A financing bank will usually secure a loan by obtaining a mortgage for a vessel and seek to protect its interests in the mortgaged vessel by way of insurance. The bank has several options to ensure that its interests are protected by insurance, depending on the conditions under which the owner's insurances are placed, the degree of risk that is acceptable and the costs of taking out various insurance covers.
Before a closing meeting for the sale and purchase of second-hand vessels takes place, the sequence of steps to be taken for payment of the purchase price and delivery of the seller's documents must be agreed, as well as whether the buyer or the seller should take the first step. Identification of the most suitable solution at an early stage will assist in achieving smooth delivery of the vessel.
One consequence of the international aspect of shipping and ship financing is that a number of contracts and related documents are drafted in English. This can often lead to confusion between the parties involved, due to differences in interpretation of the terms and expressions used.
The term 'closing' may be defined as the conclusion of a sale where payment is made, previous mortgages are discharged, new mortgages are secured and the title to the asset is transferred. This update reviews the main reasons why closings go wrong and explains how to ensure that a closing is successfully completed.