Stewart McKelvey

VESSEL TRANSACTION BASICS AND DUE DILIGENCE NUANCES In addition to payment of the associated fee, three standard form documents are required to be fi led: a bill of sale, a statement of qualifi cation and an ap- pointment of authorized representative. Additional documentation is required if the vessel is not fl ag- ged in Canada. Specifi c due diligence inquiries to confi rm regulatory compliance must be made prior to the transfer. Also, the requirements pertaining to the execution of the transfer documents may vary depending upon the peculiarities of the local regis- trar. Engaging local counsel who is familiar with vessel related due diligence and who has an estab- lished relationship with the registrar will usually save time, aggravation and expense. For fi nancing transactions, one of the main benefi ts of the registration system under the Act is the ability to register a mortgage against a vessel, whether it's in operation or under construction. The mortgage itself is a statutory form. The credit terms and conditions of the mortgage are typically set out in a seperate deed of covenants that is referenced in the vessel mortgage, but not fi led with the registry. The mortgage charges the mortgagor's interest in the shares of the vessel and the vessel's boats and appurtenances. As with most registration systems, priority between multiple mortgages is governed by the sequence in registration or by an intercreditor type agreement amongst the mortgagees. If seeking to enforce under a vessel mortgage, a mortgagee has a statutory power of sale of the vessel, in addi- tion to an in rem action and the remedy of a judicial sale. The Personal Property Security Act in each of the Atlantic provinces does not apply to a statutory vessel mortgage; however a deed of covenants can also create a security interest in certain accessories or equipment on or relating to the operation of the vessel that are not charged by the mortgage. Regis- tering a fi nancing statement in the personal prop- erty registry would then be required in addition to registration of the mortgage under the Act. It is essential to know where to conduct due diligence searches and where to effect registrations to protect a client's interests. While there are many common elements between a vessel transaction and a typical commercial trans- action – be it a purchase, sale, fi nancing or other – there are, nonetheless, aspects which make any deal that involves one or more vessels inherently different. We were able to highlight a few of those nuances in this brief article. We encourage you to contact any member of our Business Transactions group or our Marine Law group if you have questions about any of the mat- ters discussed in this article. Candace Thomas Halifax, NS 902.420.3373 cthomas@stewartmckelvey.com Sadira Jan Halifax, NS 902.444.1701 sjan@stewartmckelvey.com Stewart McKelvey proudly celebrates over twenty years of innovative leadership as Atlantic Canada's fi rst and largest regional law fi rm. With a distinguished heritage reaching back to Canada's confederation, our law fi rm has established an international reputation for generating results. More than 220 lawyers and 350 staff in our six locations have a single objective: the best results for our clients. Charlottetown, Prince Edward Island 65 Grafton Street, P.O. Box 2140 Charlottetown, P.E.I., C1A 8B9 Telephone: 902.892.2485 Fax: 902.566.5283 charlottetown@stewartmckelvey.com Fredericton, New Brunswick Suite 600, Frederick Square, 77 Westmorland Street P.O. Box 730, Fredericton, N.B., E3B 5B4 Telephone: 506.458.1970 Fax: 506.444.8974 fredericton@stewartmckelvey.com Halifax, Nova Scotia Suite 900, Purdy's Wharf Tower One 1959 Upper Water Street, P.O. Box 997, Halifax, N.S. B3J 2X2 Telephone: 902.420.3200 Fax: 902.420.1417 halifax@stewartmckelvey.com Moncton, New Brunswick Suite 601, Blue Cross Centre, 644 Main Street P.O. Box 28051, Moncton, N.B., E1C 9N4 Telephone: 506.853.1970 Fax: 506.858.8454 moncton@stewartmckelvey.com Saint John, New Brunswick Suite 1000, Brunswick House, 44 Chipman Hill P.O. Box 7289, Postal Station A, Saint John, N.B., E2L 4S6 Telephone: 506.632.1970 Fax: 506.652.1989 saint-john@stewartmckelvey.com St. John's, Newfoundland and Labrador Suite 1100, Cabot Place, 100 New Gower Street P.O. Box 5038, St. John's, N.L., A1C 5V3 Telephone: 709.722.4270 Fax: 709.722.4565 st-johns@stewartmckelvey.com

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