{"id":2401,"date":"2022-02-25T13:03:54","date_gmt":"2022-02-25T11:03:54","guid":{"rendered":"https:\/\/fzmayuxbif.wpdns.site\/?p=2401"},"modified":"2023-07-19T13:05:26","modified_gmt":"2023-07-19T10:05:26","slug":"ship-finance-in-cyprus-opportunities-and-challenges-2022","status":"publish","type":"post","link":"https:\/\/www.kyprianou.com\/zh-hans\/ship-finance-in-cyprus-opportunities-and-challenges-2022\/","title":{"rendered":"Ship Finance in Cyprus: opportunities and challenges – 2022"},"content":{"rendered":"

In this ever-changing environment, the Shipping Industry is called upon to face enormous challenges deriving from the necessity for transforming the industry into a \u201cgreen area\u201d and satisfying the environmental\u00a0requirements and evolving regulations. Most of the ship owners choose to either transform their current fleet or to build new vessels in order to meet the updated environmental regulations which include, amongst others, provisions for the greenhouse gas reductions and the mitigation of the air pollution, bio-fouling, plastic pollution and underwater noise.<\/p>\n

Inevitably, the transformation of the sector prerequisites the relevant funding and ship financing has become critical for the shipbuilding sector and shipping companies around the world. The aspect of financing\u00a0in shipping,\u00a0involves both the corporate financial management of shipping companies for the refinancing of existing debts and the new-building finance for the construction of new vessels.<\/p>\n

Cyprus, as one of the leading maritime centres (the Cyprus Registry is classified as the 11th largest merchant fleet globally and the 3rd largest fleet in the European Union), is one of the focal points of ship financing both through the maritime sector but also by providing securitization solutions for financing.<\/p>\n

Below we will briefly analyse the tools with which the financing of a ship company\u00a0and\/or\u00a0a vessel can be secured in accordance with Cyprus legislation and specifically the Cyprus Companies Law Cap 113 (\u201cCompanies Law\u201d) and the Merchant Shipping (Registration of Ships, Sales and Mortgages) Laws of 1963 to 2020 (Law 45\/1963) (\u201cMerchant Shipping Law\u201d).<\/p>\n

Pledge of Shares of a Cyprus Company owning the ship<\/p>\n

The pledging of shares of a Company\u00a0is a widely used tool\u00a0as\u00a0it offers commercial security in Cyprus. It is also used as\u00a0a\u00a0security in the shipping finance area in cases where the ship is owned by a legal entity which is incorporated in Cyprus. The\u00a0pledging\u00a0of shares is created by the execution of a share pledge agreement, which\u00a0specifies\u00a0the terms of the pledge and\u00a0provides\u00a0that upon execution\u00a0specific documentation must be\u00a0simultaneously\u00a0provided to the pledgee i.e. the specific security mechanisms that will facilitate the effective out of court enforcement of the pledge.<\/p>\n

The documentation shall enable the pledgee to enforce the pledge in\u00a0the event\u00a0of default without the need for engaging in time-consuming court procedures. Therefore, the documentation provided to\u00a0the pledgee by the pledgor,\u00a0enables the\u00a0pledgee to transfer the shares\u00a0in his\u00a0name,\u00a0if the obligations specified in the share pledge agreement fail to be discharged. Pledged shares should be fully paid up and no other charges\u00a0should be\u00a0registered against them.<\/p>\n

A pledge is a form of real security\u00a0providing to\u00a0the pledgee proprietary rights over the shares belonging to the pledgor. The possession of the pledged property may be actual or it may, more commonly, be constructive. Actual possession of the property brings concerns regarding risk and the duty of care. Therefore, constructive possession is a more commonly used practice.<\/p>\n

Ship Mortgages<\/p>\n

The most common way of security in ship financing are ship mortgages. The relevant Cyprus legislative framework (the Merchant Shipping Law) allows a vessel or a share over a vessel to be registered as security for the creation\u00a0and\/or\u00a0securitization of a loan.\u00a0More explicitly, a security over a ship, will be used by a Ship owner as a tool for obtaining the relevant financing for purchase\u00a0and\/or\u00a0transformation\u00a0and\/or\u00a0construction\u00a0of a vessel while\u00a0at\u00a0the same time a lender will acquire an interest in the mortgaged vessel. The two parties in a ship mortgage agreement will be the \u2018mortgagor\u2019,\u00a0who\u00a0is the ship owner and the mortgagee,\u00a0who\u00a0is the lender.<\/p>\n

A mortgage must always be accompanied by a collateral deed of covenants where the commercial\/ contractual terms of the agreement between the mortgagor and mortgagee\u00a0are included, which, to a large extent, reflect the agreed provisions between the lender and the borrower, as they have been incorporated in the underlying document (the facility agreement).\u00a0Although the relevant Law does not prescribe for a\u00a0specified form for the\u00a0deed of covenant, it is mandatory,\u00a0pursuant to the Merchant Shipping law,\u00a0for specific terms and matters to be reflected. These included but are not limited to the following:<\/p>\n