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Analysis of the Regulations on Aircraft Mortgage

Regulation 157 states that a mortgage of an aircraft includes both a mortgage and a charge but does not include a floating charge. This would exclude naturally the crystallisation of the floating charge as a fixed charge. This Regulation interprets, unless the context otherwise requires, the “mortgage of an aircraft” as including a mortgage or charge which extends to any store or space parts for the aircraft but does not otherwise include a mortgage created as a floating charge.

Regulation 158 provides for the requirements to register, a Malaysian aircraft mortgage in the Aircraft Register. Once the mortgagee intends to apply for aircraft mortgage registration, it shall be submitted to the Director-General in the specified form and shall be accompanied by a certified true copy of the mortgage. The mortgagee can also include the terms “priority notice”. Sub-regulation (3) provides: “A notice of intention to make an application to enter a contemplated mortgage of an aircraft in the Aircraft Register (hereinafter referred to as “a priority notice”) may also be entered in the Aircraft Register.” Sub-regulation 4 provides that the application to enter a priority notice in the aircraft register shall be made to the Director- General by or on behalf of the prospective mortgagee in the form specified by the Director-General. The following sub-regulations 5-9 are important to note as they deal with applications of mortgage notices and priority interests and their interrelationship in ranking. Sub-regulation 5 states that separate applications have to be made where there are two or more aircrafts that are the subject of one mortgage or where one aircraft is subject to two mortgages in such a case, “separate applications shall be made in respect of each aircraft or of each mortgage, as the case may be.”

Sub-regulation 6 states that where a mortgage is not in Bahasa Malaysia or in English, the application for mortgage registration must be accompanied by the original document accompanied by a certified true translation thereof. Sub-regulation (7) states that upon receipt of an application to enter a mortgage or priority notice in the Aircraft Register, the Director-General shall enter the mortgage or the priority notice by placing the application form there and by noting on it the date and time of the entry. Sub regulation (8) provides: “Applications duly made shall be entered in the Aircraft Register in order of their receipt by the Director-General.” Finally, subregulation (9) states: “The Director-General shall notify the applicant of the date and time of the entry of the mortgage or the priority notice ... and of the register number of the entry and shall send a copy of the notification to the mortgagor and the owner.”

Regulation 159 covers amendments of entries made in the aircraft register: such as in the name, status or address of mortgagee or mortgagor or description of the mortgaged property. Once the appropriate fee is paid, the Director-General shall enter the notification in the Aircraft Register and shall notify the mortgagee, the mortgagor and the owner that he has done so. Regulation 160 underscores the discharge of an aircraft mortgage when the debt owing by mortgagor to mortgagee has been settled. The Director-General shall then enter the form in the Aircraft Register and mark the relevant entry as “Discharged” and notify the mortgagee, mortgagor and the owner that he has done so. The power to rectify an entry in the aircraft register is found in Regulation 161 by order of the High Court being served on the Director-General. Regulation 162 provides that the removal of an aircraft from the aircraft register shall not affect the rights of any mortgagee under any registered mortgage, unless of course this happens before the notice of discharge of the mortgage takes place.

Regulation 163 provides for the discontinued application of the Bills of Sale Act 1950 and application of the registration provisions of the Companies Act 1965. This Regulation provides:

  • (1) The provisions of the Bills of Sale Act 1950 [Act 268] insofar as they relate to bills of sale and other documents given by way of security for the payment of money shall not apply to any mortgage of an aircraft registered in the Aircraft Register.
  • (2) Section 108 of the Companies Act 1965 [Act 1251 , shall continue to have effect on a mortgage of an aircraft or any share in an aircraft created by a company incorporated pursuant to that Act.

It is noteworthy that domestic legislation implementing the treaties has subsequently declared inapplicable the provisions of section 108 of the Companies Act 1965 also. The net effect, today, then is that both these laws are inapplicable to aircraft mortgages.

Section 2C of the Civil Aviation Act 1969 provides that the powers, duties and functions of the Director-General may be delegated in writing conferred on him under the Act.

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