Mortgage guidelines

Guidelines Relating to Registration of a Ship Mortgage

Cook Islands enjoys a British legal tradition.  The courts are efficient, honest, and transparent and, due to the relatively light load of cases, the country is one of the fastest jurisdictions in the world.  Cases in the Cook Islands High Court are heard by current and retired judges of the New Zealand High Court and can be scheduled within weeks.

Along with this, the rights of Mortgagees are well protected making it attractive for banks to support owners wishing to register their vessels in Cook Islands.

Cook Islands Law Relevant to a Ship Mortgage

Cook Islands has adopted a modern suite of maritime legislation with the Ship Registration Act 2007 and the Maritime Transport Act 2008. Laws relevant to Mortgages are also found in the Cook Islands Admiralty Act 2003, modelled upon English legislation and the national Common Law which is based upon English Common Law.

The Admiralty Act provides admiralty jurisdiction to the Cook Islands High Court. That jurisdiction extends to “any claim in respect of a Mortgage, hypothecation, right of retention, pledge or other charge on a ship”. The Admiralty Act expressly preserves the common law.

The Ship Registration Act provides for registrable interests in a ship which are clearly defined. Registrable interests are limited to ownership, Mortgages and a charter party. Other limited interests (arising out of ownership, possession, sale or a Mortgage) may be registered with the consent of persons who have an existing registered interest or by direction of the Cook Islands High Court. Maritime liens are not recognised as registrable interests as of right.

In relation to a Ship Mortgage the Ship Registration Act provides that:

A ship or share in a ship can be mortgaged as security for a loan or any obligation
A Mortgagee is entitled to register a Mortgage
Registration occurs on the date and time the Mortgage is accepted for registration by the Registrar on the island of Rarotonga, Cook Islands
A registered Mortgage has priority over every other Mortgage and interest registered after that date and time regardless of the date of execution or notice of the other Mortgage or interest
A registered Mortgage is not affected by an act of bankruptcy or insolvency of the Mortgagor
A registered Mortgage shall be preferred to any right, claim or interest in the ship by any other creditor
A Mortgagee has, in the event of default under the Mortgage, an absolute power of sale subject only to the consent of Mortgages or an order of the Cook Islands High Court
If a Mortgage is registered the Registrar shall not in relation to the ship
Register a transfer of ownership or any other registrable interest without the consent of the Mortgagee
Cancel the registration of the ship

 

Registration of a Ship Mortgage

Registration of a Ship Mortgage is effected by:

  1. Completing application Form 11 (Application to Register a Mortgage); and
  2. Sending to the Registrar Form 11 and either:

(a)  the signed original Mortgage document by courier post; or

(b)  a completed Form 18 (Notice of Mortgage Particulars) by electronic transmission;

  1. The Registrar’s office, upon receipt of these documents and noting the time and date of receipt, issuing an invoice; and
  2. The Registrar, upon payment, entering the particulars of the Mortgage upon the Register; and issuing Certificate 34 (Memorandum of Particulars of Registered Mortgage).

N.B. Where registration is effected by way of a Notice of Mortgage Particulars, the Mortgagee must within 14 days of transmitting the Notice lodge the original Mortgage document with the Registrar.

If a person has signed a Mortgage document or the Notice of Mortgage Particulars on behalf of the owner of the mortgaged property (the Mortgagor) or the lender (the Mortgagee) then a Declaration of Authority must be completed by that person.

Transfer of a Ship Mortgage

A registered Mortgage may only be transferred by:

(a) Agreement evidenced by a Memorandum of Transfer signed by both parties; or

(b) Operation of la  (i.e. death of a Mortgagee and transfer passing to successors, or transfer from a company in liquidation to a liquidator) evidenced by a Document of Transmission signed by the transferee with supporting documentation proving the event by which transmission is brought about.

In both cases, electronic submission is acceptable.

In the case of a), the process is as follows:

  1. Upon receipt of the Memorandum of Transfer, the Registrar ensures content accurately reflects information available on the Register and notes the time and date of receipt
  2. The Registrar’s office issues an invoice to the Mortgagee
  3. Upon payment, the Registrar notifies the vessel owner (the Mortgagor) by fax or email that the

Memorandum of Transfer is to be registered

  1. The Registrar issues Certificate 34 (Memorandum of Particulars of Registered Mortgage – Transfer).

Or, In the case of b):

  1. The Registrar receives the Memorandum of Transmission  and  supporting  documentation and notes the time and date of receipt

N.B. The consent of all other persons having a registered interest in the vessel must consent to the transmission, as entitlement of the transferee or the event that is claimed to give rise to the transmission, may be disputed.

  1. The Registrar’s office issues an invoice to the Mortgagee
  2. Upon payment, the Registrar issues Certificate 35 (Memorandum of Particulars of Registered Mortgage – Transfer)

Discharge of a Ship Mortgage

A registered Mortgage may only be discharged by:

(a)        a Memorandum of Discharge (Form 17) executed by the Mortgagee by electronic transmission; or

(b)        an order of the Cook Islands High Court. The process is as follows:

  1. Upon notification by the High Court or receipt of the Memorandum of Discharge, the Registrar’s office notes the time and date of receipt
  2. The Registrar’s office issues an invoice
  3. Upon payment, the Registrar issues Certificate 36 (Memo of Particulars of Discharge of Mortgage)
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