At Ogier Fiduciary Services (Cayman) Limited, our Private Wealth Team can help with the Flagging of Vessels in the Cayman Islands. This Briefing Note summarises the process and sets out some of the reasons why Flagging in Cayman might be a good idea.
Cayman Islands legal counsel advises the client on the appropriate structure and upon the use of structures involving the holding of vessels within Cayman Trust and company structures. In conjunction with onshore legal counsel, this can be effective for asset protection, tax planning and succession planning purposes. It is also an appropriate structure for risk management purposes in many cases. An owner may act in registration matters on his own behalf or may appoint an authorised person to do so. If the owner (individual or body corporate) is not resident on-island then a resident representative person must also be appointed by the owner. If the owner of the vessel (individual / joint owners or company / entity) is not resident or incorporated in the Cayman Islands, then a Representative Person resident on the Islands must be appointed to act on behalf of the owner/s on matters within the Islands. This appointment must be made before submitting the vessel registration application to the Cayman Islands. We can assist with this appointment and act in this role for a Yacht registered in the Cayman Islands (further details below).
There are a number of significant reasons for registering a vessel:
- To prove its nationality (an essential requirement for overseas voyages);
- To secure title to a movable asset for the owner of the asset; and
- To allow the vessel to be used as security to obtain a marine mortgage (the mortgage, in turn, being registered).
WHY REGISTER IN CAYMAN?
Opting to register your vessel in the Cayman Islands has a number of advantages, which include the following:
Category 1 British Registry:
The Cayman Islands, as a Category 1 British Registry, is authorised to certify all sizes and types of vessel.
The Cayman Islands is a politically-stable British overseas territory. It is an efficiently regulated international finance jurisdiction at the leading edge of global best practice.
As a Category 1 British Registry, the Cayman Islands is an effective and efficient registry, which is very responsive to enquiries and genuinely looks to facilitate smooth and efficient registrations.
With the amount of money involved in the purchase and maintenance of modern vessels, the tax neutrality of the Cayman Islands minimises the tax leakage involved in any deals.
Modern maritime legislation:
As a jurisdiction which actively seeks new vessel registrations, the Cayman Islands has enacted legislation to streamline the processes involved.
Experienced global team:
As one of the world's largest International Financial Centres, the Cayman Islands Registry is able to attract and retain a good quality staff team who can assist in making the registration process as efficient as possible.
Several types of Registration available:
The Cayman Islands offers five different types of vessel registration – Full, interim, provisional, under construction and demise charter (also known as "bareboat charter"). In fact, the only vessels that the Cayman Islands does not register is international fishing vessels.
No Age Limits:
There are no age limits on qualified vessels (although an ongoing target of the Cayman Islands Registry is to keep the average age of its fleet at less than 15 years).
Quick and simple company incorporation:
Company incorporation procedures are well-established in the Cayman Islands. There are no nationality or residency requirements for beneficial shareholders and directors.
THE REGISTRATION PROCESS
The first step is to establish whether the vessel name is available and whether the vessel qualifies for registration with the Cayman Islands Registry.
For existing commercial vessels (merchant ships or commercial yachts) it is established if the vessel would be accepted for registration by contacting the Cayman Islands Registry. We would deal with this on your behalf.
The Cayman Islands uses something called the "Merchant Ship Flag-in Matrix" to assess an existing merchant ship’s operational condition and to determine its acceptability for registration. The Matrix looks at the vessel’s 'Port State Control' record, age and type of vessel, classification society and previous Flag.
In some cases, the age of the vessel, or a high score on the Matrix may mean that a "pre-registration survey" is required.
For pleasure yachts in private use and not engaged in trade, there are minimum Convention and statutory certification requirements that apply. The precise requirements depend upon the vessel's size. A pleasure yacht in private use (not engaged in trade) may opt to voluntarily comply with the Large Yacht Code.
It is necessary to establish whether the vessel name (or the proposed name) is available from the Cayman Islands Registry. This is done by contacting the Registry. If the name is available, it can be requested / reserved by an owner (or by one of several people who are formally acting on his behalf).
The next step is for the Registry to satisfy itself that the owner is bona-fide and qualifies to own a Cayman-flagged vessel. This involves a determination of whether the owner has legal title and checking that there are no pre-existing conditions which prohibit the vessel being registered with the Cayman Islands. If the "owner" does not yet have legal title, it must be established that he can reasonably be expected to have title in the immediate future.
The Cayman Islands Registry will accept the following ownership structures for a Cayman Flagged Vessel:
- Individual or Joint Owners
- Companies and Shipping Entities
The Cayman Islands accepts applications for vessel registration on behalf of companies / entities that are in the process of being incorporated in order to allow the registration of the owning company / entity and registration of the vessel to be progressed simultaneously.
The Certificate of Good Standing (or its equivalent if the owning company / entity is incorporated in another qualified jurisdiction) for the company / entity must be produced before the vessel’s Certificate of Registry is issued by the Cayman Islands
Authorised Person and Representative Person:
Under Section 6 of the Merchant Shipping Law (2008 Revision) of the Cayman Islands a ship owned by a non-resident individual or company may only be registered if a Representative Person & Authorised Person is appointed locally for the purpose of:
- Preparing and executing Registration forms (Section 3 & 4 - Appointment and Undertaking to act as AP/RP forms;
- Receiving notices and other documents pertaining to the non-resident ship-owner;
- Liaising with the Cayman Islands Shipping Registry on behalf of our clients, at their request regarding any matters pertaining to the registered vessel;
- Acting as yacht owner’s point of contact in the Cayman Islands;
- Ongoing co-operation with the Cayman Islands Shipping Registry in connection with the operation and maintenance of the yacht or ship as a Cayman Islands registered vessel; and
- Arranging payment of Cayman Islands Shipping Registry annual fees, maintenance fees, radio licence fees, etc. As mentioned previously, this appointment must be made before submitting the vessel registration application to the Cayman Islands and we can assist with this appointment and act in this role.
Documentation - Common Vessel Registration Rules:
There are a number of general rules which are common across all types of Ship and Yacht Registration (Full, Interim, Under Construction, Provisional, or Demise Charter), Mortgage Registration, and to related requests such as Vessel Deletion, Transcript of the Register, Inspection of the Register, Priority Notice Recording.
The actual Registration Forms and Supporting Documentation required to be submitted and the Fees paid will of course vary, depending upon the particular transaction being carried-out. We will ensure that the correct forms are completed and that the relevant fees are paid.
All Forms and Supporting Documentation may be provided either in paper form or in faxed form. If provided in faxed form then these must be accompanied by an Undertaking (in a prescribed form) to deliver the originals / certified hard copies to the Head Office of the Registry within 7 days of the date of receipt of the faxed version.
Where any signatures need to be notarised, the notarisation of signatures may be done before a Registrar of British Ships, a Justice of the Peace, or a Notary Public.
Carving and Marking:
All vessels registered under the Cayman Islands are required to be marked with its Port of Registry, Official Number and Net Tonnage (for vessels 24 metres and over) or Register Tonnage (for vessels under 24 metres) within 21 days of the issue date of the vessel’s Certificate of Registry.
Issue of a Carving and Marking Note:
Once the Cayman Islands has received all Forms, Supporting Documentation, IMO Number (if applicable), relevant Fees, and the survey and audit requirements are met, Cayman then assigns an Official Number to the ship and issues to the Owner (or their Authorised or Representative Persons) a Carving and Marking Note and assigns the signal letters for the Ship’s Radio Station call sign.
Any of these parties may then arrange for the vessel to be first permanently marked and then inspected (normally by a Class Surveyor) for verification with the Carving and Marking Note. If satisfied, the Surveyor will sign the Note and return it to Cayman.