Security

Security document (mortgage) form and content

What is the typical form of a security document over the aircraft and what must it contain?

There is no statutory format with which the mortgage must comply. The mortgage itself need not be governed by BVI law. A certified copy of mortgage deed must be provided to the Governor.

Security documentary requirements and costs

What are the documentary formalities for creation of an enforceable security over an aircraft? What are the documentary costs?

There are no specific documentary formalities under BVI law. The fees are on a sliding scale according to the value of the mortgage.

Security registration requirements

Must the security document be filed with the aviation authority or any other registry as a condition to its effective creation or perfection against the debtor and third parties? Summarise the process to register a mortgagee interest.

Aircraft registered in the BVI or capable of being so registered and aircraft engines owned by or in the lawful possession of a BVI company may be made the subject of a mortgage for the purposes of registration. The application for registration of the mortgage must be in the prescribed form, and must be made to the registrar by or on behalf of the mortgagee in question. It must be accompanied by a certified true copy of the mortgage and the prescribed fees.

Registration of security

How is registration of a security interest certified?

The Governor will issue a notification of registration, which is generally available on the date of registration. The notification states the date and time of registration, whether it is the first or a subsequently registered mortgage with respect to the relevant aircraft, and the principal details of the mortgage, and acknowledges receipt of the relevant registration fee.

Effect of registration of a security interest

What is the effect of registration as to third parties?

A mortgage entered on the register has priority over any other mortgage or charge on that aircraft or aircraft engine. It is also possible for the priority of a mortgage to be fixed by filing a priority notice with the Registrar pursuant to which the priority of a yet to be executed mortgage may be fixed for a 14-day period. When entered in the register within the 14-day period, that mortgage shall be deemed to have priority from the time the priority notice was registered.

Security structure and alteration

How is security over aircraft and leases typically structured? What are the consequences of changes to the security or its beneficiaries?

A typical security package for a financing involving the BVI will consist of an aircraft mortgage, a security assignment of the borrowing party’s contractual rights (eg, under the relevant lease arrangements, the lease rentals or insurances) and a deregistration power of attorney or IDERA. It is often the case that the lenders will take security over the shares of the (often BVI) owner or borrower. These documents will usually not be governed by BVI law but, for example, by English or New York law, save that a share mortgage over the shares of a BVI company is often governed by local law.

The secured party is often a security trustee or collateral agent for the financing parties from time to time.

Security over spare engines

What form does security over spare engines typically take and how does it operate?

A mortgage to be registered on the BVI Aircraft Mortgage Register may cover any store of spare parts (including engines) for the aircraft, but may not include a mortgage created as a floating charge or a mortgage of spare parts on their own. Parts that in the future may become attached to the aircraft can be part of a registered mortgage provided they are sufficiently identifiable when acquired by the mortgagor and value is given. The BVI is not party to the Cape Town Convention.