If one is in the market to buy a fishing business it would be advisable to keep in mind the following guidelines.

Generally the sale of a business will have its own peculiarities and industry norms depending in which sector one is involved. However, the bare essentials underpinning the transaction are generally the same. Let us explore the main ingredients of these sales and in particular those peculiar to the fishing industry.


A defining feature of any sale of a fishing business is whether it is by way of a sale of the assets in the business as a going concern or the sale of the shares in the business holding entity, or a combination of both.

1.   Sale of Assets

In the fishing industry, other than processing factories and certain support vehicles and equipment, sales relate generally to two main forms of assets viz. fishing vessels and fishing rights. There may be some debate as to whether strictly speaking a fishing right is an asset capable of being owned, or is simply a statutory permission to harvest a marine resource for a specified period of time. Regardless of the category into which it falls, what is clear is that it has a value which is determinable, and it is transferable in terms of Section 21 of the Marine Living Resources Act (“MLRA”) – subject to approval. Therefore for purposes of our summary, a fishing right will be treated as part of the assets of a business.

–       Vessel

With regard to the sale of a vessel, the following issues need to be dealt with in the sale transaction:

  • An inspection of the vessel must be carried out and its condition recorded in a report preferably with pictures and preferably done by a qualified marine surveyor. The report could even be an annexure to the agreement of sale;
  • The Statutory Certificates of the vessel need to be checked including Safety Certificates, Safe Manning document and Hull Certificate with particular reference to when the next survey is due as this will have a cost implication which could affect the purchase price payable;
  • A check should be made of the shipping register to see if the vessel is bonded and by whom. If bonded then the financial institution / mortgagee needs to be involved in the transaction and in particular their requirements for the cancellation of such bond need to be established. If necessary the agreement should make provision for part of the purchase price to be paid directly to the mortgagee to obtain cancellation of the bond – the purchaser’s attorney for instance could attend to the cancellation of the bond simultaneously with registration of the transfer of the vessel;
  • As to whether or not the vessel is currently under arrest a search can be conducted  at the High Court or alternatively a call to the local maritime sheriff should suffice ;
  • It is also important to note that even where a vessel is transferred from one owner to another there are certain claims, called maritime liens, which survive the transfer of the vessel and cling to the ship like a “barnacle”. The most important of these maritime liens is for crew and master’s wages;
  • Warranties regarding the state of the vessel need to be negotiated and included in the agreement otherwise the agreement usually contains a voetstoots clause in favour of the Seller – this voetstoots clause however does not cover situations where the Seller purposely does not disclose a known material defect in the vessel;
  • The bunkers, other consumables and fishing gear on board the vessel need to be included or excluded from the sale depending on what is negotiated, and of course this will affect the purchase price payable;
  • When the agreement is signed it is also advisable to provide for the standard form Bill of Sale to be signed by the Seller and for the seller to hand over  the original Certificate of Registry which will allow the purchaser to attend to the transfer of the vessel as soon as possible;
  • The timing of the transfer of the vessel will all depend on the nature of the sale of business. Currently the key issue on the sale of a fishing business is the approval of the transfer of commercial fishing rights by the Department of Agriculture, Forestry and Fisheries (DAFF) which can take between six months and up to two years. Therefore, if the vessel and fishing rights are to be transferred simultaneously only once the suspensive condition of a Section 21 rights transfer approval is fulfilled, then the transfer of the vessel will be delayed accordingly;
  • If parties wish to have the fishing operations transferred as soon as possible, then an interim arrangement will need to be negotiated and drafted into the contract where for instance the vessel may be chartered and the rights used on the chartered vessel for the benefit of the purchaser pending the official sect 21 approval – the vessel will only be transferred thereafter. Alternatively, the vessel could be transferred already prior to the approval of the transfer of rights provided that if the agreement lapses due to the lack of such approval, then a clearly worded restitution clause needs to provide for the vessel to be re-transferred to the Seller and any purchase consideration already paid (or a part thereof) to be refunded ;
  • When providing for interim arrangements pending Section 21 approval, the provisions of Section 21 need to be taken into account so that the interim position is not in breach of legislation/regulations;
  • Where there is a charter of the vessel as an interim position, and the purchaser pays part of the purchase price to the Seller there is the risk of insolvency proceedings against the Seller which would bring the chartered vessel into the insolvent estate of the Seller with the purchaser only having a concurrent creditor’s claim for the purchase price paid in advance;
  • Therefore, as with a sale of shares agreement it is also advisable for a due diligence to be done by a purchaser even where assets are being transferred;


–       Fishing Rights

The following are issues that need to be dealt with where there is a transfer of fishing rights in any sale of business transaction :


  • A Section 21 approval in terms of the MLRA will have to be a suspensive condition in any sale of business agreement;
  • If there is to be interim usage of such fishing rights this needs to be carefully drafted into the agreement with such usage agreement making provision for the issue of valid Tax Clearance Certificates, Vessel Swop Applications and if necessary future rights applications being submitted pending the approval in terms of Section 21 (which as stated above can take as long as two years);
  • Due to the fact that pending the approval of the transfer of fishing rights, they will remain in the name of the Seller, it is important to conduct a due diligence of the Seller to establish its credit worthiness and in particular whether there are any contracts concluded with third parties in respect of such fishing rights. As with a fishing vessel, fishing rights should have their own particular warranties drafted into the agreement and the provision of certain documentation should also form part of a due diligence clause e.g. copies of latest permits, copies of previous rights applications and performance review submissions.


2.   Sale of Shares


Where a fishing business is sold by means of the sale of shares, this refers to the sale of shares in the asset holding company. The following are some of the issues which need to be dealt with when negotiating such a sale:


  • Due diligence is key for a sale of shares in that the liabilities, outstanding contracts and / or proceedings against the subject company need to be fully investigated prior to the hand over. Therefore a comprehensive due diligence clause is paramount for such an agreement;
  • An accountant’s advice on the financial statements/position of the company is essential;
  • An important issue is also whether the shares on their own are being purchased or whether shares and  loan accounts are being purchased together;
  • The agreement should always list the assets which are to remain in the company and which are valued for purposes of setting the purchase price;
  • Also, the liabilities which will be settled prior to the hand over date and those which will remain thereafter should be listed and clearly identified in the agreement;
  • If there are loans outstanding to a financial institution and they are to remain after the handover then the financial institution needs to be approached and involved in the transaction particularly with regard to the release of security provided by the selling shareholders i.e. suretyships and cessions / pledges of shares;
  • As with the sale of assets, key issues for due diligence purposes with regard to the sale of a fishing business relate particularly to liabilities of the vessel, tax liability of the entity and the ability to obtain a Tax Clearance for the issue of fishing permits as well as any third party contracts with regard to either the vessel  or fishing rights;
  • One also needs to investigate whether the company has any criminal proceedings pending or past which will prejudice the reissue of permits or re-allocation of fishing rights;
  • Due to the fact that Section 21 of the MLRA has now been given a wide interpretation a suspensive condition will also have to be inserted in a sale of shares agreement providing for the approval of the transfer of shares, particularly where there is a change of control in the company or a reduction in its black ownership level;
  • As with the sale of assets, due to the delay in Section 21 approvals an important issue to determine is the timing of the transfer of the operations. If it is required as soon as possible then a carefully worded interim charter / use of assets clause needs to be inserted in the agreement;
  • The agreement must provide for handover of certain statutory documents including company documents, vessel documents and of course fishing rights documentation including a valid Tax Clearance Certificate and other documentation which will allow for the issue of permits and the application for a transfer of rights in terms of Section 21 of the MLRA;


3.   Important Clauses

The following are certain important clauses which should be included in the sale of shares and / or sale of assets agreements generally:

  • A suspensive conditions clause listing those conditions which need to be complied with prior to the full coming into effect of the agreement. Depending on whether there is interim utilisation of rights / charter of vessel arrangements, it is important that in the event of the agreement lapsing due to non-fulfilment of suspensive conditions, there is a very clear restitution clause regarding the retransfer of assets and / or operations to the Seller together with repayment of the purchase price (or part thereof) to the purchaser;
  • A security clause is important as security is often required for warranties/indemnities given by the Seller regarding the state of the business / assets, and also if security is required from the Purchaser where the Purchaser takes immediate possession of assets / use of rights before suspensive conditions have been fully complied with. In the event of the agreement lapsing security is required for repayment of the purchase price and redelivery of assets;
  • With sales of businesses there are employees contracts which need to be taken over and as such Section 197 of the Labour Relations Act needs to be fully complied with;
  • Notices in terms of Section 34 of the Insolvency Act must also be published where there is a sale of business;
  • In terms of the Companies Act the sale of a company’s major assets or business will require a special resolution, and accordingly this is an important requirement for the agreement;
  • In order to have the transaction zero rated for vat pruposes, a going concern clause complying with the provisions of Section 11(1)(e) of the VAT Act must be included;
  • Breach clauses which dovetail with the obligations set out in the agreement are of importance;
  • Confidentiality and Good Faith clauses  protect commercial information and other confidential information disclosed during the implementation of the agreement and in the due diligence phase;
  • The agreement should provide for non-variation clauses where only written amendments signed by the parties are valid;
  • If notices are to be given in terms of the agreement the manner of giving notice should be clearly set out in a domicilium clause;
  • Where there are disputes on various issues arising from the agreement, it is advisable to have a comprehensive arbitration clause with time frames and practical procedures clearly specified, taking into account the nature of the agreement and the potential disputes which could arise. In this regard where an urgent interim interdict/relief is conceivable, this should be allowed in terms of the agreement notwithstanding such arbitration clause e.g. to stop the continued use of a vessel or fishing right;
  • The costs of the drafting and implementation of the agreement should be clearly specified, and agreed to and split between the parties where necessary;
  • As well as comprehensive warranties, indemnities are also required to assist recovery of losses where there are breaches of warranties / conditions / obligations ;
  • Whether or not the rights or obligations of the agreement may be ceded or assigned needs to be specified as well as whether certain terms of the agreement can be divisible or severed from the agreement notwithstanding that certain parts of the agreement will lapse;


In closing, what is important in any sale transaction is for a careful analyses of the goals to be achieved in terms of the agreement and for clauses to be inserted in the agreement which clearly set out the parties intentions and deal with conceivable situations / circumstances which may arise during the implementation of the agreement or even after transfer of assets or shares.  Legal, accounting and tax advice is essential for all parties involved.


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