warns on dangers of diving unprepared into shipping pools
accountant and shipping adviser Moore Stephens has warned shipowners and
operators to check carefully the financial, tax and jurisdictional implications
of participating in shipping pool arrangements.
Shipping partner, Mr
Michael Simms, says, "Shipping pools can be an attractive option,
particularly in difficult markets and during periods of economic uncertainty.
Interest in the concept generally is increasing as a way to leverage money and
maximise economies of scale. But while it might make good commercial sense for
like-minded shipping interests to pool their resources to mutual advantage,
traps may lie in wait for the unwary."
Shipping pools can
take a variety of forms, from incorporated entities or partnerships to joint
ventures and other forms of agreement. The jurisdiction in which the pool is
established is of primary importance, since it will have fundamental tax and
Mr Simms notes,
"Historically, tax-friendly offshore jurisdictions have been a natural fit
for many shipping pools, but the recent increased focus on general tax
transparency and on proper governance and reporting procedures may serve as a
catalyst for change in this regard. The existing structure of shipping pools
established in offshore jurisdictions is unlikely to change, but it would be
reasonable to expect the members of any new pool arrangements to at least
consider the option of establishing the pool in a more traditional jurisdiction.
"A move towards
greater corporatisation of shipping pools, which may grant access to trade
finance solutions, might be a viable option for many owners, provided the terms
of entry and exit are acceptable."
Moore Stephens has
advised on a number of pool agreements during the past 12 months. There are a
range of tax issues to consider when setting up, amending or joining a pool. In
the case of a new pool, it will be necessary to consider the tax position of
each entity within the pool structure. Other important considerations include
the terms of the pool agreement itself, the status of the pool under competition
law, the effectiveness of the marketing strategy, and the way pool accounts are
prepared and submitted, said a release.
Mr Simms concludes,
"Shipping pools have clear advantages for some. But it is a challenging
market, and one subject to increasingly stringent evaluation. It would be a
mistake to just dive in without careful consideration."
News Service - London, April 20