The sale of an aircraft in The Bahamas would trigger stamp duty at 10%. Both become payable at the time of the transfer or assignment as opposed to the signing of the sales agreement. However, no customs duty liability is triggered with respect to the importation of aircraft to The Bahamas.

For a foreign document to be enforced in The Bahamas such documents (inclusive of sale agreements) must be translated into English by a locally certified translation specialist and authenticated by:

• a Bahamian embassy or consulate; or
• apostilled by the relevant Secretary of State or their designate for states that are party to the Hague Convention on Documents. 

Both the original and the translation must be presented at the time of enforcement proceedings.

Legal title is transferred by way of, and effective at, an agreement of the parties involved (whether for value or in the form of a gift). Such transfer of title extends to all items specifically mentioned and sufficiently described in the transfer document. 

A Bahamian Court, in deciding an issue with respect to a Bill of Sale, which provides for a foreign governing law, will recognise and uphold the choice of foreign governing law. No minimum substantive requirements must be satisfied for the Bill of Sale to be recognised. 

See 1.1.2 Sales Governed by English or New York Law.

Filing a Bill of Sale is required as a prerequisite to update the registration of an aircraft or engine registered in The Bahamas. If a person acquires or disposes of a propriety interest in a Bahamian registered aircraft, the holder of the certificate of registration must, prior to the date of the acquisition, send to the Civil Aviation Authority Bahamas (CAAB) a notice by completing Form REG 014 | Change of Aircraft Details, and submitting supporting documents, as outlined in Appendix 1 of the same. The registration will be revoked if the new owner has not submitted an application at the date indicated in the notice.

See 1.1.1 Taxes/Duties Payable upon Execution of the Sales Agreement. The sale of ownership interest relates to a Bahamian registered aircraft, whether located in The Bahamas, international waters or in transit. 

There is no statutory requirement as to the form or type of aircraft lease that can be entered into by individuals and companies in The Bahamas. However, under Bahamian law, a lease is a contract between the parties, and the rules relating to the validity of a contract under Bahamian law are substantially the same as those under English law. 

A foreign law-governed lease will be recognised to validly lease an aircraft registered in The Bahamas. A Bahamian Court, in deciding an issue with respect to a lease that provides for a foreign governing law, will uphold the choice of foreign governing law.

The parties to an aircraft lease governed by Bahamian law are generally at liberty to negotiate the terms which are mutually acceptable to them. However, in The Bahamas, resident individuals and companies for exchange control purposes require consent from the Exchange Control Department of the Central Bank of The Bahamas (the “Central Bank‟) to deal in foreign currencies. The permission is typically granted and entails the purchase of the foreign currency at a premium. Similarly, non-resident individuals or companies for exchange control purposes require Central Bank consent to deal in Bahamian dollars. 

Licensed businesses operating inside The Bahamas are permitted to establish and maintain foreign currency operating accounts of up to USD100,000, without reference to the Central Bank, only to facilitate payments for trade, and must be financed only from revenues generated in foreign currency. The following conditions apply:

• credits or deposits to the accounts would be restricted to foreign currency revenue earned in the normal course of business, except where such proceeds are converted into Bahamian dollars to meet expenses inside The Bahamas;
• utilisation of the accounts would be confined to trade-related payments for goods and services obtained from outside The Bahamas, repayment of foreign currency loans and advances, and conversions into Bahamian dollars;
• no payments would be permitted in foreign currency to companies or persons deemed resident in The Bahamas for exchange control purposes; and
• no cash would be permitted to be withdrawn from the accounts.

Further to 2.1.3 Restrictions Concerning Payments in US Dollars, the current policy of the Exchange Control Department of the Central Bank of The Bahamas is that approval is required to convert sale proceeds into a foreign currency. Exchange control approval is readily and speedily granted in appropriate cases.

Where the aircraft lease involves an aircraft owned by an individual or a company incorporated under the Companies Act 1992 or International Business Companies Act, 2000, the lease will attract a stamp tax of 2.5% of the annual rent reserved.

There are no local statutory requirements with respect to the eligibility or qualification specific to foreign aircraft lessors in The Bahamas. However, pursuant to Section 3 of the Business Licence Act, 2010, no person can carry on a business in or from within The Bahamas without a business licence. “In or from within The Bahamas” is interpreted to include where a foreign company conducts business with a resident of The Bahamas, which includes resident companies. As a result, a lessor which does business with a domestic lessee may be deemed as caught under Section 3 of the Business Licence Act, 2010 and, therefore, required to obtain a business licence.

There are no mandatory terms required under Bahamian law for leases governed by English or New York law.

There are no statutory prohibitions on tax or other withholding gross-up provisions under Bahamian law.

In The Bahamas, spare parts can be made the subject of a lease. Future parts, providing they are identifiable with a sufficient degree of certainty, may be the subject of a lease. 

The concept of title annexation is not cognisable under Bahamian law.

Under Bahamian law, a trust is not a separate legal personality, and the trustee of a trust holds assets on behalf of a trust. The concept of a trust and the role of an owner trustee under a lease is recognised under Bahamian law.

Pursuant to Section 9 of the Civil Aviation Authority Bahamas Act, 2021 (CAABA), the CAAB must maintain records of all documents which affect title to or any legal or beneficial interest in:

• any civil aircraft registered in The Bahamas; and
• any aircraft engine, propeller, rotor, appliance, or spare part intended for use on any aircraft registered in The Bahamas. 

No document affecting title to, or any interest in, such registered aircraft engines, propellers, rotors, appliances, or spare parts shall be valid, except between the parties thereto, unless it is recorded in that system. The validity of any document so recorded, unless otherwise specified by the parties thereto, shall be determined under the laws of The Bahamas.

The interest may be noted and, once noted, shall be notice in rem.

The aircraft registry in The Bahamas is an owner registry. An aircraft may be registered in the name of the owner if the owner is not also the operator.

At present, there is no separate public register of aircraft mortgages and/or leases and/or security interests in The Bahamas. See 2.3.1 Notation of Owner’s/Lessor’s Interests on Aircraft Register. In addition, all security documents may be recorded at the Bahamian Registrar General’s Department pursuant to the provisions of the Registration of Records Act (RRA). Once the document is duly presented for recording, upon its being processed, it will bear an official stamp certifying its recording and a system reference for the same. 

To be clear, the RRA is the only Bahamian statute dealing with securing priorities in this jurisdiction. In particular, Section 10 of the RRA provides that where competing interests are involved, a document has priority from the date it is lodged for recording at the Registry of Records (not from the date of the execution of the document). However, this protection is afforded only in respect of a document that deals with land, goods and effects situated in The Bahamas. 

If the assets provided as security are not situated in The Bahamas, then it will not be possible to secure priorities in this jurisdiction, although we would note that recording the relevant security document may have the benefit of placing a third party on notice of the existence of the same.

There is no requirement for a lease to be registered under The Bahamas’ domestic aircraft registry or for government consent. See 2.3.1 Notation of Owner’s/Lessor’s Interests on Aircraft Register with respect to the ability to register/record a lease at the CAAB.   

There is no required form for an aircraft lease under Bahamian law. With respect to recording at the Registry of Records referenced in 2.3.3 Aircraft/Engine-Specific Registers, the formalities are as follows:

• the original documents bearing original signatures must be submitted for recording;
• the margin on page one of the lease must bear the signature, name, address and occupation of the person responsible for preparing the lease; and
• an affidavit must be sworn by each witness to the execution of the lease before a notary public. If the execution takes place outside of The Bahamas, the affidavit must be apostilled or legalised for use in The Bahamas. If the execution of the lease is not witnessed, then each executing party must swear an affidavit of due execution.

See 1.1.2 Enforceability against Domestic Parties. 

At present, there are no taxes or duties attracted upon the registration of an aircraft lease at the CAAB. With respect to recording an aircraft lease at the Registry of Records, there are recording fees of BSD4.50 per page.

The two most popular countries for alternative registration are the USA and Bermuda.

Original documents are not required, except for the proof of ownership, as copies of the originals are sufficient. The following items are required to enable the aircraft registration process to commence.

• Applicants may request out-of-sequence registration mark after prefix C6- followed by three letters, numbers, or a combination of letters and numbers, free of charge. Notification of availability for the desired registration mark should be received prior to completing forms for registration. 
• Form REG 08 - Application for an ICAO Mode-S Code. On receipt of this form, the Authority will issue an ICAO Mode-S Code for C6 registration. 
• Form REG 01 - Application for Registration of Private aircraft (Director General Discretion). This application must be signed by the aircraft owner if an individual, company director or authorised representative holds a power of attorney. 
• For aircraft owned by:
1. a foreign company, a certificate of incorporation or equivalent document and a list of company directors not older than three months; 
2. a foreign individual, a copy of their passport will be required; and
3. a Bahamian company or an individual, the aircraft must be imported, and customs must be cleared. 
• A Power of Attorney/Evidence of Authority if the application will be signed by a representative on behalf of the aircraft owner. 
• If the aircraft owner chooses to nominate an entity to be the operator, a certificate of incorporation or equivalent document will be required. 
• Fees and charges: the invoice presented in accordance with the current Scheme of Fees shall be paid at the time of application.

The following items are required prior to the issuance of a certificate of registration.

• Proof of Ownership (Bill of Sale). The Authority will check for all transactions, so if there is more than one bill of sale, all records must be sent.  When the aircraft owner is the same as that stated for the deregistration, a bill of sale is not required. 
• De-registration or Certificate of Non-Registration. If the aircraft has been previously registered in another state, the Authority must receive confirmation of that last aircraft owner from the previous State of Registry. This can be in the form of the deregistration or separate notification. If the aircraft is new and has not been previously registered in another state, then a statement of non-registration is required from the State of the Manufacturer. The Authority must receive notification directly from the previous State of Registry via email. 
• Form REG 09 ‒ Application for Registration of a Mortgage, if applicable. 

The registered owner or operator should nominate a representative to be the main point of contact throughout the process. Owners or their nominated representatives are, therefore, advised that if the aircraft does not meet certification standards then the registration exercise cannot be continued. 

The Bahamas does not have income, capital gains or withholding taxes. 

Any lease payments made by the lessee under the aircraft lease incur stamp duty at 1.5% on amounts remitted or transferred outside of The Bahamas. This rate is fixed and cannot be reduced or eliminated. The stamp tax is deducted by the remitting bank and paid to the government.

Under the laws of The Bahamas, the foreign lessor will not be deemed to be resident, domiciled or carrying on any commercial activity in The Bahamas, nor subject to any tax, charge, assessment or imposition as a result only of the entry into, performance or enforcement by the foreign lessor or the lessee of the obligations to be assumed by such parties under the lease, and it is not necessary for entry into or performance or enforcement of the lease, that the foreign lessor be authorised or qualified to carry on business in The Bahamas.

Liabilities may be imposed on foreign lessors. The parties to an aircraft lease governed by Bahamian law are generally at liberty to negotiate the terms which are mutually acceptable to them.

Largely, the liability of foreign lessees is subject to the terms of the lease or security document. However, under the Civil Aviation Act, 2021, liability is statutorily removed from an owner where the aircraft is let under a dry lease exceeding 14 days.

Local attachment proceedings in The Bahamas extend to assets which the lessee is possessed of legal title. 

Subject to the specific terms of a lease, there are no statutory third-party rights that will take priority over a lessor’s rights, save for those that arise from the Bahamas Air Navigation Services Authority Act.

There are no specified mandatory insurance threshold requirements or subsidiary insurance regulations that apply to the operation of aircraft under Bahamian law.

See 2.5.1 Requirement to Engage Domestic Insurance Companies.

See 2.5.1 Requirement to Engage Domestic Insurance Companies.

“Cut-through‟ clauses are not unlawful in The Bahamas.

See 2.5.1 Requirement to Engage Domestic Insurance Companies.

The lessor generally takes possession of the aircraft, however, this right is not absolute. 

Moreover, the lessee may have allowed certain liens to accrue against the aircraft, usually in breach of the lease. Thus, a lien arising from the repair of the aircraft may have accrued. In such circumstances, the lessee will have to pay off those possessory liens before the aircraft is released to it. The only remedy of the lessor is to seek an indemnity against the lessee.

Since most liens arise out of the operation of law and are incapable of registration, a lessor could be caught by surprise.

It is customary for the lease agreement to make provision for the lessor to have a right to repossess the aircraft in the event of default. If the lease agreement is silent on the issue of repossession, the lessor will have to seek the court’s intervention to retake possession of the aircraft. In any event, it may be prudent for the lessor to take possession with the court’s assistance. In this case, the original (or certified copy) of the lease will be required, together with evidence that the lessee is in default of its obligations under the lease and evidence of the service of a notice of default on the lessee.

There are currently no specialised aviation courts in The Bahamas.

Obtaining a grant of summary judgment under Bahamian law requires the exercise of judicial discretion. Such an application must satisfy the Court that there is no reasonable defence to the claim to succeed in such an application. 

A Bahamian Court, in deciding an issue with respect to a lease that provides for a foreign governing law will uphold the choice of foreign governing law, submission to a foreign jurisdiction, and waiver of immunity.

The Bahamas is not a party to the 1971 Convention on the Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters. Additionally, despite its being signed on 2 July 2019 at the Hague, the Convention of 2 July 2019 on the Recognition and Enforcement for Foreign Judgments in Civil and Commercial Matters is currently not in force. However, subject to compliance with the Reciprocal Enforcement of Judgments Act (Chapter 77, Statute Laws of The Bahamas, 2009 Edition), a final and conclusive judgment for a specified sum of a superior court of the UK, or the courts of certain Commonwealth countries outside of the UK, may be registered in the Supreme Court of The Bahamas without the need to litigate the merits of the case in The Bahamas. 

An application to register a judgment must be made to the Supreme Court within 12 months of the date of judgment unless the court, at its discretion, extends the period. Where a judgment is registered, from the date of registration, it has the same force and effect as if it had been a judgment originally obtained in The Bahamas.

Recognising and Implementing Foreign Judgments

If any final and conclusive judgment were rendered by the courts of a country in which there is no statutory enforcement in The Bahamas, the courts of The Bahamas would recognise such foreign judgment as a valid judgment and permit the same to found the basis of a fresh action in The Bahamas and should give a judgment based thereon without there being a re-trial or reconsideration of the merits of the case provided that:

•       such courts had proper jurisdiction under Bahamian conflict of law rules over the parties subject to such judgment;

•       the judgment is for a debt or definite sum of money other than a sum payable in respect of taxes or charges of a like nature or in respect of a fine or penalty;

•       such courts did not contravene the rules of natural justice of The Bahamas;

•       such judgment was not obtained by fraud on the part of the party in whose favour the judgment was given or of the Court pronouncing it;

•       the enforcement of such judgment would not be contrary to the public policy of The Bahamas;

•       the correct procedures under the laws of The Bahamas are duly complied with;

•       such judgment is not inconsistent with a prior Bahamian judgment in respect of the same matter; and

•       enforcement proceedings are instituted within six years after the date of such judgment.

Subject to compliance with the procedural requirements of the Arbitration (Foreign Arbitral Awards) Act 2009, an arbitral award made pursuant to an arbitration agreement in a state other than The Bahamas that is a party to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards is, with leave of the Supreme Court of The Bahamas, enforceable in the same manner as a judgment or order of the Supreme Court to the same effect. An arbitral award is binding for all purposes on the persons between whom it was made, and it may be relied upon by any of those persons by way of defence, set-off, or otherwise in any legal proceedings.

Refusal of Enforcement

Enforcement of an arbitral award may be refused if the person against whom it is invoked proves: 

•       that a party to the arbitration agreement is under some incapacity under the law applicable to that party;

•       that the arbitration agreement was not valid under the law to which the parties subjected it or, failing any indication thereon, under the law of the state where the award was made;

•       that he was not given proper notice of the appointment of the arbitrator or the arbitration proceedings or was otherwise unable to present his case;

•       subject to the second bullet in the list below, that the award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration or contains decisions on matters beyond the scope of the submission to arbitration;

•       that the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties or failing such agreement, with the law of the state where the arbitration took place; and

•       that the award has not yet become binding on the parties, has been set aside or suspended by a competent authority in the state in which or under the law of which the award was made.

Further:

•       enforcement of an arbitral award may also be refused if the award is in respect of a matter that is not capable of settlement by arbitration or if it would become contrary to public policy to enforce the award; and

•       an arbitral award that contains decisions on matters not submitted to arbitration may be enforced to the extent that it contains decisions on matters submitted to arbitration that can be separated from those not so submitted.

The courts of The Bahamas have the power to award judgment in relation to an aircraft lease in terms of the currency stipulated in the aircraft lease, notwithstanding that such currency may not be the currency of The Bahamas. However, it may decline to do so at its discretion, and a Bahamian court might not enforce the benefit of any currency or conversion clause.

There are no statutory limitations or prohibitions in relation to a lessor’s ability to obtain an award of damages as a relief with respect to a claim for default interest (or the compounding thereof) or additional rent following termination of the lease for default, including where the lessee fails to return the aircraft. However, a Bahamian court may not enforce such claim unless it is a genuine pre-estimate of the loss suffered. 

By virtue of the Supreme Court (Civil Procedure Fees) Rules, 2023 court fees are chargeable on every process filed at the Supreme Court to commence proceedings, which are calculated based on the value of the amount claimed, of up to a maximum fee of BSD1,000.

There are no mandatory notice periods for the termination of an aircraft lease.

While the concept of sovereign immunity is cognisable under Bahamian law, as is the case under English law, this concept has not developed into an absolute or universal rule. Additionally, diplomatic immunity may also be claimed in the appropriate circumstances. Both immunities are capable of being waived.

See 2.6.6 Domestic Courts’ Recognition of Foreign Judgments/Awards.

There are no other relevant issues in respect of the enforcement of lessor rights in relation to an aircraft in The Bahamas.

The concepts of assignment and novation are recognised under Bahamian law.

The ability to assign or novate a private agreement is a matter of private law in The Bahamas. Therefore, the requirement of obtaining the lessee’s consent will be subject to the terms of the contract.

See 1.1.2 Enforceability against Domestic Parties.

See 2.3.1 Notation of Owner’s/Lessor’s Interests on Aircraft Register and 2.3.4 Registration of Leases with the Domestic Aircraft Registry.

If the assignment/novation is governed by Bahamian law and/or executed in The Bahamas, taxes/duties will be payable on the value of the consideration of the assignment/novation. 

Under Bahamian law, such a transfer of ownership would, in the ordinary course, be one that is not caught as there is no interference with the status of the noted owner of record. That being said, it is advisable to register the transfer of interest with the CAAB.   

Deregistration is initiated by the owner of record upon submission to the CAAB of a Form REG 03 ‒ Application for Deregistration requesting that the aircraft be deregistered. Evidence of the right to request deregistration should accompany the request (ie, the original registration certificate). The aircraft register will be amended to reflect deregistration, and the importing state notified of the deletion of the aircraft from The Bahamas Register.

Generally, the Bahamian government will not interfere with the valid claim of a mortgagee. In practice, the government will not interfere with the valid title of the mortgagee or on aspects of registration and deregistration. 

For such purposes, it is typically advised that the lessee execute in blank a lease termination document, an instruction letter to the CAA for deregistration of the aircraft and a power of attorney in favour of granting power to complete the documents executed in blank.

The applicant (owner or owner’s representative) must inform the Authority by submitting Form REG 03 - Application for Deregistration. Such an application is typically accompanied by the relevant registration certificate.

The application for deregistration is reviewed primarily as an administrative formality. Once the application is complete, a Certificate of Deregistration is typically issued to the applicant. Deregistration of an aircraft is straightforward and typically can be effected in 24 to 48 hours.

The CAAB does not usually provide advance assurances as to the prompt deregistration of the aircraft.

Such fees are assessed based on a schedule relative to the type of aircraft and available upon request from the Authority.

The CAAB does not recognise a deregistration letter/power of attorney alone.

See 2.8.7 Deregistration Power of Attorney.

See 2.8.7 Deregistration Power of Attorney.

See 2.8.7 Deregistration Power of Attorney.

As The Bahamas registry is an owner registry, no consent is required of the mortgagee or lessor for an owner to deregister an aircraft from The Bahamas. Due to the position of the owner and subject to the provisions of the relevant mortgage document addressing the liberty of a mortgagee to take possession of their security, customarily, possession of a mobile asset due to default is effected by way of judicial intervention. 

In order to effect possession of security by way of judicial intervention, the original mortgage will be required to support the application, and the asset will need to be located in the jurisdiction. For such purposes, the owner, mortgagee or lessor may wish to have their counterparty execute in blank, a power of attorney in their favour granting power to export the aircraft. 

No export certificate or permit is required to export an aircraft from The Bahamas. When an order is obtained from the Court, the same may be relied upon.

There are no restrictions on the import or export of aircraft in The Bahamas, and such import does not incur any customs liability.

There are no significant practical issues in respect of the deregistration of aircraft in The Bahamas that a lessor should be aware of not already addressed above.

Companies may be incorporated under the Companies Act, 1992, or the International Business Companies Act, 2000. These pieces of legislation govern the insolvencies and liquidations of Bahamian Companies. 

The winding-up, liquidation or dissolution proceedings (together “insolvency proceedings”) applicable to companies in The Bahamas are as follows:

• voluntary winding-up;
• compulsory winding-up; and
• receivership. 

None of the insolvency proceedings are designed to provide for protection against creditors while restructuring debts. 

There are no statutory provisions in The Bahamas that mandate cross-border co-operation where there are overseas proceedings. However, Part 69 of the Supreme Court Civil Procedure Rules, 2022 provides the Supreme Court jurisdiction to make orders in relation to a matter pending before a court or tribunal in a place outside the jurisdiction.

See 2.8.7 Deregistration Power of Attorney. Additionally, the Cape Town Convention has not been signed or ratified by The Bahamas.

A lease is not set aside in the ordinary course as a result of insolvency proceedings. The lessor will have all rights available to it under the lease as provided for in the event of a default. As such, there is no statutory requirement that would impede the repossession of the aircraft. 

As a lease does not assign legal title to the aircraft, the aircraft will not be deemed a part of the lessee’s property. Statutory claims and secured creditors will account for priority to the Lessor.

Obtaining a judgment which is unenforceable due to a lack of or no assets is the main risk for a lender when a borrower, a guarantor, or an entity providing security becomes insolvent.

There are no statutory provisions in The Bahamas that impose a moratorium or similar stay with reference to the initiation of insolvency proceedings against regular (eg, non-bank) incorporated entities.

Liquidation is effected by filing a petition seeking the winding up of the lessee. A receivership is effected by filing an originating summons. In both applications, a supporting affidavit is required to set out the particulars of the relationship between the parties and the event(s) of default giving rise to the request. This process can range anywhere from three to 11 months if protracted, and the Court is satisfied that the circumstances warrant such a protraction. All relevant correspondence passing between the parties in relation to any security document being relied on (if any) will be required to support the application.

Unless prohibited by the respective agreement between the parties, the Court will have regard to all of the alleged events of default in determining an application.

Subject to the terms of the relevant lease agreement, usually the lease over the aircraft would be treated as an end with the result of the deposit and reserves standing to the credit to the lessor. Any contingent agreements will also be treated as at an end by operation of law.

The Bahamas has not signed or ratified the Cape Town Convention on International Interests in Mobile Equipment and the related Aircraft Protocol.

See 2.10.1 Conventions in Force.

See 2.10.1 Conventions in Force.

See 2.10.1 Conventions in Force.

The Bahamas is not a party to the 1948 Geneva Convention on the International Recognition of Rights in Aircraft nor the 1933 Rome Convention on the Unification of Certain Rules, relating to the Precautionary Arrest of Aircraft.

The current policy of the Exchange Control Department of the Central Bank of The Bahamas is that a borrower is required to obtain approval to enter into foreign lender financing. Exchange Control approval is readily and speedily granted in appropriate cases to facilitate bona fide commercial transactions. 

Pursuant to Section 4 of the Financial and Corporate Service Providers Act, 2020, no person can offer any financial service, engage in or carry on the business of providing financial services or act as a financial service provider in or from within The Bahamas has obtained a licence under the FCSPA. Under the FCSPA, a financial service provider is a person (ie, non-bank) engaged in money lending in The Bahamas, offering financial services to Bahamian residents. Money lending includes:

• the granting of short-term loans, which may be in the form of payday and cash advances;
• the granting of consumer or mortgage loans; and
• any ancillary activity related to money lending.

See 2.1.3 Restrictions Concerning Payments in US Dollars, 2.1.4 Exchange Controls and 3.1.1 Restrictions on Lending and Borrowing.

Borrowers may grant security to foreign lenders. However, borrowers which are “resident” for exchange control purposes must obtain the prior approval of the Central Bank to grant security for a foreign currency obligation.

Section 10 of the International Business Companies Act, 2000 (IBC Act) provides that subject to any limitations in its Memorandum of Association or Articles of Association, the IBC Act or any other law currently in force in The Bahamas, a company incorporated under the IBC Act has the power, irrespective of corporate benefit, to perform all acts and engage in all activities necessary or conducive to the conduct, promotion or attainment of the objects or purposes of the company. That being said, under the IBC Act, the directors have a duty to act honestly and in good faith in the best interests of the company. It is, therefore, for the directors to determine that the guarantees are in the company′s best interests.

The Companies Act, 1992 (Companies Act) does not provide that companies incorporated thereunder may engage in acts irrespective of corporate benefit. Under the Companies Act, a company may only grant financial assistance to a third party, through a loan or a secured or unsecured guarantee in the circumstances prescribed in Sections 30 and 31 of the Companies Act. The provisions of Section 30, which may be relevant, are where financial assistance is given in the following circumstances:

“(a) in the ordinary course of business, if the lending of money by such a company is not prohibited by any Act in force in The Bahamas;

(b)…..

(c) to a parent company, if the company that intends to make the loan or give a guarantee is a subsidiary company of the parent company;

(d) to a subsidiary company of the parent company”.

However, it is generally felt that while Section 30(a) is not applicable as it includes lending of money as opposed to a guarantee, Sections 30(c) and/or 30(d) are. Please be advised that “parent” is defined in the Companies Act as “a company that owns at least 50% of the outstanding voting shares of each class or series of shares in another company”. 

Pursuant to Section 31 of the Companies Act, a guarantee may be given (where Section 30(c) or 30(d) is applicable) provided that there are no reasonable grounds for believing that:

• the company is unable or would, after giving the guarantee, be unable to pay its liabilities as they become due; or
• the realisable value of the company’s assets, excluding the amount of any financial assistance in the form of a loan and the form of assets pledged or encumbered to secure the guarantee, would, after giving the guarantee, be less than the aggregate of the company’s liabilities and issued share capital of all classes.

A pledge of shares is recognised under Bahamian law.

There are no statutory prohibitions to negative pledges under Bahamian law; however, the enforcement of a negative pledge clause will be subject to consideration as to whether a third party had notice.

There are no material restrictions or requirements imposed on intercreditor arrangements.

The concept of agency and the role of an agent under a syndicated loan is recognised under Bahamian law.

There is no distinction or segregation among methods of debt subordination for the purposes of permissibility and recognition under Bahamian law. 

The transfer or assignment of all or part of an outstanding debt under an English or New York law-governed loan is permissible and would be recognised under Bahamian law.

Under the Money Lending Act, the Supreme Court is empowered to revisit and rewrite agreements between parties in the case of excessive interest. In addition, a Bahamian court will not enforce a penalty unless it is a genuine pre-estimate of the loss suffered and common law usury principles of interest where interest is limited only to the extent that it is unconscionable or grossly extortionate apply.

Aircraft Mortgages or Pledge of Shares Agreements are the typical forms of security in The Bahamas for a domestic aviation finance transaction. The typical forms of recourse for mobile assets are judgment and repossession.

There are no types of security which are prohibited under Bahamian law.

Under Bahamian law, a trust is not a separate legal personality, and the trustee of a trust holds assets on behalf of a trust. The concept of a trust and the role of an owner trustee under a lease is recognised under Bahamian law.

There are no statutory prohibitions under Bahamian law, and the right to assign will be subject to the relevant security document.

There are no statutory prohibitions under Bahamian law, and the right to assign will be subject to the relevant security document.

A local court will uphold the selection of a foreign governing law. 

No formalities/mandatory terms required to perfect the status of a security assignment that is substantively and formally valid as an agreement. See 2.3.1 Notation of Owner’s/Lessor’s Interests on Aircraft Register, 2.3.3 Aircraft/Engine-Specific Registers and 2.3.4 Registration of Leases with the Domestic Aircraft Registry, which apply mutatis mutandis.

Where an English or New York law-governed security assignment was to be taken in respect of an aircraft registered domestically, there is no domestic law security instrument that a financier should take in addition. As the Bahamian Supreme Court is placed with unlimited original jurisdiction in civil cases, it is not necessary for a local mortgage to be taken for a matter to be adjudicated by it. 

Provided the object or factual focus of the complaint and the terms of the security document provide for the jurisdiction of The Bahamas or The Bahamas as the seat for arbitration (or other form of alternate dispute resolution), such a complaint can be commenced in The Bahamas. See 2.6.6 Domestic Courts’ Recognition of Foreign Judgments/Awards with respect to the enforcement of foreign judgments and arbitral awards. Additionally, The Bahamas has not adopted the Cape Town Convention.

See 2.3.1 Notation of Owner’s/Lessor’s Interests on Aircraft Register, 2.3.3 Aircraft/Engine-Specific Registers and 2.3.4 Registration of Leases with the Domestic Aircraft Registry, which apply mutatis mutandis with respect to a security assignment. 

The transfer of security interests over an aircraft and/or engines is recognised under Bahamian law.

Under Bahamian law, the terms provided under a security assignment will only extend to the parties thereto. Therefore, should the identity change in a material way, the security may be in jeopardy unless the change in identity can be sufficiently addressed through extrinsic evidence/documentation, such as a Certificate of Incorporation (Change of Name).

No parallel debt structures are being used domestically, so that the security trustee has an independent right to the secured debt.

See 2.4.2 Effects of Leasing on the Residence of a Foreign Lessor, which applies mutatis mutandis. 

See 2.3.3 Aircraft/Engine-Specific Registers concerning securing priority under Section 10 of the RRA where there are competing interests. Subject to priority in favour of the mortgagee as afforded under Section 10 of the RRA priority of mortgages and charges, it will be determined in accordance with the common law rules governing the priority of mortgages and charges.

Should an aircraft mortgage be registered in the local general registry of records, the security provided will only extend to the property specifically referred to and sufficiently described in the security document.

A charge over the bank account would typically be taken as security. See 2.3.3 Aircraft/Engine-Specific Registers with respect to securing priority under Section 10 of the RRA where there are competing interests.

See 2.4.6 Priority of Third Parties’ Rights. Third parties may take and register liens over an aircraft under Bahamian law. Statutory liens in relation to navigation charges as well as liens for repairer’s costs are aircraft specific and relate specifically to the amount outstanding in respect of each of them. Fleet liens are not recognised under Bahamian law; however, parties enforcing a lien are entitled to detain the aircraft.

There are no average timeframes to discharge a lien or mortgage under Bahamian law.

Currently, there is no active aircraft mortgage register in The Bahamas. See 2.3.2 Registration if the Owner is Different from the Operator with respect to the recording of all documents which affect title to or any legal or beneficial interest in any civil aircraft registered in The Bahamas.

The statutory right of detention has been repealed from Bahamian aviation legislation. Non-consensual preferential liens are recognised over a specific aircraft under Bahamian law.

While there is no dedicated register of interest, a search of the Registry of Records as well as of the aircraft registry is recommended.

There are no relevant difference in enforcing a security assignment as opposed to a loan or a guarantee under Bahamian law.

The rights of enforcement of the security trustee would be subject to the terms of the assignment.

A local court will uphold the selection of a foreign governing law and submission to a foreign jurisdiction under Bahamian law.

See 2.6.6 Domestic Courts’ Recognition of Foreign Judgments/Awards.

Customarily, in The Bahamas, the repossession of a mobile asset due to default is effected by judicial intervention. In order to effect possession of security by way of judicial intervention, the original mortgage will be required to support the application, and the asset will need to be located in the jurisdiction.

The Bahamian Supreme Court has unlimited original jurisdiction in civil matters.

See 2.6.4 Summary Judgment or Other Relief.

See 2.6.7 Judgments in Foreign Currencies.

See 2.6.9 Lessor’s Requirement to Pay Taxes/Fees.

There are no other relevant issues in respect of the enforcement of its rights in relation to an aircraft in The Bahamas that a lender should be aware of not already addressed above.