The ownership and management structure of marine shipping companies

The ownership and commercial/operational management structure of shipping companies appear complicated, both in terms of the players involved, terminology and relationships between the players. How do Ship Owner, Commercial Operator, Technical Manager, Third Party Operator and other players relate to each other and what are concrete roles of each company? What is the difference between the Registered Owner and Beneficial Owner? Is Technical Manager the same as ISM Manager?

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While the roles of a Technical Manager and ISM Manager may overlap, they are not necessarily the same.

Technical Manager: The technical manager oversees the technical aspects of a vessel, including its maintenance, repairs, and compliance with regulatory requirements. They ensure the ship is seaworthy, safe, and environmentally compliant. Technical managers can be part of the ship owner’s organization or third-party companies contracted by the ship owner.

ISM (International Safety Management) Manager: The ISM Manager is responsible for ensuring the ship’s compliance with the International Safety Management (ISM) Code, a mandatory international framework for the safe management and operation of ships. The ISM Manager is often part of the technical management team and can be an employee of the ship owner or a third-party company.

Regarding Registered Owner and Beneficial Owner:

  • Registered Owner: This is the entity or individual that is listed as the owner of the ship in the ship registry of a particular country. The registered owner is responsible for the vessel’s legal and regulatory compliance and is often the entity that holds the ship’s title.

  • Beneficial Owner: The beneficial owner is the entity or individual that ultimately benefits from the ownership and operation of the ship. They may not be listed as the registered owner but control the ship through a chain of ownership or financial arrangements. The beneficial owner may be hidden behind a holding company or other legal structures to protect their identity or for tax purposes.

Hope this helps!

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Beneficial owner - is the ultimate owner of the ship.
Beneficial owner typically holds ship through different legal entities - in order to manage their liability and risk. Given high risk nature of business - owners do not want to link the ships under a single company. Registered owner is a company that holds ships. But the name of the registered company may not mean much.
Ship owners can manage the commercial and technical operations of the ship in house or outsource it. Sometimes owners choose to outsource especially technical operations - because companies can pool many ships to achieve economies of scale in operations. While outsources technical management is popular - many ship owners actually choose to manage their ships in house.
So, technical manager can be a subsidiary of owner or a separate company that manages the technical operations including crewing, maintenance, etc. ISM is one aspect of technical management, can be part of technical management or separate.
Commercial manager is typically responsible for commercial operations of the ship - finding cargo, dealing with cargo owners - ensuring ship is fully utilized.

Building on the previous explanations, I’d like to provide some more insight on the roles of Commercial Operator, Ship Owner, and Third Party Operator:

Ship Owner: The ship owner is the individual or entity that owns the ship, whether they are the registered owner or the beneficial owner. They are responsible for the overall management of the ship and can choose to handle operations in-house or contract them out to other companies.

Commercial Operator: A commercial operator is responsible for the commercial aspects of running the ship, such as finding cargo, negotiating contracts, and managing the financial aspects of the operation. They work closely with the ship owner and technical manager to ensure the ship operates efficiently and profitably. Commercial operators can be part of the ship owner’s organization or can be contracted by the ship owner as a third-party company.

Third Party Operator: This term can be used to refer to any external company that is contracted by the ship owner to handle certain aspects of the ship’s management, such as technical management, commercial operations, or crewing. Third-party operators can provide specialized expertise and economies of scale, allowing ship owners to focus on their core business or reduce operational costs.

To summarize, the relationships between these various players in the shipping industry can indeed be complex. However, understanding the roles of each player and how they relate to one another can help clarify the overall management structure of shipping companies.

Roles of,

Technical Manager
Under a management contract, a manager may be required to provide technical management services for a vessel. These services could include:

  • Ensuring the vessel complies with Flag State requirements
  • Ensuring compliance with the ISM Code
  • Ensuring compliance with the ISPS Code
  • Providing competent personnel for maintenance and efficiency
  • Arranging and supervising dry dockings, repairs, and maintenance
  • Ensuring compliance with classification society requirements
  • Arranging for necessary stores, spares, and lubricating oil
  • Appointing surveyors and technical consultants as needed
  • Arranging bunker sampling and testing
  • Providing other related services

Crew Manager
Crew management services may also be required, including:

  • Crew recruitment
  • Arranging crew deployment
  • Crew training and career development
  • Payroll
  • Insurance and employee benefits

Commercial Manager
Some ship owners delegate commercial management functions, such as securing vessel employment and obtaining marine insurance, to professional managers. This is especially true for banks that foreclose on ship mortgages and repossess vessels, as they may choose to operate the vessel while waiting for a better resale market. Ship managers in various locations around the world provide these services to ship owners worldwide to help them operate their fleets more efficiently.