The Liberian government has recently amended the Liberian Maritime Law in order to address concerns from ship financiers regarding the situation where a bank which is holding a Liberian mortgage as agent or security trustee becomes insolvent.
The new Insolvency of Foreign Mortgagee Act has come into force and provides a remedy to ensure the preferential rights of beneficiaries of Liberian mortgages in the event of the insolvency of such beneficiaries.
The new legislation has been added as Section 116B to the Liberian Maritime Law (Title 21 of the Liberian Code of Laws of 1956). It provides for full recognition of non-Liberian insolvency proceedings against non-Liberian mortgagees. In particular, the right to transfer, encumber or otherwise dispose of any assets of the mortgagee is now stayed by the commencement of insolvency proceedings against the mortgagee in a non-Liberian jurisdiction.
The new piece of legislation is expected to bring good news for ship financing banks who had previously had to suffer from serious uncertainties regarding the worthiness of Liberian registered first priority mortgages in their favour.
For inquiries related to this Client Alert, please contact:
Alastair MacAulay (firstname.lastname@example.org)