriment to the State-owned enterprise’s or subsidiary’s ability to
perform its functions or cause a detriment to another person. This
duty continues after the person ceases to be a director or employee.
(6) If a person contravenes, or is involved in a contravention of, this
section, the State-owned enterprise or subsidiary is entitled to recover
compensation from the person for any loss suffered by the State-
owned enterprise or subsidiary because of the contravention.
(7) In this section:
“advantage” and “detriment” are not limited to financial advantage
or detriment.
§621. Directors’ indemnities
(1) A State-owned enterprise must not:
(a) exempt a director of the State-owned enterprise from a liability
owed to it as a director of the State-owned enterprise; or
(b) indemnify a director in respect of a liability owed to it, or to a
subsidiary of it, as such a director; or
(c) except as permitted by subsection (3)—indemnify a director in
respect of a liability owed to a person other than the State-
owned enterprise or a subsidiary of the State-owned
enterprise.
(2) A subsidiary of a State-owned enterprise must not:
(a) exempt a director of the subsidiary from a liability owed to it
as a director of the subsidiary; or
(b) indemnify a director of the subsidiary in respect of a liability
owed to it, to another subsidiary of the State-owned enterprise
or to the State-owned enterprise, as such a director; or
(c) indemnify a director of the State-owned enterprise, or of
another subsidiary of the State-owned enterprise, in respect of
a liability owed to it, to another subsidiary of the State-owned
enterprise or to the State-owned enterprise, as such a
director; or
(d) except as permitted by subsection (3)—indemnify a director in
respect of a liability owed to a person other than the State-
owned enterprise or a subsidiary of the State-owned
enterprise.
(3) A State-owned enterprise or a subsidiary of a State-owned enterprise
may, with the written approval of the Minister, indemnify a director
of the State-owned enterprise or subsidiary in respect of the director’s
liability to a person other than the State-owned enterprise or a
subsidiary of the State-owned enterprise if (but only if):
(a) the liability arose out of an act or omission of the director
acting in that capacity; and
(b) the act or omission was done in good faith and with due care.
(4) This section extends to the executive officers of a State-owned
enterprise.
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§622. Remuneration and other terms of appointment
A director of a State-owned enterprise:
(a) is entitled to be paid, by the State-owned enterprise,
remuneration and allowances determined in writing by the
Minister; and
(b) holds office on terms and conditions (if any) in relation to
matters not covered by this Act that are determined by the
Minister.
§623. Board meetings
(1) The directors of a State-owned enterprise must hold meetings at least
once every 2 months, and at such other times as they consider
necessary for the efficient conduct of the State-owned enterprise’s
business.
(2) At a board meeting, a majority of the directors are a quorum.
(3) Subject to this Act and to any contrary provision in the State-owned
enterprise’s articles:
(a) the Chairman is to preside at all meetings of the board;
(b) if the Chairman is not present at a meeting—the Deputy
Chairman is to preside;
(c) if neither the Chairman nor the Deputy Chairman is present—
the directors present at the meeting must appoint a director
who is present to preside.
(4) A question arising at a board meeting is to be determined by a
majority of the votes of the directors present and voting.
(5) The person chairing a board meeting has a deliberative vote and, if
necessary, a casting vote.
(6) If:
(a) the board of a State-owned enterprise has determined—
(i) that resolutions may be passed in accordance with this
subsection; and
(ii) the method by which directors are to indicate
agreement with a resolution proposed to be passed in
accordance with this subsection; and
(b) without meeting, a majority of the directors indicate
agreement with a resolution in accordance with that method;
and
(c) either:
(i) all the directors had been given reasonable notice of the
resolution (including its terms); or
(ii) reasonable efforts had been to made to give that notice;
the resolution is taken to have been passed at a meeting of the
board on the date on which the last director indicated his or
her agreement.
(7) Paragraph (6)(b) does not apply in relation to a director who would
have been prevented by subSection 6024(2) from deliberating on the
resolution if the resolution had been put to a meeting of the board.
(8) Subject to this Act, the directors of a State-owned enterprise may
regulate proceedings at board meetings as they consider appropriate.
(9) The board of a State-owned enterprise must keep written minutes of
all its meetings, and of all meetings of committees of the board.
§624. Disclosure of interests
(1) Each director of a State-owned enterprise or a subsidiary of a State-
owned enterprise must disclose in writing to each other director of
the State-owned enterprise or subsidiary all interests that director has
that could conflict with the proper performance of the functions of his
or her office. The disclosure must be given as soon as practicable after
the director becomes aware of the interest.
(2) A director of a State-owned enterprise or a subsidiary of a State-
owned enterprise who has an interest in relation to a particular
matter that could conflict with the proper performance of the
functions of his or her office must not perform those functions unless:
(a) the director has complied with subsection (1) in relation to the
interest; and
(b) each of the other directors of the State-owned enterprise or
subsidiary has consented to the director performing those
functions in relation to the matter despite the possible conflict
of interest.
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(3) For subsections (1) and (2), it does not matter whether an interest is
direct, indirect, pecuniary or non-pecuniary, and it does not matter
when the interest was acquired.
(4) For the purposes of this section, if:
(a) a related party of a director has an interest; and
(b) if the director had the interest, it could conflict with the proper
performance of the functions of his or her office;
the director is taken to have the interest, and this section applies
accordingly.
(5) In subsection (4):
“related party” of a director means any of the following:
(a) a spouse, child or parent of the director;
(b) a corporation or company(other than the State-owned
enterprise) of which the director is a director or executive
officer, and a subsidiary of such a corporation or company;
(c) a corporation or company of which a spouse, child or parent of
the director is a director or executive officer;
(d) if the director, or a spouse, child or parent of the director,
owns, or controls the exercise of votes attached to, more than
the percentage prescribed by the regulations of shares of a
corporation or company—the corporation or company;
(e) if the director and another person are parties to a contract,
arrangement or understanding, whether formal or informal,
written or not and whether or not enforceable:
(i) to acquire, hold, sell or otherwise deal in shares or other
securities in concert; or
(ii) to exercise voting rights in a specified body corporate in
concert;
the other party to the contract, arrangement or understanding.
(6) A State-owned enterprise must take reasonable steps to ensure that
its employees make proper and adequate disclosure of their interests.
(7) A State-owned enterprise must record, and maintain a register of, all
disclosures under this section.
§625. Board committees
(1) The board of a State-owned enterprise must establish the committees
of the board specified in the regulations, with the functions specified
in the regulations. It may also establish other committees, with
specified functions, as it thinks appropriate.
(2) A committee may include a person who is not a director, but each
committee of a State-owned enterprise must include at least 1director
of the State-owned enterprise.
(3) A committee may determine its own procedures, but must comply
with any direction of the board and the procedures must otherwise
be consistent with the procedures of the board and this Act.
§626. Staff etc
A State-owned enterprise may, on terms its board thinks fit:
(a) employ staff;
(b) engage other persons to advise it or provide services for it; and
(c) make arrangements with the Public Service Commissioner for
the services of employees of the Public Service to be made
available to it on terms agreed by its board.
§627. Chief executive officers
(1) Each State-owned enterprise must, after consultation with the
Minister, appoint a staff member to be its chief executive officer.
(2) The chief executive officer of a State-owned enterprise is, under the
board of the State-owned enterprise, to manage the affairs of the
State-owned enterprise.
(3) The contract of employment of the chief executive officer of a State-
owned enterprise must:
(a) provide for a specified proportion of the chief executive
officer’s remuneration to be payable, or that the chief executive
officer will be entitled to some other specified benefit, only if:
(i) the chief executive officer achieves specified
performance criteria; and
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(ii) the State-owned enterprise achieves specified
commercial outcomes; and
(b) include provision for reviews (at least annually) of the chief
executive officer’s performance.
§628. Codes of conduct
(1) The board of a State-owned enterprise must formulate a code of
conduct for the State-owned enterprise, and must review the code
and its operation at least once every 3 years.
(2) A code of conduct must:
(a) be consistent with this Act and other written laws; and
(b) make provision for at least the following matters:
(i) standards of conduct of directors and employees;
(ii) actively promoting ethical behavior and encouraging
reporting of unlawful or unethical behavior;
(iii) the circumstances in which directors and employees
may accept gifts and other benefits, including reporting
and recording them;
(d) the use by directors and employees of the State-owned
enterprise’s resources, including phones, cars and other
property;
(e) business travel, including its relationship to personal travel;
(f) conflicts of interests, including procedures for identifying,
reporting and resolving them;
(g) managing breaches of the code, including monitoring
compliance and reporting breaches;
(h) the use and disclosure of information by directors and
employees;
(i) reducing or eliminating improper influence on directors and
employees in carrying out their functions as directors and
employees of the State-owned enterprise;
(j) trading in and ownership of securities or other financial
instruments by directors and employees.
(3) Each director of the State-owned enterprise, and each employee of
the State-owned enterprise, must comply with the code of conduct as
it applies to him or her. Failure to comply with the code is not an
offence.
DIVISION 5—FINANCES OF AND REPORTS BY STATE-OWNED ENTERPRISES
§629. Acquisition of shares etc in State-owned enterprises
(1) The Minister may, with the approval of the Cabinet, acquire on behalf
of the Republic shares in or other securities of a state-owned
enterprise.
(2) Money payable by the Government for the acquisition of shares in a
State-owned enterprise (whether in connection with its incorporation
or otherwise) is payable out of funds appropriated by the Nitijela for
the purpose.
§630. Government credit support for State-owned enterprises
The Minister may, with the approval of the Cabinet, give a guarantee or
other credit support in respect of a liability of a State-owned enterprise.
§631. Financial records
(1) Each State-owned enterprise, and each subsidiary of a State-owned
enterprise, must keep written financial records that:
(a) correctly record and explain its transactions and financial
position and performance; and
(b) will enable true and fair financial reports about itself to be
prepared and audited; and must keep them for at least 7 years
after the date of the transactions to which they relate.
(2) The records are to be kept in English, and at the State-owned
enterprise’s principal place of business. They may be kept
electronically, but must be able to be converted into hard copy.
§632. Financial statements
(1) The board of a State-owned enterprise must prepare, for each
financial year, a financial statement for the group consisting of the
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State-owned enterprise and each subsidiary of the State-owned
enterprise.
(2) A financial statement must consist of:
(a) balance sheets, profit and loss accounts and other financial
statements for the year, as required by and consistent with,
applicable accounting standards;
(b) notes to the financial statements, as required by applicable
accounting standards; and
(c) a declaration by the directors whether, in their opinion:
(i) there are reasonable grounds to believe that the State-
owned enterprise and its subsidiaries will be able to pay
their debts as and when they become due and
payable; and
(ii) the financial statement and notes are in accordance with
this Act.
(3) The financial statements and the notes together must include all
information necessary to ensure that the financial report gives a true
and fair view of the financial position and performance of the State-
owned enterprise and the group consisting of the State-owned
enterprise and its subsidiaries.
(4) In this section, “subsidiary” does not include a joint venture.
§633. Audits of State-owned enterprises
(1) The Auditor-General is, by this section, appointed to be perform all
auditor functions, and provide all auditing services, for each State-
owned enterprise and each subsidiary of a State-owned enterprise.
(2) Subsection (1) does not prevent the Auditor-General from engaging
an appropriately qualified person to assist in the conduct of an audit
of a State-owned enterprise or a subsidiary of a State-owned
enterprise.
(3) For the purposes of subsection (1), the Auditor-General, and persons
assisting the Auditor-General, have a right of access at all reasonable
times to the books and financial records of a State-owned enterprise
and of any subsidiary to a State-owned enterprise.
(4) A director or staff member of a State-owned enterprise or of any
subsidiary to a State-owned enterprise must comply with any
reasonable direction given to him or her by a person conducting an
audit of the enterprise or subsidiary to:
(a) answer a question; or
(b) provide information, explanations or other assistance;
in connection with an audit of the enterprise or subsidiary being
conducted by the Auditor-General.
(5) In this section, “subsidiary” does not include a joint venture.
§634. Annual reports and other reports by State-owned enterprises
(1) No later than 2 months after the end of the first half of each financial
year, each State-owned enterprise must submit to the Minister a
report of the operations of the State-owned enterprise during that
half-year. The report must include:
(a) a report of the extent to which the State-owned enterprise and
its subsidiaries have achieved the outcomes specified in the
applicable statement of corporate intent; and
(b) any other matter that the Minister has directed the State-
owned enterprise to include in the report.
(2) No later than 3 months after the end of a financial year, each State-
owned enterprise must submit to the Minister a report of the
operations of the State-owned enterprise and its subsidiaries during
that financial year. The report must include audited financial
statements required by this Act for the financial year, together with
an audit report as required by applicable auditing and accounting
standards.
(3) A report under subsection (2) must contain such information as is
necessary to enable an informed assessment of the operations of the
State-owned enterprise and its subsidiaries during the financial year
to which it relates. Without limiting this, a report must include the
following:
(a) a review of operations during the year of the entity reported
on and the results of those operations;
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(b) a report of the extent to which the State-owned enterprise and
its subsidiaries have achieved the outcomes specified in the
applicable statement of corporate intent;
(c) a statement of the dividend or distribution paid or to be paid
to the Government in respect of the financial year;
(d) details of any CSO agreement applicable during the financial
year, and the revenue received by or payable to the State-
owned enterprise in respect of the agreement;
(e) details of any significant changes in the State-owned
enterprise’s affairs during the financial year;
(f) details of any matter or circumstance that has arisen since the
end of the financial year that has significantly affected, or may
significantly affect the State-owned enterprise’s operations in
future financial years;
(g) any other matter that the Minister has directed the State-
owned enterprise to include in the report.
(4) A report under subsection (2) may omit material that, in the
reasonable opinion of the board of the State-owned enterprise, is
likely to result in unreasonable prejudice to the commercial interests
of the State-owned enterprise or a subsidiary of the State-owned
enterprise. If material is omitted, the report must say so.
(5) The Minister must table in the Nitijela a copy of each report under
subsection (2) within 15 sitting after the Minister receives the report.
(6) Each State-owned enterprise must cause to be published in 1 or more
newspapers generally circulating in the Republic a summary of each
annual report, including a statement showing actual performance
against targets set in the relevant statement of corporate intent. The
summary must be in English and Marshallese. The summary must be
published no later than 1 month after the report is submitted to the
Minister.
DIVISION 6—MISCELLANEOUS
§635. Status of State-owned enterprises
Unless and to the extent that the Cabinet determines, or this or another law
expressly provides:
(a) a State-owned enterprise, and the subsidiaries of a state-
owned enterprise, do not represent, and cannot bind, the
Government or the Republic; and
(b) a liability of a State-owned enterprise, or of a subsidiary of a
State-owned enterprise, is not a liability of the Government or
the Republic.
§636. Disclosure
(1) The Minister may give a written direction to a State-owned enterprise
to disclose to the public or to a person or persons specified in the
direction (which may include the Minister) specified information or
documents relating to the affairs of the State-owned enterprise or a
subsidiary of the State-owned enterprise.
(2) The Minister must consult the board of the State-owned enterprise
before giving such a direction, and must take into account, in
deciding whether to give the direction, any matter raised by the
board.
(3) Unless the direction says to the contrary, the State-owned enterprise
may impose reasonable conditions on the person specified in the
direction, including conditions restricting further disclosure of the
information or documents.
(4) A direction under subsection (1) must not extend to information
relating to an individual if the individual can be identified using the
information.
(5) Compliance with a direction under subsection (1) does not give rise
to any civil or criminal liability.
§637. Delegations
(1) The board of a State-owned enterprise may, subject to this section, by
resolution, delegate to any director, the chief executive officer, any
staff member or any subsidiary of the State-owned enterprise any of
its powers and functions, but not this power of delegation.
(2) The chief executive officer of a State-owned enterprise may, by
instrument in writing, delegate to any staff member of the State-
owned enterprise all or any of the chief executive officer’s powers
and functions, but not this power of delegation.
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(3) A delegation may be subject to conditions specified in the resolution
or instrument of delegation.
(4) A delegated power or function must be exercised or performed in
accordance with the resolution or instrument of delegation.
(5) A delegation may be varied or revoked at will and does not prevent
the board or the chief executive officer from exercising the delegated
power or performing the delegated function.
§638. Transition
(1) Each director of a State-owned enterprise in office on the date on
which this Act takes effect continues in office, subject to this Act, until
the end of his or her term of office.
(2) Each chief executive officer of a State-owned enterprise in office on
the date on which this Act takes effect continues in office, subject to
this Act and to his or her contract of employment, until the end of his
or her term of office.
§639. Regulations
The Minister may, with the consent of Cabinet, make Regulations for the
proper and efficient administration of this Act pursuant to the
Administrative Procedures Act.
§640. Effective date
This Act takes effect on the date of its certification, in accordance with the
Constitution of the Republic of the Marshall Islands and the Rules of
Procedures of the Nitijela.
l Page31
SCHEDULE
STATE-OWNED ENTERPRISES
(Section 602(u))
Air Marshall Islands, Inc.
Kwajaleing Atoll Joint Utility Resources Inc
Majuro Atoll Waste Corporation
Majuro Resort
Majuro Water and Sewer Company
Marshall Islands Development Bank
Marshall Islands Ports Authority
Marshall Islands Shipping Corporation
Marshalls Energy Company, Inc
National Telecommunication Authority
Tobolar Copra Processing Authority