Richard Munden and Elaine Kerr of Walkers provide a guide to the Cayman Islands Aircraft Registry.

Oversight of civil aviation throughout the Cayman Islands and of aircraft registered in the Cayman Islands is carried out by the Civil Aviation Authority of the Cayman Islands (the “CAACI”). The CAACI operates in accordance with the Air Navigation (Overseas Territories) Order 2013 (as amended) (“ANOTO”) which was enacted in the United Kingdom and extended to the Cayman Islands as a British Overseas Territory. ANOTO together with the Overseas Territories Aviation Regulations, certain other aviation related legislation and regulations set out requirements for the registration, operation and continuing airworthiness of aircraft registered in the Cayman Islands.

Aircraft registry

The CAACI maintains the Register of Aircraft (the “Aircraft Register”) and the Register of Aircraft Mortgages (the “Aircraft Mortgage Register”) in accordance with ANOTO and the Mortgaging of Aircraft Regulations 1979.

Aircraft considerations

Weight restrictions for jets: It is the CAACI’s policy to accept both jet and non-jet aircraft on to the Aircraft Register with a Maximum Take-Off Weight (MTOW) exceeding 12,500lbs/5,700kg. The CAACI is happy to consider exceptions to the weight requirement where it is satisfied that the aircraft’s operational base is in the Cayman Islands or on a case by case basis in respect of modern light turbojet and turboprop aircraft and helicopters based on yachts registered in the Cayman Islands.

Aircraft type issues (i.e. must be Type Registered)

The CAACI accepts aircraft with Type Certificates issued by the FAA, Transport Canada, JAA and EASA.

Age Restrictions

There is no set age restriction. For aircraft with a manufacturing year of 1990 or earlier, the CAACI requests that before an application to register the aircraft is submitted the applicant (the “Applicant”) enquires directly to the Director of Air Safety Regulation or the Manager of Airworthiness as to the suitability of the aircraft for inclusion on the Aircraft Register.

Structuring requirements

Nationality requirements: ANOTO sets out the categories of qualified persons who may hold a legal or beneficial interest by way of ownership in an aircraft registered in the Cayman Islands: “The following persons are qualified to hold a legal or beneficial interest by way of ownership in an aircraft registered in the Cayman Islands or a share therein –

  • The Crown in right of Her Majesty’s Government in the United Kingdom or in right of the Government of the Territory;
  • United Kingdom nationals;
  • Commonwealth citizens;
  • Nationals of any European Economic Area State;
  • Bodies incorporated in any part of the Commonwealth and which have their registered office or principal place of business in any part of the Commonwealth; or
  • Undertakings formed in accordance with the law of a European Economic Area State and which have their registered office, central administration or principal place of business within the European Economic Area.”

The Commonwealth is defined in ANOTO as:

“the United Kingdom, the Channel Islands, the Isle of Man, the countries mentioned in Schedule 3 to the British nationality Act 1981 and all other territories forming part of Her Majesty’s dominions or in which Her Majesty has jurisdiction”.

In addition a person who holds a legal or beneficial interest in an aircraft but who does not fall into any of these categories may obtain registration of its aircraft at the discretion of the CAACI if such person resides or has a place of business in the Cayman Islands.

If an aircraft is chartered by demise to a qualified person the aircraft may be registered in the name of the charterer by demise, whether or not an unqualified person is entitled as owner to a legal or beneficial interest in the aircraft.

Typical structures

In most cases the Applicant will be in category (e) in the list of qualifying persons above and be either a Cayman Islands exempted company incorporated with limited liability or a company incorporated elsewhere in the Commonwealth.

It should also be noted that the Aircraft Register is not strictly an owner registry; a registered owner (who must fall within one of the categories of qualifying persons) may be a ‘charterer by demise’, for example, a lessee under a lease. In these circumstances, the certificate of registration will note that the registered owner is a charterer by demise and can also state the name and nationality of the lessor/charterer.

Is there a need to hold local shareholder or director requirements?

There are no local shareholder or director requirements.

Local office/physical presence required?

There is no requirement that the registered owner of an aircraft on the Aircraft Register have a local office or physical presence in the Cayman Islands. If the aircraft is registered in the name of a company incorporated in the Cayman Islands then pursuant to the Companies Law (2013 Revision) of the Cayman Islands that Cayman company is required to have a registered office in the Islands.

Due diligence issue

In order to meet its antimoney laundering and other know-your-client requirements, the CAACI will conduct financial and legal due diligence on the Applicant and look through the corporate structure up to the ultimate beneficial owner of the aircraft (the “Beneficial Owner”). There is no definitive list of what the CAACI will require in this regard but an initial submission is typically prepared containing the information and documentation listed below:

  • Certified true copies of the certificate of incorporation and memorandum and articles (or equivalent) of the Applicant;
  • If applicable, a certificate of good standing in respect of the Applicant;
  • A notarised copy the register of directors and register of members (or equivalent documents) of the Applicant;
  • A notarised copy of the passport photo page for each director (or equivalent) of the Applicant;
  • A transparent overview of the business of the Beneficial Owner;
  • A notarised copy of the passport of the Beneficial Owner;
  • If applicable, a copy of the bill of sale; and
  • If applicable, copies of the signed and dated lease documents to evidence the lease structure.

 

Continuing requirements (include fees and fillings)

The certificate of airworthiness must be renewed on an annual basis. This is discussed in further detail below. The registered owner of the aircraft is also required to inform the CAACI of any change in information that was supplied at the time of registration of the aircraft (which would include, for example, details of a change of beneficial owner), the destruction or permanent withdrawal of use of the aircraft and/or the termination of the lease in the case of an aircraft registered in the name of a charterer by demise.


Use and operation of the aircraft

Private use or Charter use?
  • The majority of aircraft registered on the Aircraft Register are registered in the private category. In considering whether an aircraft can be registered in the private category it is important to understand how the aircraft will be operated. For example, if the aircraft will be used wholly or partly for charter then such use would not constitute private use.
  • An aircraft that is used to fly for commercial air transport cannot be registered in the private category and must be registered in the commercial category. An aircraft is deemed to fly for the purpose of commercial air transport if “valuable consideration is given or promised for the carriage of passengers or cargo in the aircraft on that flight” (as set out in ANOTO). Additional requirements apply to the operation of aircraft for commercial air transport including that the operator of such aircraft must hold an air operator’s certificate.

 

Registration requirements

Together with submitting the due diligence information and documents required by the CAACI the Applicant is required to provide: • (pending acceptance of the aircraft onto the Aircraft Register) a deposit of 50% of the cost of the Initial Certificate of Airworthiness; and

  • A completed and signed application form.
  • At the time an application is made, the Applicant may also reserve a specific registration mark. A Cayman Islands aircraft registration mark has the prefix “VP-C[x][x]”.

 

Following satisfactory submission of the due diligence documents, application form and fees the CAACI will confirm whether or not the aircraft will be accepted onto the Aircraft Register (however the CAACI will not put the aircraft on the Aircraft Register until it has confirmation that the aircraft has been deregistered from an existing state of registry).

Certificate of Airworthiness requirements

Concurrently with the acceptance onto the Aircraft Register or shortly thereafter an airworthiness survey of the aircraft will usually be undertaken. To ensure airworthiness standards are met on a continuing basis, the Applicant must nominate a technical coordinator whose qualifications and experience must be assessed and approved by the CAACI. The technical coordinator is responsible for liaising with the CAACI surveyor concerning the inspection of the aircraft and records. A maintenance program or schedule must also be developed and submitted to the CAACI for approval which will comply with the aircraft manufacturer’s recommended maintenance program and be customized to reflect the specific aircraft equipment and scope of operations for the aircraft.

Any maintenance must be carried out by an organisation approved by the CAACI at a recognised maintenance facility. Once the airworthiness survey is complete, then if the aircraft is airworthy (and provided that at that time the aircraft has been accepted onto the Aircraft Register) a certificate of airworthiness will be issued. Typically an export certificate of airworthiness from the ‘exiting’ state of registry will be available and the original provided to the CAACI surveyor at the inspection of the aircraft before a certificate of airworthiness is issued. The aircraft must at all times conform to an ICAO recognized certification standard.

Operation requirements

Prior to placing an aircraft on the Aircraft Register, the CAACI must be satisfied that flight operations will be conducted in a manner consistent with internationally recognized safety standards and recommended practices. The CAACI’s requirements are set out in further detail at the Operational Requirements section of its website:

http://www.caacayman.com/portal/ page?_pageid=3321,6647575&_dad=portal&_ schema=portal

As noted on the website, among other things:

  • The operator of the aircraft must have an approved Operations Manual and a Safety Management System in place; and
  • The Aircraft must meet the noise standards sets out in ICAO Annex 16, Environmental Standards.

 

Inspection interval

The certificate of airworthiness must be renewed on an annual basis for a private aircraft.  In connection with each such renewal, an airworthiness survey of the aircraft will need to be completed by an authorised CAACI surveyor.

 

Costs and service Initial cost

Issue of the initial Certificate of Airworthiness costs US$243.90 per 500kg of MTOW.

Annual cost

The cost of renewing a certificate of airworthiness annually is calculated on a sliding scale and based on the MTOW of the aircraft, for example:

  • For an aircraft with an MTOW of between 2,730kg and 5,700kg the fee is US$2,440 in respect of each complete year of validity applied for in respect of the certificate; and
  • For an aircraft with an MTOW of between 34,000kg and 68,000kg the fee is US$12,200 plus US$171 per 500 kg or part thereof exceeding 34,000 kg up to a maximum of US$23,180.

 

Average time needed to register an aircraft (estimate)

4-6 weeks. The survey of the aircraft itself will typically take 2 days but scheduling the survey and completion of the due diligence process by the CAACI typically result in a 4-6 week period.

Cost to register mortgage

Mortgage registration fees are capped at CI$5,000 (US$6,097.56) and depend on the value of the sum secured as follows:

  • Amount secured < than US$6,097,560 (CI$5mil) – fees are US$1,525
  • Amount secured between US$6,097,560 to US$1,220,000 (CI$10mil) – fees are US$3,050
  • Amount secured between US$1,220,000 to US$2,440,000 (CI$20mil) – fees are US$4,575
  • Amount secured exceeds US$2,440,000 – fees are US$6,100

 

These fees must be paid ahead of registration or generally the CAACI will not register the mortgage. Cost to register priority notice (if applicable): US$305

Costs to deregister aircraft

US$610 (plus the man hours involved at US$305 per hour)

Costs to discharge mortgage

Nil

 

Financing

Governing law of mortgage: There is no requirement that the mortgage be governed by the laws of the Cayman Islands and typically mortgages registered on the Aircraft Mortgage Register are governed by English law or the laws of New York.

Priority notice

A prospective mortgagee can file a notice of priority, indicating their intention to enter a mortgage on the Aircraft Mortgage Register. This “priority notice” will ensure that, for a period of 14 days from the date of registration, any mortgage referred to in that priority notice will have priority over any other mortgage registered subsequently to the registration of that priority notice. If the mortgage is registered within the 14 day period it will be deemed to have been registered from the date the priority notice was registered. Any other mortgage registered during the period in which a priority notice is in effect will not take priority over the mortgage that is the subject of the priority notice. If the prospective mortgage is not registered within the 14 day timeframe, then at the discretion of the prospective mortgagee another priority notice can be filed.

Deregistration Power of Attorney

A deregistration power of attorney can be lodged with the CAACI pursuant to which the registered owner appoints a third party (typically the mortgagee) as its attorney in-fact with relevant powers including to cancel the registration or amend the registered particulars with respect to the aircraft.

Public registration

For a fee of US$122 (per search) the Aircraft Register and the Aircraft Mortgage Register is searchable by any person. Details of the VP-number, manufacturer’s serial number and aircraft type are typically required to search these registers.

Perfection

There is no requirement that a mortgage over an aircraft be registered and the registration of a mortgage on the Aircraft Mortgage Register operates to affect priority only.  Accordingly, the absence of registration of mortgages in the Aircraft Mortgage Register does not preclude the existence of any mortgages or liens (including possessory liens) over the Aircraft. A mortgage registered on the Aircraft Mortgage Register will have priority over subsequent registered mortgages and unregistered mortgages (except for pre-9 October 1979 mortgages).

Cape Town registration

The Cayman Islands has implemented the necessary legislation to enable the Cape Town Convention to become applicable law in the Cayman Islands at the same time as the Convention comes into force in the United Kingdom. We expect the Convention to be applicable in the Cayman Islands from 1 November 2015. The Cape Town Convention Law, 2009 of the Cayman Islands (“CTL”) was implemented with a view to placing the Cayman lslands on a similar footing with jurisdictions in which the Convention and the associated aircraft protocol are applicable law. The CTL aims to replicate the substantive concepts contained in the Convention. In certain cases the CTL will apply automatically to a transaction and in circumstances where the CTL would not apply automatically, an election in respect of the CTL may be made by a Cayman Islands entity with the result that a secured party will have the rights and remedies to the extent provided by the CTL (which are broadly consistent with those provided by the Convention). When the Convention takes effect the rights and remedies it provides will be available to the creditors of Cayman Islands entities that participate in aircraft finance structures. At that time the CTL will be repealed.

Requirements for deregistration of aircraft

In order to deregister the aircraft from the Aircraft Register, the following documents will need to be provided to the CAACI:

  • A request to deregister from the registered owner or its attorney-in-fact;
  • The original certificate of registration with the relevant section completed with respect to the de-registration; and
  • Prior written consent from all parties who have a ‘vested interest’ in the aircraft, including the beneficial owner of the aircraft, any party who has been provided with a letter of assurance from the CAACI that it will not deregister without their consent (usually a mortgagee or lessor) and any mortgagee under a mortgage registered on the Aircraft Mortgage Register.

 

A deregistration fee in the amount of US$610. If an export certificate of airworthiness is required, a fee in amount of US$122 per 500kg will be payable.

Requirements for deregistration of mortgage

In order to note as discharged and remove a registered aircraft mortgage from the Aircraft Mortgage Register, the following documents will need to be provided to the CAACI:

  • A mortgage discharge form signed by the mortgagee; and
  • A certified copy of the executed deed of release.

 

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