Due diligence

Demonstrating title or legal ownership

How does one demonstrate title to or legal ownership of a vessel registered under the laws of your jurisdiction?

For a standard fee of £29 or premium (24-hour service) fee of £79 a transcript of registry is available from the Registry of Shipping and Seamen. This transcript will show details of the ship, the name and address of the current ownership and division of ownership of shares in the ship and details of any mortgages over the ship.

Liens

How can one determine whether there are any liens recorded over a vessel?

The transcript of registry only shows any mortgages registered over a ship. Liens do not need to be registered under English law.

How does one determine whether there are any security agreements, liens, charges or other encumbrances granted by a vessel owner or affiliated party who might be a borrower, guarantor or other credit party in connection with a vessel finance transaction?

See questions 1 and 2. A transcript of registry will demonstrate whether a mortgage has been granted over the ship and registered. However, unregistered mortgages are possible.

If the shipowner is a company registered in the UK (references throughout this chapter to companies registered in the UK will, in most cases, also apply to UK incorporated limited liability partnerships), a search of the Companies House register for the relevant part of the UK will reveal any fixed or floating charges granted by the shipowner and registered.

A writ search can be carried out at the Admiralty and Commercial Court for a fee of £11 to determine whether any claims have been commenced against the ship. This will demonstrate any encumbrances over the ship.

Public registry searches

Can one determine whether an obligor registered in your jurisdiction is duly organised and in good standing from a search of a public registry?

A search on the Companies House website will show key information such as the registered office, date of incorporation, insolvency actions registered against the company and key future filing dates. Company accounts and annual returns can also now be accessed free of charge. However, the accuracy of Companies House data is reliant on companies making filings.

Good-standing certificates can be ordered from Companies House. A good-standing certificate will state that a company has been in continuous, unbroken existence since its incorporation and that no action is currently being taken to strike the company off the register. An incorporation certificate can also be requested, certifying the names of directors, the secretary and company objects. You can no longer order certificates with information on shareholders, shareholdings or statement of capital.

A search at the Bankruptcy and Companies Court will determine whether any proceedings have been lodged against a company. This can be done using the search computers at the Bankruptcy and Companies Court (a £11 fee is payable for a 15-minute search) or by telephone.

Can the shareholders or other equity interest holders, directors and officers or other authorised signatories of an obligor organised in your jurisdiction be determined from a search of a public registry? If not, how are these parties customarily identified?

Details of a company’s directors, officers, secretary and shareholders will be listed on the company’s confirmation statement, which can be requested from Companies House. Companies House also maintains an accessible register of company secretaries and directors, and companies are required to make filings upon a change of any director or secretary for the purposes of this register. However, as mentioned above, the accuracy of Companies House data is reliant on companies making the required filings in a timely manner.

Companies are also required to keep a register of directors and a register of shareholders, which must be kept at the company’s registered office or at a single alternative inspection location. Any person is entitled, on payment of a prescribed fee (currently £3.50), to inspect these registers. Since 30 June 2016, a private company has been able to choose to send information usually kept in all or any of certain statutory registers to the registrar of companies to be kept on the public registrar at Companies House rather than keep the statutory registers at its registered office.

The register of shareholders maintained by the company and the annual return will identify only the registered shareholders. They will not identify whether the registered shareholder is holding them as a nominee for another, nor describe any equitable interests that exist. However, on 6 April 2016 legislation came into force to facilitate transparency as to the ultimate beneficial owners of UK companies whereby most companies (with certain exceptions) must keep a register of ‘persons with significant control’ over that company, and from 30 June 2016 it also became necessary to file such details with Companies House. For newly incorporated companies, a statement of initial significant control must now be filed at Companies House as part of the application for registration. As from 26 May 2015 the use of bearer shares in UK companies was prohibited.

Debt obligation

What corporate or other entity action is necessary for an obligor to enter into or guarantee a debt obligation? When is action by the board of directors or other governing body required? Must shareholders approve a guarantee?

Entry into a debt obligation or guarantee must be duly authorised by the appropriate corporate action. Typically this will be by means of a resolution of the board of directors, although the board may delegate powers to individual directors or others to enter into such obligations on behalf of the company. A shareholders’ resolution is not usually required for either guarantees or loans unless the loan is made to a director or the guarantee is given on his or her behalf. Shareholder approval may also be appropriate if the directors have doubts as to whether a transaction is of benefit to the company and, therefore, if the transaction would be a proper exercise of their powers.

The company’s articles of association or other constitutional documents may place restrictions on the giving of guarantees or impose procedures that must be followed in order to authorise the entry into a debt or guarantee obligation, but (subject to exceptions relating to transactions involving directors) in favour of a person dealing with a company in good faith, the power of the directors to bind the company, or authorise others to do so, is deemed to be free of any limitation under the company’s constitution (section 40, Companies Act 2006).

Obligations of foreign lenders

Must foreign lenders qualify to do business in your jurisdiction to extend credit to a borrower organised in your jurisdiction? Will foreign creditors be deemed resident as a consequence of making a loan or other extension of credit to an obligor within your jurisdiction?

Foreign banks or other lenders do not need to seek UK regulatory approval to extend credit to a UK company, and there are no exchange controls in place that would restrict payments from a UK company to such foreign lenders. Corporate lenders will not be deemed UK-tax resident unless they are incorporated in the UK or are centrally managed and controlled here. A non-resident company that trades through a UK permanent establishment is liable to pay UK corporation tax on the profits arising from that permanent establishment. However, see also question 10 in relation to withholding tax on interest payments.