Investing wisely

THE entry of shipping companies into the stock exchange presents some peculiarities which, in the opinion of the legislators, created the necessity for qualitative criteria safeguarding the protection and complete and proper briefing of investors.

In the case of the Athens Stock Exchange (ASE), the authorities took into consideration the fact that Greece is a rather small market, and therefore it is not easy for companies with large a capitalisation - as shipping companies are by nature - to be absorbed. It is also generally accepted that the shipping sector has special futures which are mainly linked to significant fluctuations in the assets and revenues of shipping companies. For these reasons, a law (L2843/2000) was passed in the Greek Parliament in 2000, and amended in 2002 (Law 2992/2002), which sets out the criteria for the listing of oceangoing shipping companies on the ASE.

Incorporation of a special purpose company

The law requires that a special purpose company called 'Company for Investment in Ocean-Going Shipping' (CIOS) should be incorporated
with the exclusive purpose of investing in oceangoing shipping and ships.

For the purpose of the law, oceangoing ships are vessels carrying wet or dry cargoes over 3,000 gross tons. They must either be registered with a Greek shipping registry or at the registry of an EU member or other country in the European Common Financial Area, or should be owned by a shipping company which has a contract with the Greek Seamens Pension Fund (NAT).

The share capital of the CIOS, which should be at least €29,350,000, must be fully paid up at the time of its incorporation and must consist of assets permitted by law. All shares of the CIOS and its subsidiaries are to be registered shares.

Permitted investments

A CIOS is only permitted to invest in the following:

  • 100 per cent of the shares of shipowning companies of oceangoing cargo ships. Companies owning ships under construction may be included up to an amount not exceeding 30 per cent of CIOS assets;
  • cash, bank deposits and liquid securities.

The above investments cannot be less than 75 per cent of the accounting value of assets. The remaining 25 per cent balance can be invested:

  • in 50 per cent of the shares and votes of shipowning companies of oceangoing cargo ships. Companies owning oceangoing cargo ships under construction may be included;
  • in shares of shipmanagement companies representing at least 51 per cent of their share capital and votes;
  • in real estate property or moveable assets which promote the CIOS's own operational requirements or those of its subsidiaries;
  • in swaps and other banking instruments for the purpose of hedging the CIOS's currency and interest rate risks.

Evaluation of the assets of CIOS and loans

The valuation of the assets of the CIOS must be conducted at its own expense. The shares of shipping companies are valued, on the basis of international accounting standards, by two independent qualified auditors, one of which can be an internationally acceptable auditing firm. The ships/newbuildings are valued by two independent, internationally recognised sale and purchase broking companies, which must be included in a list published by the Greek Capital Market Committee in 2001. The other assets of the CIOS are valued by an internationally recognised accounting firm or investment bank on the basis of international accounting standards.

At the time of submission of an application to the appropriate Greek authorities, the CIOS's equity must not be less than thirty per cent of the total accounting value of its assets. However, this limitation does not apply if the loans of the CIOS or its subsidiaries have been valued by an internationally accepted valuation company in a percentage internationally recognised as acceptable for investments.

Special provisions in respect of the ships owned by a CIOS

In addition to the provisions regarding gross tonnage, registry and flag, the following provisions also apply;

Classification society - all ships in the CIOS group must be classed with a classification society recognised by the European Union and certified by the Greek state. They must also maintain the highest classification status with the aforesaid classification society for vessels of the same type.

Insurance - all ships in the CIOS group must be insured throughout their operation with the highest quality insurances by internationally recognised insurance companies and protection and indemnity clubs for hull and machinery, war risks, P&I risks, FD&D, pollution risks. And, if the ship trades within or close to US territorial waters, additional pollution risks insurance (API) must be effected.

The compliance of the CIOS with these insurance requirements must be certified by an internationally