Royal Caribbean Cruise Lines 2010 Annual Report Download - page 35

2010 ANNUAL REPORT 32
PART I
The provisions of Section 883 are subject to change
at any time by legislation. Moreover, changes could
occur in the future with respect to the identity, resi-
dence or holdings of our direct or indirect sharehold-
ers, or relevant foreign tax laws, that could affect our
eligibility for the Section 883 exemption. Accordingly,
there can be no assurance that we will continue to
be exempt from United States income tax on United
States source shipping income in the future. If we were
not entitled to the benefit of Section 883, we and our
subsidiaries would be subject to United States taxation
on a portion of the income derived from or incidental
to the international operation of our ships, which
would reduce our net income. See “Item 1. Business—
Taxation of the Company ” for a discussion of such
taxation in the absence of an exemption under
Section 883.
As part of our growth strategy, we have recently
expanded our presence within the U.K. tonnage tax
regime and maintained our participation in various
other international tonnage tax regimes. See “Item 1.
Business—Taxation of the Company.” To the extent the
tonnage tax laws change or we do not continue to
meet the applicable requirements, we may be required
to pay higher income tax in these jurisdictions, result-
ing in lower net income.
As budgetary constraints continue to adversely impact
the jurisdictions in which we operate, increases in
income tax regulations affecting our operations may
be imposed.
We are controlled by principal shareholders that have
the power to determine our policies, management and
actions requiring shareholder approval.
As of February 14, 2011, A. Wilhelmsen AS., a Norwegian
corporation indirectly owned by members of the
Wilhelmsen family of Norway, owned approximately
19.4% of our common stock and Cruise Associates,
a Bahamian general partnership indirectly owned by
various trusts primarily for the benefit of certain
members of the Pritzker family and a trust primarily
for the benefit of certain members of the Ofer family,
owned approximately 15.4% of our common stock.
A significant sale of shares by A. Wilhelmsen AS. or
Cruise Associates, or a perception that either may sell
a material amount of shares, could cause a drop in
our share prices.
A. Wilhelmsen AS. and Cruise Associates are parties
to a shareholders’ agreement which provides that
they will each vote their shares for the election of four
nominees of A. Wilhelmsen AS., four nominees of
Cruise Associates and our Chief Executive Officer. Our
Articles of Incorporation require that during the term
of the shareholders agreement the approval of at
least one director affiliated with A. Wilhelmsen AS.
and one director affiliated with Cruise Associates is
required for certain corporate actions. As such, A.
Wilhelmsen AS and Cruise Associates or either of them
have the power to determine, among other things,
certain of our policies, the persons who will be our
officers, and actions requiring shareholder approval.
A. Wilhelmsen AS. and Cruise Associates are not pro-
hibited from engaging in a business that may compete
with our business, subject to certain exceptions. If
any person other than A. Wilhelmsen AS. and Cruise
Associates acquires ownership of more than 30% of
our common stock and our two principal shareholders,
in the aggregate, own less of our common stock than
such person and do not collectively have the right to
elect, or to designate for election, at least a majority
of the board of directors, we may be obligated to pre-
pay indebtedness outstanding under the majority of
our credit facilities, which we may be unable to replace
on similar terms. If this were to occur, it could have an
adverse impact on our liquidity and operations.
We are not a United States corporation and our share-
holders may be subject to the uncertainties of a foreign
legal system in protecting their interests.
Our corporate affairs are governed by our Restated
Articles of Incorporation and By-Laws and by the
Business Corporation Act of Liberia. The provisions of
the Business Corporation Act of Liberia resemble pro-
visions of the corporation laws of a number of states
in the United States. However, while most states have
a fairly well developed body of case law interpreting
their respective corporate statutes, there are very
few judicial cases in Liberia interpreting the Business
Corporation Act of Liberia. As such, the rights and
fiduciary responsibilities of directors under Liberian
law are not as clearly established as the rights and
fiduciary responsibilities of directors under statutes or
judicial precedent in existence in certain United States
jurisdictions. For example, the right of shareholders
to bring a derivative action in Liberian courts may be
more limited than in United States jurisdictions. There
may also be practical difficulties for shareholders
attempting to bring suit in Liberia and Liberian courts
may or may not recognize and enforce foreign judg-
ments. Thus, our public shareholders may have more
difficulty in protecting their interests with respect
to actions by management, directors or controlling
shareholders than would shareholders of a corpora-
tion incorporated in a United States jurisdiction.