Sale and Purchase

The way in which these practical services are dealt with and especially how the various functions are grouped together will differ, however all these different activities will need to be provided either from within the company or by contracting out to independent ship management or crewing companies. Before the company can operate it must have some vessels under its control. The traditional way of procuring ships is to buy them outright. The company will either use its own cash resources to buy the vessel or more likely obtain a loan or mortgage secured on the vessel. The very largest companies may employ their own naval architects and design staff to create the type and size of new buildings they want for the future or this function may be delegated to independent naval architects. More commonly companies may buy vessels built to a pre-existing shipyard design that will be ‘tailored’ to its needs. Other companies may concentrate on building up their fleet by buying second hand tonnage and for this purpose will use the services of a Sale and Purchase Broker. Increasingly shipowning companies are using more ‘innovative’ ways to procure new ships through intermediaries.  This is because either the company does not have sufficient borrowing capability for all the ships it wants to operate, or an intermediary is in a better position to obtain tax benefits from purchasing ships than the operating company. In concept, the approach can be seen as analogous to leasing rather than owning a car. The ship owner may still be heavily involved in the design of the ship and may indeed have the ‘lifetime’ use of the vessel sometimes with an option to purchase after (say) 25 years for a nominal sum. A typical ‘tax driven’ approach is the German “KG” scheme where German individuals or companies who own vessels can secure favourable tax treatment, part of the benefit of which they can pass on through competitive charter rates to the liner company.