In the current economic climate, companies have been looking for partners with whom they can enter into joint ventures for a ship or a fleet of ships. There are many reasons for doing so including sharing of risk, access to capital or financing opportunities, pooling of expertise or providing opportunities to new entrants to the shipping markets. Much like a marriage, there are many issues to be discussed in the formation and operation of a joint venture and some of these issues are discussed in the attached presentation.

1. Vessel Ownership and Joint Ventures
Owen McHugh
22 February 2012
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2. Joint Venture
Joint Venture  Why set up a Joint Venture?
 Sharing of Risk
 Access to Financing – Equity and Debt
 Pooling of Expertise and Assets
 Access to Markets and Employment Opportunities
But…
There is always a sacrifice of control and flexibility
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3. Joint Venture
Joint Venture  Joint Venture Structures
Structure
Structure  A Company
 A Partnership (or limited partnership)
 A Contractual Co-operation Agreement
 Considerations
- type of venture
- liability
- legal protection and control
- finance
- publicity
- accounting
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4. Inputs and
Inputs and
Outputs
Outputs Assets Equity Debt
Shareholders
JV Co Contributions
Interest and Shareholder Dividends
Loan Repayments Management Fees
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5. Control and
Control and  Board Level
Management of
Management of - equal number of directors?
JV Co
JV Co
- what level of authority is delegated to the
board?
- directors’ duties
 Shareholder Level
 Reserved Matters
- what are these?
- how are they dealt with?
 Appointment of Related Parties by JV Co
- pre-approval?
- termination of appointment
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6. Deadlock
Deadlock  Definition of “deadlock”
- failure to agree on a matter requiring
unanimous agreement
- quorum not present
- non-attendance at meetings
 Dispute resolution procedures
- Chairman’s casting vote
- Outsider’s swing vote
- mediation
- Escalation
 Ifdeadlock persists…termination / exit
strategy
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7. Termination
Termination  How does this typically rise?
- failure to resolve deadlock
- default
- consensual termination
- expiry of purpose / completion of project
- sale by a party of its interest
 Treatment of assets
- buyout of other party’s shares
- division between the parties?
- market sale to third parties with right of first /
last refusal
- financing considerations?
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8. Documentation
Documentation  Letter of Intent / Memorandum of Understanding
 Shareholders’ Agreement
 Articles of Association
 Asset transfer agreements – MOAs, Shipbuilding
Contract Novations
 Share transfer agreements
 Management Agreements – technical, commercial,
accounting
 Guarantees / Counter Indemnities
 FinanceDocumentation – shareholder loan
agreements and bank facilities
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9. Clyde & Co LLP is a limited
liability partnership
registered in England and
Wales.
Authorised and regulated
by the Solicitors Regulation
Authority.
© Clyde & Co LLP 2011
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