There is a conversation I have had more times than I can count, and it tends to follow the same path. Somewhere between insurance renewal and crew payroll sits a budget line item called “compliance”, a figure set aside for classification society (Class) surveys, flag state (Flag) inspections, International Safety Management (ISM) audits, among others, and it gets treated the way most cost lines get treated: as something to be minimised.

What I say to an owner or his/her principal representative is this: compliance and corporate governance are part of the value of the yacht, the same way engineering and design are. When treated as part of asset management, compliance and governance reduce operational friction, enhance resale certainty and strengthen governance credibility. The industry is good at explaining legal obligations, but weaker at explaining why they matter commercially. That gap is where value is lost, even on yachts whose owners are investing heavily in other aspects of the asset. This attitude can cost owners more than the compliance itself ever does.

Some owners view governance as a series of administrative tasks, a survey here and a filing there. However, the commercial market may interpret something different in the paperwork which provides a running record of how much uncertainty may exist behind the asset. Governance is one of the clearest signals insurers, lenders, buyers and crew have for assessing the uncertainty behind the asset.

A yacht with a clean survey history, current certification and a safety management system that is actively used moves through its annual cycle with minimal friction. By contrast, a yacht with deferred items, last-minute scrambles before a survey deadline and a dormant safety management plan easily creates avoidable operational drag. That difference may be reflected in insurance premiums, operating expenses and the credibility a yacht has with Class and Flag when warranted extensions or exemptions are requested.

Jo Assael

A robust ownership structure, one with clear beneficial ownership, appropriate transparency for the jurisdiction, and documentation that holds up under scrutiny from insurers, financiers and port State authorities alike, forms part of the asset’s credibility in the same way its Class and Flag record does.

Then there is the moment where everyone focuses – the sale. A prospective buyer’s team does not just inspect the yacht, they dissect its documentation. The documentation tells a story whether anyone intended it to or not: whether it shows interrupted Class, recommendations left open longer than they should have been or a registration history with changes of Flag that were never fully explained. Each of these raises a question in a buyer’s mind that no amount of interior refit will gloss over. The yacht’s condition today is only a part of the picture; buyers pay a premium for certainty, and a clean, consistent compliance record is one of the few things that delivers this certainty.

However, not every part of that picture comes from paperwork. The Maritime Labour Convention, 2006 (MLC, 2006) is often a red flag in plain sight. As an internationally agreed minimum for the living and working conditions of crew that is mandatory on commercial vessels but not on private yachts, I regularly hear some version of “It’s not required, so it’s not done”. That single sentence does more damage than nearly anything else I see in this line of work. An owner that is prepared to not take into consideration the wellbeing of crew in order to save cost is unlikely to draw the line there. Crew take notice of this, and crew retention suffers along with service standards and on-board safety culture. Insurers, managers and buyers read the same signal, which raises a fair question about what else is being sacrificed.

Corporate structures can also fall foul of this attitude and, in my experience, get very little attention once established. Owners and their advisors will spend real time on tax efficiency and asset protection when a structure is established, and understandably so, but the structure itself is rarely revisited as a living piece of the yacht’s governance. A robust ownership structure, one with clear beneficial ownership, appropriate transparency for the jurisdiction, and documentation that holds up under scrutiny from insurers, financiers and port state authorities alike, forms part of the asset’s credibility in the same way its Class and Flag record does. When that structure is opaque or inconsistently maintained, it slows down financing, complicates crew employment arrangements and becomes one more thing a buyer’s lawyer flags during due diligence.

As yachts become subject to increasingly sophisticated financing, insurance assessment, beneficial ownership requirements and transaction due diligence, the market-dictated value has just as much to do with whether compliance is treated as a baseline exercise or intrinsic to the operation of the yacht. Owners and their representatives need to stop pushing governance to the background and start incorporating it as part of the commercial profile of the asset itself. Yachts that hold their value best are not simply those that are well built or well maintained, but those whose governance gives the market fewer reasons to hesitate.

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