Protecting mortgages for Cyprus-flag ships

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By Zacharias Kapsis

According to the Merchant Shipping Laws of 1963, the main statutes for all matters relating to the registration of ships and related transactions in the Register of Cyprus Ships, a mortgage against a ship flying the Cyprus flag can be registered at any time after the completion of the vessel’s registration (provisional or permanent) or in the Special Book of Parallel Registration.

By a registered mortgage, the shipowner can secure a loan or other financial benefits, subject to the conditions agreed between the contracting parties, without the need for exchange control permission.

The creation of a mortgage under Cypriot law is not allowed on vessels registered in-parallel in the Register of Cyprus Ships.

A mortgage, once created, must be submitted to the Registrar of Cyprus Ships, or to a consular officer on the instructions of the Registrar.

Whether deposited with the Registrar or with a consular officer, the mortgage will be recorded thereafter in the Register, as from the date and time of its deposit, and shall remain an encumbrance on the vessel until it is discharged by the mortgagees.

A mortgage can be created independently of whether the ship is provisionally or permanently registered.

If the ship, against which a mortgage was created, belongs to a Cypriot company, the mortgage will also have to be registered with the Registrar of Companies within a maximum 42 days after its creation.

In this way, the mortgagee’s security is protected in the case of liquidation of the ship-owning company.

Transfer of a mortgage may be effected by completing the statutory form of transfer and submitting it to the Registrar of Cyprus Ships or to a consular officer, together with the relevant deed of covenants.

Both the statutory mortgage and the deed of covenants must be duly certified or notarised.

A duly certified or notarised power of attorney of both the registered owner/mortgagor and the mortgagee, authorising the entering into the mortgage and the execution of the mortgage

documents are normally submitted to the Registrar of Cyprus Ships.

For discharging a mortgage, a memorandum of discharge is needed to be duly executed by the mortgagee.

The same has to be later attested and delivered to the Registrar of Cyprus Ships or a consular officer on the instructions of the Registrar.

Under the Merchant Shipping (Registration of Ships, Sales and Mortgages) Laws of 1963, as amended, there is full protection for financiers and mortgagees and there is no stamp duty on ship mortgage deeds or other security documents.

Documentation

Documents required for the Registration of a Mortgage on a Cypriot ship

  1. Written Application by a local lawyer together with €30 Advocate stamps.
  2. Resolutions of Directors on behalf of the Shipowners.
  3. Duly executed Power of Attorney on behalf of the Shipowners.
  4. Mortgage and Deed of Covenants (duly executed).
  5. Certificate of Directors and Secretary (in case of Cyprus registered Company).
  6. Duly executed Incumbency Certificate (in case of foreign-registered Companies).

Documents required for the Discharge of a Mortgage on a Cypriot ship

  1. Written Application by a local lawyer together with €30 Advocate stamps.
  2. Duly executed Power of Attorney on behalf of the Mortgagees (if the documents are not properly notarially attested).
  3. Duly executed Discharge Receipt (either separate or endorsed on the original Mortgage Documents).

Documents required for the Transfer of a Mortgage on a Cypriot ship

  1. Written Application by a local lawyer.
  2. Instrument of Transfer of Mortgage (duly executed).
  3. Duly executed Power of Attorney on behalf of the Mortgagees (if the documents are not properly notarially attested).
  4. Documents required for the Transmission of a Mortgage on a Cypriot ship
  5. Written Application by a local lawyer.
  6. Declaration of Transmission of Interest in a Mortgage (duly executed).
  7. Duly executed Power of Attorney on behalf of the Mortgagees (if the documents are not properly notarially attested).

 

Zacharias Kapsis is a shipping lawyer at A. Karitzis & Associates L.L.C in Limassol. He specialises in maritime law, member of the Navigation Committee of the Cyprus Bar Association. [email protected]