Ince & Co
4 Experts
4 Contributions by Ince & Co
PRACTICE NOTES
This Practice Note covers the main areas involved in taking security over a superyacht and highlights the issues which set it apart from mainstream ship finance.
For wider guidance on taking security over commercial vessels generally, see Practice Note: Shipping finance—security.
Lenders typically structure collateral into three strands:
charges over the superyacht itself;
security over rights linked to the yacht;
security over the beneficial owner’s other property.
In addition, third parties may obtain security over a superyacht, whether arising by agreement or imposed by law, in the form of liens over it.
This final category matters greatly to a lender, as some liens, in certain legal systems, can outrank the lender’s collateral.
The type and timing of the security package will also depend on whether the facility supports a new build or the purchase of a pre-owned
Banking & Finance
PRACTICE NOTES
This Practice Note sets out an overview of the principal issues that should be taken into account in respect of superyacht finance. Whilst, in principle, the legal framework supporting yacht finance mirrors that for any other ship, practical approaches differ considerably when set against mainstream ship finance. A widely accepted description of a ‘superyacht’ is a luxury vessel (motor or sail) exceeding 24 metres (79 feet) in length. Lenders will finance acquisitions of pre-owned yachts, construction projects (both pre- and/or post-delivery stages), and refit works. Facilities may therefore support second-hand purchases, new-builds at various stages, and comprehensive yacht refits. The borrower is very often an offshore, single-purpose vehicle (SPV). Dedicated yacht financiers are typically private banks or the private wealth arms of large international banks, which commonly seek a personal guarantee from the high net worth client who is the ultimate
Banking & Finance
PRACTICE NOTES
Introduction
This Practice Note summarises key aspects of English insurance law, how they relate specifically to yachts, and the developments introduced on commencement of the Insurance Act 2015 (IA 2015). For fuller guidance on the fundamental rules that underpin any insurance contract, see Practice Note: General principles of insurance contract law. For an outline of marine insurance across all categories of vessel, see Practice Note: Marine insurance—general principles.
The relevant legislation
The Marine Insurance Act 1906 (MIA 1906) continues to govern questions of yachting insurance, but its provisions have been revised and built upon by the Consumer Insurance (Disclosure and Representations) Act 2012 (CI(DR)A 2012) and the IA 2015. Smaller yachts and pleasure craft, usually owned by individuals, will typically come within CI(DR)A 2012, which safeguards consumer insureds by substituting the duty of utmost good faith with an obligation to take reasonable care not to
Banking & Finance
PRACTICE NOTES
This Practice Note outlines the features of superyacht sale and purchase that diverge from transactions involving commercial ships. For broader guidance on commercial vessels, see Practice Note: Sale and purchase of second-hand vessels. Yacht builders typically table their own standard construction agreement, or the parties may settle a bespoke build contract. For shipbuilding of other vessel types, see Practice Note: Shipbuilding contracts. The focus here is the sale of a completed or second-hand superyacht, very often arranged through a yacht broker. Across Europe, the predominant contract for second-hand superyachts is the standard sale form (see The MYBA form below). That template adopts a caveat emptor approach, placing the burden on the buyer to undertake due diligence. Following completion, the buyer’s selection of flag for registration and the ownership vehicle should reflect the owner’s convenience, intended use of the yacht and exposure to
Banking & Finance
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