Cayman Islands: Ship Registration in the Cayman Islands

Last Updated: 21 November 2002
Article by Andrew Moon

The Cayman Islands are a British Overseas Territory (Crown Colony). The capital, George Town, is a Category One port of British Registry, able to register vessels of any size, age or type (except commercial fishing vessels), and ships registered here areBritish ships entitled to fly the Red Ensign and entitled to all the privileges of a British ship. George Town is the world's largest registry for yachts over 100ft in length as well as having many commercial ships registered.

The Cayman Islands has become one of the world's leading offshore financial centres based on its political and economic stability, excellent communications, zero tax, highly developed infrastructure, full range of professional advisers and service providers with depth of experience, a sound judicial system and a flexible and progressive system of law based on English principles. The Cayman Islands is one of the leading offshore jurisdictions for banking, mutual funds, insurance companies, structured financing, company registrations, trusts and partnerships, and is the source of many public and private offerings of securities in the world debt and equity markets.

The Cayman Islands has over 66,000 offshore companies and many thousands of trusts and partnerships. There are a large number of Cayman Islands companies which own vessels, not only registered in the Cayman Islands but many registered elsewhere. The Companies Law provides the most modern and flexible framework available for the establishment of a company and is under constant review with changes designed to make the operation of Cayman Islands companies smoother and more in tune with current demands.

There are approximately 3,944 regulated mutual funds in the Cayman Islands and around 222 licensed mutual funds administrators. Mutual funds located here include various shipping investment funds. The Cayman Islands are attractive to the insurance industry and there are approximately 583 insurance companies licensed in the Cayman Islands. While the Cayman Islands is not the home for any of the P & I Clubs, a number of captive insurance companies exist for shipping companies, and indeed for non-shipping companies, which write marine and related risk insurance.

Approximately 47 of the world's top 50 banks have established branches or subsidiaries in the Cayman Islands, approximately 405 banks and 126 trust companies are licensed and nearly 120 banks and trust companies have a physical presence in the Cayman Islands. The Cayman Islands are the fifth largest banking center in the world.

The globalisation of the world's capital markets led the Cayman Islands to become an attractive base for offshore finance vehicles. One of the earliest traditional Eurobond issues was made by the Cayman Islands subsidiary of a major Japanese shipping line over 20 years ago. The increasing sophistication of the international markets has led to far more complicated transactions being undertaken by finance vehicles, including securitisations and other forms of structured financings which are adaptable for ship finance transactions.

The Cayman Islands is a zero tax jurisdiction and there are no direct taxes such as income, corporation or capital gains tax. There are no exchange or foreign currency controls and in particular, there is no taxation of, and no withholding taxes imposed on, charter hire payments, payment of interest or principal on loans, payments to officers or crew or freight or other charges. The Cayman Islands Government is committed to the continuation of the zero tax regime of the Cayman Islands. This regime has no aspect of ‘ring fencing’ and applies equally to residents and non-residents, to individuals, partnerships, trusts and companies. The OECD has accepted this regime and confirmed that it is not considered harmful as opposed to regimes which differentiate between residents and non-residents or particular types of entity.

Using a Cayman Islands company to own or bareboat charter a ship brings with it the benefits of the Cayman Islands flexible corporate law regime. Even if transaction documentation is governed by laws other than the laws of the Cayman Islands, which is usually the case, the laws of the Cayman Islands are still likely to be relevant as a result of the application of the conflict of laws principles of the laws governing the documentation, for example, in areas such as execution of documents, authorisation of transactions, insolvency and liquidation.

Many jurisdictions which provide a well regulated shipping registry like the Cayman Islands have inflexible or arbitrary corporate law regimes which impose undesirable limitations on the way locally incorporated companies conduct their business, manage their affairs, borrow money or grant security. While having a fully developed legal system based on English law principles, the Cayman Islands recognises the need for a user friendly legal environment in which locally incorporated companies can carry on business.

Cayman Islands legislation is responsive to the needs of the financial community and has been quick to introduce changes to enable business to be conducted more effectively. For example, the legislation to deal with contractual subordination and various security problems which have arisen under English law, and to introduce the concept of limited duration companies which make it possible to establish a corporate vehicle which possesses the relevant indicia to enable the vehicle to be treated (notwithstanding its corporate status in the Cayman Islands) as a partnership in certain other jurisdictions for tax purposes and to enable the shareholders to benefit from the tax transparency of such vehicle for their own purpose. The Cayman Islands initiated much new legislation in relation to merchant shipping which was subsequently introduced in the UK and other dependencies.

Company incorporations in the Cayman Islands are low cost, simple and straightforward, there is no minimum paid-up share capital requirement, there are no residency conditions, only one shareholder and one director is required, no accounts have to be filed and incorporations can usually take place within 24 hours. The Cayman Islands, therefore, is an ideal location for the more complex ship financings, joint venture arrangements, off balance sheet structures and funds, as well as standard ship financing transactions.

It is usually straightforward under Cayman Islands law for any shipowner to establish the necessary ownership or chartering structure to qualify for registration of a ship in the Cayman Islands. The Cayman Islands Ship Registry does not concern itself with the ultimate ownership or control of the ship, only the immediate owner and its principal place of business. Indeed, it is not even necessary to be the owner to register a ship. Bareboat charterers which satisfy certain conditions can also register in the same way as an owner. 'Flagging-out' to the Cayman Islands may be particularly useful when a ship has to be registered in another jurisdiction which may, for example, impose too stringent national crewing requirements, or which may be too highly regulated or taxed, or to take advantage of subsidies offered to new constructions or depreciation write-offs, or for political risk reasons.


The registration procedure in the Cayman Islands is straightforward and based on the well established British system. The Cayman Islands has initiated legislation in recent years in advance of similar legislation subsequently enacted in the UK and other dependencies to ease registration requirements.

For instance, the Cayman Islands registry does not require the owner to mark the ship's beam with her official number and the number denoting her registered tonnage prior to final registration. It is sufficient that the owner delivers to the Registrar a declaration that the ship will be marked within a 21-day period after registration. This is particularly helpful to a lender because it means that a mortgage can be registered immediately without having to wait for carving and marking to occur.

It is also possible for a purchaser to obtain registration of a ship in the Cayman Islands on the basis of a written agreement to purchase the ship from the seller. Such registration is conditional on the bill of sale being produced within 21 days. Although this conditional registration does not affect the actual contractual or proprietary rights of the purchaser or seller in relation to the ship, it does mean that the purchaser knows that a full certificate of registry will be issued subject to producing the bill of sale and gives the purchaser time to send the original bill of sale to the Cayman Islands without prejudicing registration. Furthermore, the conditional registration of the ship by the purchaser enables a lender to register his mortgage in advance of making a loan to the purchaser. This is particularly valuable as it gives complete assurance to the lender that the mortgage is registered and effective when the loan is made and any existing mortgage discharged. The mortgagee can gain control of the bill of sale at closing so that he can be reasonably satisfied that the vessel will be permanently registered.

The Cayman Islands does not overburden the owner with excessive administrative requirements but does apply international standards relating to safety, pollution and crewing and provides effective supervision of ships on the Register. Legislation has been enacted in the Cayman Islands and action taken to extend the application to the Cayman Islands of the major maritime conventions including the International Regulations for Preventing Collisions at Sea (1972), the International Convention on Load Lines (1966), the International Convention for the Safety of Life at Sea (1974), the International Convention for the Prevention of Pollution from Ships (1973), the International Convention on Tonnage Measurement of Ships (1969) and the International Convention on Standards of Training, Certification and Watchkeeping for Seafarers (1978). Regulations have been made in the Cayman Islands implementing these Conventions, and a Marine Survey Department of the Government of the Cayman Islands has been established with qualified marine surveyors of ships to administer these aspects of shipping.


The current initiatives of the G8 countries are expected to result in the enhancement of the Cayman Islands as a leading offshore financial centre specialising as it does in institutional business. The OECD, in respect of its initiative against harmful tax competition, has accepted the system of indirect taxation and tax neutrality in the Cayman Islands and has approved the Cayman Islands as one of the co-operating jurisdictions.

Properly structured transactions will not be affected by the changes the Cayman Islands has agreed with the OECD to implement over the course of the next five years. It is proposed that information will be exchanged in certain specified circumstances, and in response to specific requests on criminal and ultimately civil tax matters within the framework of the existing Cayman Islands anti-money laundering legislation. The Cayman Islands has been acknowledged by FATF to have in place anti-money laundering regulations in compliance with the FATF standards for onshore centres.

As the complexity of transactions increases, the need for a sophisticated offshore jurisdiction such as the Cayman Islands will continue to increase. The Cayman Islands seek to provide the world's shipping and financing communities with the flexibility and legal framework they demand. Innovative legislation continues to be developed and both the public and private sectors are committed to responding to the changing demands of the ship owning and ship financing industries and to enable ship owners and ship financiers to benefit from the use of an offshore jurisdiction.

The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.

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