Registration of Aircraft in Bermuda

by: Kerri K. Rance Cox Hallett Wilkinson - Hamilton Office

August 14, 2006 Why Register in Bermuda? Bermuda has become recognised as one of the world’s preferred places to register aircraft due to a broad range of factors including the following: The Bermuda Register: Bermuda registered aircraft are maintained and operated to the highest standards required and accepted internationally by reputable aviation regulatory authorities.  As Bermuda is an Overseas Territory of the United Kingdom, the Bermuda Department of Civil Aviation (BDCA) is subject to safety oversight surveillance by the UK Civil Aviation Authority.  The UK’s Air Safety Support International Organisation ensures that Bermuda’s aviation safety and regulations meet international standards.  The high standard of the Bermuda register is evidenced by the fact that the US Federal Aviation Authority classified Bermuda as a Category 1 jurisdiction under their International Aviation Safety Assessment Program. Bermuda’s Uniqueness: Bermuda is a group of Atlantic islands only 40 km sq and home to around 65,000 people and a thriving international business sector – has paved the way for co-operation and close working relationships between the BDCA and local law firms (who make the applications for registration).  BDCA personnel are highly qualified and applicants will find them very responsive to their needs. Tax Neutrality: Secondly, Bermuda is essentially tax neutral and owners and operators may be in a position to take advantage of favourable tax treatment in their principal place of business by registering aircraft in Bermuda.  There are no Bermuda income or profits taxes, withholding tax, capital gains tax, capital transfer tax, estate duty or inheritance tax payable by a Bermuda company or its shareholders, other than shareholders ordinarily resident in Bermuda.  Further, Bermuda does not normally require an import licence and does not charge importation tax upon aircraft. Operation Outside Bermuda: An aircraft may be registered in Bermuda and operated in another country (under suitable agreement).  Transport Category aircraft may be operated in accordance with a Bermuda Air Operators’ Certificate, if the principal place of operation is in Bermuda, or in accordance with an Air Operators’ Certificate issued by another country (under agreement between Bermuda and the other country).  This is particularly attractive to owners and leasing companies that are reluctant to register their aircraft in their customer’s county because of political unrest or legal uncertainty. Neutral Registration Mark: The Bermuda registration mark ‘VP-B’ is a neutral registration mark compared to a major European or the US mark, which some operators consider advantageous when operating in areas of the world with political instability. Type Certification: If a particular aircraft is not type-certificated in an acceptable jurisdiction, it can be expensive to undergo such certification.  Bermuda is particularly beneficial in these circumstances as the BDCA will validate the existing type-certification of an aircraft if it has been type-certificated by a competent Aviation Authority, enabling an aircraft to be registered in Bermuda from another register with minimum inconvenience and expense and, if later sold, to be exported back to the original jurisdiction with ease. Financing: Similarly, if international lenders finance an aircraft, the registration jurisdiction will have to be of a standard acceptable to the financiers and yet suitably neutral for the operator.  Bermuda is an attractive choice, which may often solve both of these issues.  Further, Bermuda’s sophisticated legal system (a British common law jurisdiction) and significant infrastructure gives lenders and operators great comfort. Mortgage Register: Bermuda has two registers - aircraft mortgages and aircraft engine mortgage - through which aircraft financiers may protect their interests.  By registering a mortgage, aircraft financiers may obtain priority over unsecured creditors, take possession of aircraft in the event of a default by the owner or borrower and sell the aircraft to recover monies to satisfy the lender’s debt. The Registration Process Bermuda Government policy is that an application to register an aircraft is normally only accepted from a person residing in Bermuda or a Bermuda exempted company, save for exceptional circumstances. A Bermuda exempted company is defined in the Companies Act 1981 as a company that may be owned by non-Bermudians but may not conduct business in Bermuda. It may be incorporated solely for the purpose of owning and operating an aircraft (subject to the approval of the Bermuda Monetary Authority (BMA)) and indeed this is a customary practice.  A confidential disclosure of the beneficial owner’s identity of the proposed company must be made to the BMA and strict confidentiality concerning this disclosure is ensured by statute. The beneficial ownership and control of an aircraft to be registered must also be disclosed to the Director of the BDCA.  Again, this disclosure is confidential and does not form a part of the public record of the registration. Preliminary Application:  The first step in registration is to make a preliminary written application to the BDCA.  This is submitted by a local law firm stating the use of the aircraft and the following details: ·          company name under which the aircraft is to be registered; ·          aircraft type, model, serial number and year of manufacture; ·          engine type, model or variant and manufacturer; ·          name and nationality of beneficial owner; ·          the place where the aircraft is based and main geographic areas of operation; ·          the proposed aircraft maintenance provider; and ·          the proposed operations and crewing arrangements. The BDCA will issue an approval in principle if the preliminary application is approved. Formal Application:  The BDCA issues a list of items that must be submitted to the BDCA when making the formal application for registration.  An application for the issue of a Certificate of Airworthiness (C of A) should also be made at this time.  Once satisfied with the information submitted, the Director will arrange for an inspection of the aircraft by a BDCA airworthiness inspector.  The C of A is renewable annually following further inspection of the condition and technical status of the aircraft. At this time, an application should also be made to the Bermuda Department of Telecommunications for the issue of a Class Six Radio Operating Licence.  Once the BDCA have reviewed and are satisfied with all the supporting documents and information, it will register the aircraft and issue a Certificate of Registration.  The Register forms the official public record and contains the following information: ·         the number of the Certificate of Registration; ·         the nationality and the registration marks assigned to the aircraft; ·          the make and model of the aircraft and year of manufacture; ·          the serial number of the aircraft; and ·          name and address of the owner of the aircraft. The Director will also issue a Noise Certificate and a Certificate of Approval of Aircraft Radio Installation.  The Class Six Radio Operation Licence is issued once the aircraft has been registered and must be carried on board the aircraft along with all of the registration documents. Deregistration De-registration:  Removing an aircraft from the register is a straightforward process.  A written application requesting de-registration and a certified resolution authorizing the cancellation must be submitted to the BDCA.  All documentation issued in connection with the registration of the aircraft must also be returned to the BDCA. Where an Export C of A is required for re-registration in another jurisdiction, the Director will arrange for an inspection by a BDCA airworthiness inspector. Once all mortgages have been discharged and all fees payable to the BDCA have been settled, the BDCA will de-register the aircraft.  BDCA will notify the appropriate National Aviation Authority of the State to which the aircraft is being exported of the cancellation.  In Summary The Bermuda aircraft register has had an international reputation for high safety standards and regulation oversight since its inception in 1931.  There are currently 214 aircraft on the Bermudaregister. The Bermuda Government regards the continued growth of the Bermuda aircraft register as an important component of its international business platform. Consequently, given the relative size of the jurisdiction, BDCA is extraordinarily well staffed and has a substantial amount of financial resources available to it.  These factors allow the register to continue to grow and have led to the BDCA being able to carry out its regulatory functions autonomously.  Bermuda is the only UK Overseas Territory that has full unconditional designation of the Governor’s aviation safety regulation powers for all aspects of aviation. The Bermuda Government’s flexibility and the adaptability of Bermuda’s international business laws will continue to ensure that the standard of the Bermuda aircraft register justifies its reputation and that its growth will steadily continue.