Shipping is an important sector of the Cyprus economy. Consequently, shipping finance is an essential part of the Cyprus shipping industry. International and national financial institutions may shape the development of the shipping industry in the island. Apart from banking and financial institutions, another important dimension that should be taken into account is the provision of high-quality legal services.
Mortgages is an extensively popular tool for ensuring the repayment of a loan or any other financial obligation of a shipping company toward its creditors. The mortgage is created over a ship in favour of the creditors. Precisely the Cyprus Merchant Shipping Law No. 45/1963 (Registration of Ships, Sales and Mortgages) permits the creation of a mortgage over the whole vessel or part of it. The latter constitutes a security for the generation of a loan.
In order to create a mortgage, the vessel has to be registered under the Cyprus flag. Generally, a mortgage constitutes a loan security or other financial obligations based on terms and conditions agreed by the parties, without the necessity of exchanging permission control. In this point, it should be clarified that the Cyprus law does not permit the creation of a mortgage on vessels registered parallel-in in the Registrar of Cyprus Ships. That is to say, a mortgage can be created only if a vessel is registered provisionally or permanently.
As soon as a mortgage is created, it must be deposited with the Registrar of Cyprus Ships or with a consular officer following the instructions of the Registrar. The mortgage is filed with the Registrar of Ships since the date and time of its deposit. It remains as an encumbrance on the ship until discharged by the mortgagees. It should be underlined that mortgages on ships have priority over another one based on the exact date and time of their submission to the Registrar.
In case the vessel on which a mortgage was created belongs to a Cypriot company then the mortgage has to be also registered with the Registrar of Companies within a period of 42 days after its creation. In case of liquidation of the shipowning company the security of mortgagee is guaranteed and protected. The mortgage can be transferred by completing the legal form of transfer and then submit it to the Registrar of Cyprus Ships or to a consular officer.
Discharge of a Mortgage
A mortgage is discharged only if the mortgagee duly executes a memorandum of discharge. Afterwards, it should be validated and delivered to the Registrar of Cyprus Ships or to a consular officer following the instructions of the Registrar.
Protection of the Rights of Mortgagee:
In Cyprus, the rights of mortgagees are protected following the provisions of the Admiralty Law. Some of the most important provisions are listed below:
- A mortgagee may proceed to a legal action for enforcement of a mortgage in a Cyprus court, or he or she may exercise his or her assigned right of ship’s disposal or its share that is subject to the mortgage.
- A mortgagee has the right to sell the mortgaged ship. Nevertheless, if there are more than one mortgagees, he or she will need a court order.
- In the case of a forced sale through auction or other private agreements, then the mortgagee’s right have priority in the distribution of income.
Advantages of Cyprus Ship Mortgages:
The Cyprus Mortgage System offers some considerable advantages, some of them are listed below:
- The details of all registered mortgages are securely filed.
- The bureaucratic procedures related to the registration, transfer and discharge of mortgages are not complicated and rather efficient.
- As it was mentioned above, the registration of a mortgage can be held in a Cyprus consul. In other words, the registration of a mortgage may take place abroad without unnecessary delays since the date of deposit of the mortgage to a Cyprus consul is considered to be the date of registration.
- In case, the ship is provisionally registered its status remains unaffected by its permanent registration.
- No stamp duty is imposed on any mortgage document.
Create a Ship Mortgage:
The creation of a ship mortgage requires an adequate legal and administrative guidance that will ensure the interests of all parties. If you wish to receive more information, then please contact us: [email protected]
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