BIMCO issues new Shipmanagers’ Letter of Undertaking

BIMCO issues new Shipmanagers’ Letter of Undertaking

Overview

A new “Shipmanagers’ Letter of Undertaking” (LoU) is now available on the BIMCO website, together with Explanatory Notes. The LoU sets out shipmanagers’ obligations to lenders financing owners’ purchase of a managed vessel.

The LoU is for use where shipmanagers maintain and operate a vessel but have no financial interest in the ownership. The content has been drafted to provide a basis for discussion, thereby eliminating the need for, and cost of, negotiating every agreement from the beginning. Respective party interests are addressed and a balance has been established without the imposition of lenders’ often onerous obligations, which can adversely impact on shipmanagers’ wider business activities.

In summary, the LoU acknowledges the financing agreement between lenders and owners, and notes the shipmanagers’ role in accordance with the management agreement. A series of undertakings is given by shipmanagers, including restrictions on the extent to which they may take action for the recovery of any claims beyond an agreed level of permitted credit. 

Lenders’ interests in respect of insurance are addressed through a loss payable clause thereby removing the potentially difficult issue of assignment of shipmanagers’ rights. Shipmanagers’ obligations cease on discharge of the loan or termination of the management agreement. Provisions covering governing law and jurisdiction are based on English law, although there is an option for parties to agree an alternative regime.

Grant Hunter
in London,

Coronavirus

Access BIMCO's free COVID-19 related articles and advice.

Read more

Latest piracy reports

Latest industry releasable threats

 
 

ELSEWHERE ON BIMCO

Contracts & Clauses

All of BIMCO's most widely used contracts and clauses as well as advice on managing charters and business partners.

Learn about your cargo

For general guidance and information on cargo-related queries.

More about cargo

BIMCO Publications

Want to buy or download a BIMCO publication? Use the link to get access to the ballast water management guide, the ship master’s security manual and many other publications.

About a new business partner

We can help members check new business partners. We also help to recover millions of USD (undisputed) funds every year.