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This guide is intended to give the reader a basic overview of the law governing the registration of vessels under the Cyprus flag and the procedures to be followed at the Department of Merchant Shipping (“DMS”) into this respect.
The procedure pertaining to the registration of vessels under the Cyprus flag and the registration of mortgages thereon, is governed by The Merchant Shipping (Registration of Ships, Sales and Mortgages) Law of 1963 (Law 45/63) as has been amended.
There are three (3) types of vessel registration in Cyprus: (1) Provisional, (2) Permanent and (3) Parallel registration.
A vessel may only be registered in the Register of Cyprus Ships if:
1. More than fifty percent (50%) of the shares of the ship are owned:
• by Cypriot citizens or
• by citizens of other Member States who in the instance of not being permanent residents of the Republic must appoint and maintain an authorised representative in the Republic of Cyprus throughout the time that the vessel shall be registered under the Cyprus flag, or
2. The total (100%) of the shares of the ship are owned by one or more corporation, which have been established and operate:
• in accordance with the laws of the Republic of Cyprus and have their registered office in the Republic, or
• in accordance with the laws of any other Member State and have their registered office, central administration or principal place of business within the European Economic Area and which will have either appointed an authorised representative in Cyprus or the management of the ship is entrusted in full to a Cypriot or a Community shipmanagement company having its place of business in Cyprus, or
• outside Cyprus or outside any other Member State but controlled by Cypriot citizens or citizens of Member States and have either appointed an authorised representative in Cyprus or the management of the ship is entrusted in full to a Cypriot or a Community shipmanagement company having its place of business in Cyprus. The corporation is deemed to be controlled by Cypriots or citizens of any other Member States when more than fifty percent of its shares are owned by Cypriots or citizens of any other Member States or when the majority of the Directors of the corporation are Cypriot citizens or citizens of any other Member State.
Member State means a Member State of the European Union or other contracting party to the European Economic Area Agreement.
An authorised representative must be a Cypriot citizen or a citizen of any other Member State, who is resident in the Republic, or a partnership / corporation / branch established in accordance with the laws of Cyprus, which has its place of business in the Republic and which employs permanent staff in the Republic.
In view of the above requirements, all non-European owners who wish to register their ships under the Cyprus flag may incorporate a company in Cyprus, which will either acquire the ship in its name, or bareboat charter the ship.
In accordance with the Advocates Laws of Cyprus, only lawyers registered as practicing advocates in Cyprus are entitled to draft the necessary documents for the incorporation of Cypriot companies as well as to carry out all registry transactions. Therefore, the first step to be taken by persons interested in registering a vessel under the Cyprus flag is to engage the services of a local lawyer.
Cypriot merchant shipping legislation (clause 23 of the Law) allows for the provisional registration of a vessel, provided that the vessel becomes the property of a qualified person while at a port outside the Republic. Most owners/applicants usually choose to have their ship provisionally registered first. This will allow them time (up to 9 months, including a 3 month extension, on payment of a fee equal to one half of the registration fee) during which they will be able to complete the administrative formalities for permanent registration which includes, mainly, the inspection of the vessel by the Classification Society and the issue of the requisite trading and statutory certificates.
As it is explained in the “Provisional Registration” section, the Law allows the provisional registration of a vessel in order to allow the owner of the vessel the necessary time to complete the administrative formalities for permanent registration which includes, mainly, the inspection of the vessel by the Classification Society and the issue of the requisite trading and statutory certificates. The permanent registration of a provisionally registered vessel must be effected within 6 months from the date on which she was provisionally registered or within 9 or 12 months if extension has been obtained. It has to be noted that a vessel must be registered permanently, directly, if at the time of her registration is lying at a port in Cyprus.
The following documents must be submitted to the Registrar of Cyprus Ships in addition to the documents required for the provisional registration:
• Certificate of Survey (Form M.S.1) and Tonnage Certificate (form M.S.12 or M.S.12A or M.S.12B depending on the type of vessel) from a recognized Classification Society;
• Ship’s Carving and Marking Note (M.S. 32);
• The International Certificates from a recognized Classification Society in accordance with the relevant international maritime conventions in force (where applicable);
• Safety Management Certificate (SMC) (where applicable);
• Confirmation of the Customs Department on the payment of V.A.T. for pleasure craft, where applicable;
• All the documents that in the course of the provisional registration the registered owner has undertaken to submit before the vessel’s permanent registration.
After receipt of all the documents set out above, and provided the appropriate fees have been paid, the Registrar of Cyprus Ships will proceed with the permanent registration of the vessel and the issue of the Certificate of Cyprus Registry (form M.S. 4 or M.S.4B).
This form of registration offers the possibility to a foreign flag vessel on bareboat charter to a person (legal or physical, qualified to own a Cyprus ship) to be registered in ‘parallel’ under the Cyprus flag for a period, usually 2 years, which is renewable. Under this type of registration, the deletion of the registration in the foreign register is not required, but the foreign nationality is suspended and the foreign registry is operative only with respect to the ownership and encumbrances status of the ship. The law of the country of the foreign registry must allow the parallel registration of the ships registered in its register.
Under the Merchant Shipping (Registration of Ships, Sales and Mortgages) Law, 45/63 as amended, Cyprus ships may be bareboat chartered to a foreign person or company and registered ‘parallel-out’ in a foreign register for the duration of the charter party. This so called ‘Parallel-out’ registration allows the financing of a ship and her mortgaging under the Cyprus flag and her registration in a foreign registry through a bareboat charter arrangement.
The parallel-out registration of a Cyprus ship is possible if she is bareboat chartered to a foreign individual or corporation and the law of the country of the foreign registry allows the parallel registration of vessels of another registry, under prerequisite conditions similar to those set out for the parallel-in registration of ships in the Register of Cyprus Ships. This type of registration is possible for Cyprus ships which are provisionally or permanently registered in the Register of Cyprus Ships. The parallel-out registration of a Cyprus ship must be approved by the Minister of Communications and Works.
Cyprus ship must be deleted from the Register of Cyprus Ships as soon as the ownership is transfered to a person (legal or natural) not qualified to own a Cyprus ship under the merchant shipping legislation.
Furthermore, a Cyprus ship may be deleted from the Registry upon the submission of an application by the owner of the ship in order for the same to be registered in a foreign registry. No export license is required for the deletion of a vessel from the Register of Cyprus Ships. A deletion certificate or a Closed Transcript of Registry is issued as soon as the registered mortgages and other encumbrances are discharged and all matters pending with the Registry, including financial obligations, are settled.
The following documents must be submitted to the Registrar of Cyprus Ships:
Once a ship has been registered under the Cyprus flag, a mortgage can be created thereby securing a loan or other financial obligations on conditions agreed to by the parties, without the need for exchange control permission. The creation of a mortgage under Cypriot laws is not allowed on vessels registered parallel-in in the Register of Cyprus Ships.
A mortgage once created must be deposited with the Registrar of Cyprus Ships or with a consular officer on the instructions of the Registrar. Whether deposited with the Registrar or with a consular officer, the mortgage is recorded thereafter in the Register as from the date and time of its deposit and remains an encumbrance on the vessel until discharged by the mortgagees. A mortgage may be created independently of whether the ship is provisionally or permanently registered.
If the ship on which a mortgage was created belongs to a Cypriot company, the mortgage will also have to be registered with the Registrar of Companies within a maximum period of 42 days after its creation. The mortgagee’s security is protected in the case of liquidation of the shipowning company. Transfer of a mortgage may be effected by completing the statutory form of transfer and submitting it to the Registrar of Cyprus Ships or to a consular officer, together with the Deed of Covenants. Both the statutory mortgage and the deed of covenants must be certified or notarised. A duly certified or notarised power of attorney of both the registered owner/mortgagor and the mortgagee authorizing the entering into the mortgage and the execution of the mortgage documents, is normally submitted to the Registrar of Cyprus Ships.
In order to discharge a mortgage, a memorandum of discharge will need to be duly executed by the mortgagee. It will then have to be attested and delivered to the Registrar of Cyprus Ships or a consular officer on the instructions of the Registrar