The last few years saw an increase in people in the maritime industry who wish to purchase shipping assets such as ships. There have been sustained improvements in the freight markets, with people looking forward to taking their trade to the next level with proficient ships. Thereby, to meet the requirements of international trade through waters, an increasing number of people are connecting with brokers for ship sale and purchase service.
The sale and purchase of ships have become a fairly popular service; however, the procedure is detailed and complicated. As purchasing a maritime asset is a comprehensive business activity, it must be undertaken with utmost care.
The reason for writing this blog is not to primarily disclaim ourselves but to save potential buyers of pre-owned ships a severe headache. Therefore, here is the complete process of ship sale and purchase as listed below-
- The first step involves the potential buyer and seller connecting with shipbrokers for price negotiation and signing the deal. Before the deal is signed and terms agreed upon, various procedures take place. This involves ship inspections, condition assessment, haggling over price, and agreeing on what will be included or excluded in the sale. A shipbroker provides complete information about the vessel to the buyer, negotiates price, and deals with legal disputes that may arise. They make sure the subjects are lifted validly, which is a matter of contractual interpretation.
- If the parties sign a binding contract, it is evidenced by a clean recap (all subjects to be lifted). The contract’s terms should be drafted as per the standard form of contracts with agreed amendments.
- As per the contract terms, there will be a provision for paying a deposit within a decided number of days. This deposit is paid by the vessel’s buyer to its owner. However, it is more common to hold the deposit in an escrow account now. Most often, lawyers are asked to act as escrow agents who hold the deposit in the escrow account until the vessel is delivered. If there is a legitimate cancellation, the amount is returned to the buyer with accrued interest.
- There can be a long period between the signing of a binding contract and delivery of the vessel, during which the parties are required to complete various formalities. After the formalities are carried out, the balance is released on closing by the escrow agent.
- Numerous documents will be handed over by the ship’s seller to the new owner on closing.
- There are separate arrangements of financiers for sellers and buyers. However, the finance details shall remain confidential to the seller and buyer. The only issue that arises during closing is that there are authorised representatives for all parties who release funds, delete the ship from the seller’s registry and register it under a new registry with a new secured mortgage. This is done to ensure that the lender’s security is not compromised.
- The closing procedure will be evidenced by a Protocol of Delivery and Acceptance to confirm the date and time of delivery.
The above is a straightforward outline of what you can expect in a basic sale and purchase transaction of a ship. If you are intending to enter into such a transaction, Sinotech marine can help. We offer ethical and transparent services for inspection during the ship sale and purchase procedure. With our service, we aim to assist our clients in making an informed decision for their investments into shipping assets. Connect with us to make your purchase beneficial.