CF_Mag_2015_web-V2

SUPERYACHTS
AND THE CAYMAN ISLANDS
By David Cooney
“Money can’t buy you happiness, but it can buy you a yacht
big enough to pull up right alongside it.” — David Lee Roth
According to Boat International’s
“Market Intelligence“ a total of
412 superyachts changed hands
in 2014, having a combined
asking price of over £3.2 billion
(approximately US$5 billion).
That amount is greater than the
IMF’s calculation of the GDP of
Kyrgyzstan for 2013. Sale numbers
were up 16% over 2013 figures and
up over 52% against equivalent
2012 figures. The superyacht
market is booming and 2015 looks
set to be an even stronger year.
The world’s wealthiest families
have more money than ever at their
disposal and are finding ever-more
expensive toys on which to spend
it. The world’s longest superyacht is
around 180 metres (590 feet), with
longer yachts under construction,
or in the design stages. Whether
seen as the ultimate status symbol,
a decadent display of wealth, or
merely a fun and luxurious way
to escape to a floating palace of
solitude, more and more people are
joining the superyacht owners club.
Once a decision to purchase a
superyacht has been made, two
very important decisions follow
almost immediately. The first is
how to own the vessel, the second
is where to flag the vessel. Cayman
offers attractive solutions to both
of these decisions.
How to Own the Vessel
Most superyachts are owned by
companies established solely for
that purpose. This has long been
considered best practice by maritime
lawyers. These corporate ownership
vehicles offer liability protection
and a degree of confidentiality
around ownership: whilst the
wealthy are keen to own these
vessels, they are often less keen on
others knowing they own them.
Ostentatious displays of wealth can
make the owners, and their families,
targets for kidnappers, nuisance
lawsuits, or adverse publicity, in a
world that only recently emerged
from a global recession.
The ownership of the shares in the
owning company varies from case
to case, influenced by the wider
considerations and concerns of the
ultimate owner. In many cases the
shares of the owning company are
held by another company. In other
cases, the ultimate owner directly
holds the owning company shares
and, in other cases still, those shares
are held as part of a trust structure.
Where families own multiple
superyachts (another emerging
trend), it is common to see each
vessel held in a separate company
and for all of the shares to be
owned by the same trust.
Cayman has long been a hub
for private client structuring and
offers a flexible trust regime to allow
clients to tailor the terms of the
trusts to meet their family’s unique
needs. Coupled with the fact that
Cayman has a high number of wellqualified
professionals to establish
and support the structures required
by clients, it is a popular place for
superyacht purchasers to set up their
ownership structures.
Company incorporation procedures
are quick and well-established in
Cayman. There are no nationality
or residency requirements for
shareholders and directors. When
the owners look to “flag” the vessel
(to which we turn below) they can
be confident that the process of
doing so in Cayman is simplified
where the vessel is owned by a
Cayman company.
Flagging the Vessel
The second consideration for a
would-be superyacht owner is where
to “flag” the vessel. “Flagging” is the
process of registering the vessel with
a shipping registry somewhere in the
world, the vessel thereafter flying the
flag of that jurisdiction. Flagging is
a requirement for vessels sailing in
international waters and entering
foreign ports (because it allows a
vessel to prove its nationality), it
secures title to a movable asset for
the owner, and it allows the vessel
to be used as security to obtain a
marine mortgage (the mortgage, in
turn, being registered).