Documentation on delivery
Clause 8 of Saleform 2012 sets out the agreed place for the documentary closing, being the place where the Buyers and Sellers meet to exchange certain documentation on delivery of the Vessel. It might be at the location of physical delivery of the Vessel, but most often the documentary closing takes place at a different location, often at the offices of the Deposit Holder, the Sellers’ Bank, the Sellers/Buyers’ offices or lawyers’ offices, or at a ship registry.
As mentioned in our article regarding payment of the purchase price (see [insert link]), a key provision is in lines 233/234, stating that various documentation, such as bill of sale, evidence that the Vessel is free of encumbrances etc, shall be delivered by the Sellers to the Buyers in exchange for payment of the purchase price. As per the explanatory notes to Saleform 2012, this (read together with the wording of lines 244 – 248 regarding evidence of free of encumbrances) is intended to regulate that payment shall be received first, and thereafter documentation provided.
Clause 8 provides a rather extensive list of closing documentation. The list was substantially extended in the revision of its predecessor, Norwegian Saleform 1993, and included also Buyers’ deliverable documents.
We do not go in detail on the documents listed in Clause 8, but it should be noted that Deletion Certificates and closed CSR (sub clauses (a) (vi) and (vii)) will not be applicable if the Buyers continue under the sale flag as the Sellers’ had prior to delivery of the Vessel.
We still see that parties often prefer to delete the document list from Clause 8 and rather agree a document list in a separate Addendum agreed post-signing of the MoA. In our opinion, this is an unnecessary heritage from the previous Saleform 1993 when the list was short and incomplete. In our opinion, the current wording of Clause 8 provides sufficient coverage of closing documentation, and any additional documents are merely inserted therein. As these documents are key to a successful transfer of title to the Vessel and the purchase price, we do not recommend to leave this outstanding when a MoA is signed.
A part of the list which is a bit vague is (a) (ii) (Sellers) and b (i) (Buyers) covering corporate documentation, where it is only a general reference to “evidence that all necessary corporate, shareholder and other action has been taken”. Exactly what documentation is required will depend on the jurisdiction of the relevant party and its corporate type, but in general we would expect to see (i) Certificate of Registration/Certificate of Incorporation/Certificate of Good Standing and/or Certificate of Incumbency (whatever is applicable to that party), (ii) Articles of Association/By Laws, (iii) Board Resolutions, and (iv) (in some jurisdictions) shareholders resolutions. The wording covers these broadly, but if the parties would like to specify further, and they do not have the necessary information of what is required on signing, they could add “to be agreed and set out in writing between the parties within [ ] days prior to estimated delivery of the Vessel” rather than leaving the whole clause outstanding.
Also technical and class documentation, Vessel’s certificates etc. are just generally described in (e) and (f). We sometimes see that parties would like to list certain certificates or vessel documentation. If this is preferred, and the information is not available on signing, a similar adjustment as described in the paragraph above could be made.
What the list does not cover is various customary Letters of Undertaking (LoUs), except for a confirmation that the Vessel is not blacklisted, which is included in (a) (xii). We sometimes see parties wanting to include several additional LoUs such as “no mortgages, liens and encumbrances”, and “not touched bottom”. The Singapore Ship Sale Form 2011 lists such documents in the document clause. In our opinion there is no need for such LoUs. The warranty that there exist no mortgages, liens etc. is covered by Clause 9 of the MoA and will also normally be repeated in the Bill of Sale. In respect of “not touched bottom”, the Sellers give warranties on condition of the Vessel in Clause 11, and the Buyers also have a right to perform diver inspection under Clause 6. There should not be a need for an additional separate undertaking. If, however, a Seller agrees to give separate undertakings on such issues, it should make sure that the wording goes no further than the terms agreed in the MoA in this respect.
Additional documentation may also be required if the MoA covers a newbuilt vessel where yard guarantees still apply, if the MoA is entered into in respect of a sale/lease back transaction or if there are special considerations for that particular Vessel; but in general, the documentation list set out in Clause 8 should be sufficient for most sale and purchases, with minimal changes to it.
