Ship Management Agreement (Hong Kong)

A Ship Management Agreement in Hong Kong fixes the respective duties and entitlements of the parties to the arrangement.

Hong Kong’s maritime cluster is exceptional in its concentration and depth. The Hong Kong Shipping Register — administered by the Marine Department under the Merchant Shipping (Registration) Ordinance (Cap. 415) — is one of the world’s ten largest registries, with approximately 2,600 vessels registered as of 2025. Major international ship management companies including V.Group, Anglo-Eastern Univan, Wallem Group, Bernhard Schulte Shipmanagement, and Pacific Basin Shipping operate management functions from Hong Kong, managing fleets ranging from bulk carriers and container vessels to LNG tankers and offshore support vessels.

The standard industry contract for ship management is the BIMCO SHIPMAN (Standard Ship Management Agreement), which is endorsed by the Baltic and International Maritime Council (BIMCO) and provides a balanced framework for the management relationship. SHIPMAN 2009 is the current edition widely used in Hong Kong, though parties frequently negotiate riders (additional clauses) to address specific aspects of the transaction. The BIMCO CREWMAN (Crew Management Agreement) is used where crew management only is delegated without full technical management.

The legal and regulatory framework for ship management in Hong Kong is thorough. The Merchant Shipping (Safety) Ordinance (Cap. 369) and its subsidiary regulations implement the International Safety Management (ISM) Code, requiring every shipping company operating Hong Kong-flagged vessels to establish a Safety Management System (SMS) and obtain a Document of Compliance (DOC) from the Marine Department. The Merchant Shipping (Seafarers) Ordinance (Cap. 478) implements the Maritime Labour Convention (MLC) 2006, regulating seafarers’ employment agreements, wages, working hours, leave entitlements, repatriation, and onboard living conditions for crew on Hong Kong-flagged vessels. The Marine Insurance Ordinance (Cap. 329) governs marine insurance contracts, and the Arbitration Ordinance (Cap. 609) provides the framework for HKIAC arbitration of ship management disputes.

Hong Kong’s tax regime is a decisive competitive advantage for ship management. Profits from the operation of ships in international trade are exempt from Profits Tax under Section 23B of the Inland Revenue Ordinance (Cap. 112) — this exemption applies to both shipowners and ship managers earning management fees in connection with ship operation. Section 14 of Cap. 112 imposes profits tax on persons carrying on a trade or business in Hong Kong, but Section 23B carves out shipping profits from this charge. No goods and services tax (GST) or value-added tax (VAT) applies in Hong Kong. Management fees denominated in USD are the industry standard for international trades, reflecting the global convention of USD as the shipping industry’s currency. The Hong Kong Shipping Register under the Merchant Shipping (Registration) Ordinance (Cap. 415) requires vessels to maintain valid certificates of class and seaworthiness under Section 10 of Cap. 415.

The Hong Kong Shipowners Association (HKSOA) and the Hong Kong Ship Management Association represent the interests of shipowners and ship managers in the territory and engage with the Marine Department, the International Maritime Organization (IMO), and the International Chamber of Shipping (ICS) on regulatory and policy matters affecting the industry. The Nautical Institute Hong Kong Branch and the Institute of Chartered Shipbrokers (ICS) Hong Kong Branch provide professional training and qualifications for maritime professionals.

Forms-legal.com provides a Ship Management Agreement template for Hong Kong that incorporates BIMCO SHIPMAN principles adapted for use under Hong Kong law, with guidance notes explaining the ISM Code, MLC 2006, and Marine Department compliance requirements.

A Ship Management Agreement in Hong Kong is required in seven distinct situations where a shipowner delegates vessel management responsibilities to a professional management company.

Financial Investor Vessel Ownership: When a private equity fund, family office, hedge fund, or individual investor acquires vessels as financial assets but lacks the maritime operational expertise to manage them. Ship management companies in Hong Kong provide full turnkey management services — technical, crew, commercial, and insurance — enabling non-shipping investors to own vessels without maintaining an in-house maritime team. The ship management fee is a known, budgeted cost that simplifies the investment model.

Full Technical Management Outsourcing: When a Hong Kong shipowner has vessels but chooses to outsource all technical management — maintenance, repairs, drydocking, classification society compliance, surveys, and ISM Code administration — to a specialist manager with the engineering expertise and global repair network to manage these functions efficiently. Technical management outsourcing is common for specialised vessel types (LNG carriers, offshore vessels, chemical tankers) where in-house expertise is expensive to maintain.

Crew Management and Manning Agency Services: When a shipowner retains technical and commercial control of the vessel but delegates crew management — recruitment, engagement, payroll, training, travel, and repatriation — to a Hong Kong crew management company or manning agency. Crew managers in Hong Kong source officers and ratings from the Philippines, China, India, Myanmar, and other major seafarer-supplying countries. Seafarers’ Employment Agreements (SEAs) must comply with the MLC 2006 as implemented by the Merchant Shipping (Seafarers) Ordinance (Cap. 478).

ISM Code Compliance Management: When a vessel owner is required to operate the vessel under a Safety Management System (SMS) certified by the Marine Department, but needs a ship management company with an existing Document of Compliance (DOC) to serve as the designated company for ISM Code purposes. The ship manager assumes responsibility for the SMS, internal audits, non-conformity reporting, and emergency response procedures under the Merchant Shipping (Safety) Ordinance (Cap. 369).

Fleet Expansion by Operating Companies: When a Hong Kong shipowner expands its fleet by acquiring additional vessels and delegates management of the new vessels to a third-party manager while it develops its in-house management capacity. The Ship Management Agreement enables the owner to quickly bring new vessels into service without the lead time required to hire and train an in-house team.

Distressed Vessel Management: When a vessel is arrested by the High Court Admiralty jurisdiction under the Admiralty jurisdiction vested in the Court of First Instance of the High Court by the High Court Ordinance (Cap. 4), and a ship manager is appointed to maintain and operate the vessel during the arrest pending judicial sale. The Court of First Instance’s Admiralty list handles maritime arrests efficiently, and Hong Kong’s mature maritime legal market provides court-appointed managers with clear authority.

Newbuilding Supervision and Pre-Delivery Management: When a Hong Kong shipowner has contracted with a shipyard for the construction of a new vessel and appoints a ship management company to supervise the construction, participate in trials and inspections, and take over management of the vessel upon delivery. The ship manager’s newbuilding supervision team (typically consisting of a site superintendent and technical inspectors) is critical to confirming the vessel is delivered in accordance with the specifications.

A Hong Kong Ship Management Agreement must contain the following key elements to be legally complete and commercially effective under Hong Kong law and international maritime standards.

Parties: Full legal names and addresses of the shipowner (or disponent owner if the vessel is chartered) and the ship management company, including Hong Kong Companies Registry registration numbers. The agreement should identify whether the ship manager is acting as agent of the shipowner or as an independent contractor — this distinction has significant liability and insurance implications.

Vessel Details: Name, IMO number, flag state (Hong Kong or foreign), port of registry, classification society (e.g. Lloyd’s Register, DNV, Bureau Veritas, ClassNK), type, gross tonnage, deadweight tonnage, and year and place of build. The vessel’s current trading certifications and class status should be confirmed at the commencement of the agreement.

Scope of Management Services: A precise definition of which management functions are delegated — technical management (maintenance, repairs, drydocking, class compliance), crew management (recruitment, payroll, travel, SEAs under the MLC 2006 and Cap. 478), commercial management (chartering, voyage operations, freight collection), and/or insurance management (H&M, P&I, war risks, loss of hire). BIMCO SHIPMAN 2009 uses a modular structure allowing parties to select the applicable services.

Management Fee and Expense Structure: The fixed monthly management fee in USD or HKD, payable monthly in advance. The structure for reimbursement of operating expenses (passed through at cost), including bunkers, port charges, crew wages, stores, repairs, and insurance premiums. Provisions for the annual operating budget — the ship manager prepares a budget before the start of each calendar year for the shipowner’s approval, and operating expenses are managed within the agreed budget.

ISM Code Compliance: Identification of the party responsible for ISM Code compliance under the Merchant Shipping (Safety) Ordinance (Cap. 369) and ISM Code Chapter 1.1.2. The ship manager typically assumes ISM responsibility for fully managed vessels, obtaining a Document of Compliance (DOC) from the Marine Department and confirming each vessel maintains a valid Safety Management Certificate (SMC). The identity and contact details of the Designated Person Ashore (DPA) must be specified.

Crew Management Provisions: The ship manager’s obligations regarding seafarers under the Merchant Shipping (Seafarers) Ordinance (Cap. 478) and the MLC 2006 — including Seafarers’ Employment Agreements (SEAs), minimum wage obligations under MLC Standard A2.2, working hours compliance under MLC Standard A2.3, leave entitlements, repatriation at the end of engagement, and crew welfare. For Hong Kong-flagged vessels, all SEAs must meet MLC 2006 requirements.

Insurance Obligations: The party responsible for arranging and maintaining hull and machinery (H&M) insurance, Protection and Indemnity (P&I) club entry (typically with an International Group P&I Club), war risks insurance, loss of hire insurance, and crew personal accident insurance. The minimum insured values and P&I entry conditions should be specified. The Marine Insurance Ordinance (Cap. 329) governs the insurance relationship.

Accounts, Reporting and Audit Rights: The ship manager’s obligation to maintain proper accounts for all vessel-related expenditure, provide the shipowner with monthly operating accounts and quarterly management accounts, submit an annual budget before the start of each year, and permit the shipowner to audit the accounts on reasonable notice. Transparency in financial management is a key feature of quality ship management in Hong Kong.

Termination: Notice periods for termination (typically 3–6 months’ written notice), automatic termination events (total loss of the vessel, sale, change of flag), and the handover procedure — including delivery of vessel documents, accounts, and spare parts inventory to the incoming manager. BIMCO SHIPMAN 2009 provides a detailed termination and handover protocol.

Governing Law and Dispute Resolution: Hong Kong law governs the agreement. Disputes are referred to HKIAC arbitration under the HKIAC Administered Arbitration Rules, with the seat in Hong Kong and English as the language of arbitration. Forms-legal.com recommends HKIAC arbitration for all Ship Management Agreements, particularly those involving foreign shipowners or multi-flag fleets, given the enforceability of HKIAC awards under the New York Convention.