Frontline plc F-4, filed Sep 14, 2022
Frontline plc (FRO)
F-4
2022-09-14
View Original
Added on
October 24, 2026
As filed with the U.S. Securities and Exchange Commission on September 14, 2022.
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________
Form F-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
____________________________________
Frontline Ltd.
(Exact name of registrant as specified in its charter)
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Bermuda
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4412
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N/A
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(State or other jurisdiction of
incorporation or organization)
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S. Employer
Identification Number)
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Frontline Ltd.
Par-la-Ville Place
14 Par-la-Ville Road
Hamilton, HM 08
Bermuda
+1 (441) 295 6935
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Seward & Kissel LLP
One Battery Park Plaza
New York, NY 10004
212-574-1200
(Name, address, including zip code, and telephone number, including area code, of agent for service)
____________________________________
Copies to:
Keith Billotti, Esq.
Seward & Kissel LLP
One Battery Park Plaza
New York, NY 10004
(212) 574-1200 (telephone number)
(212) 480-8421 (facsimile number)
____________________________________
Approximate date of commencement of proposed sale of the securities to the public
________________________________________________________________________________________________
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities
Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this
transaction: Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer) ☐
Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer) ☐
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities
Act of 1933.
Emerging growth company ☐
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its
Accounting Standards Codification after April 5, 2012.
____________________________________
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its
effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the
registration statement shall become effective on such date as the U.S. Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
EXPLANATORY NOTE
For purposes of clarity, in some places in this Proxy Statement/Prospectus (defined below), we refer to our company prior to
the Redomiciliation (defined below) as “Frontline (Bermuda)” and the re-domiciled Cyprus entity as “Frontline (Cyprus).” For more information, please see the section entitled “The Redomiciliation.”
Following the completion of the Redomiciliation, Frontline (Cyprus) plans to file a post-effective amendment to this
registration statement pursuant to Rule 414(d) under the Securities Act of 1933, as amended (the “Securities Act”), as the successor to Frontline (Bermuda), to expressly adopt this Proxy Statement/Prospectus, as
it is modified by such post-effective amendment, as its own proxy statement/prospectus for all purposes of the Securities Act and the Securities Exchange Act of 1934 (the “Exchange Act”).
The information in this preliminary Proxy Statement/Prospectus is not complete and may be changed. The
registrant may not sell the securities described herein until the registration statement filed with the Securities and Exchange Commission is declared effective. This preliminary Proxy Statement/Prospectus is not an offer to sell these securities and
it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
PRELIMINARY PROXY STATEMENT/PROSPECTUS - SUBJECT TO COMPLETION - DATED
September 14, 2022
September 14, 2022
PROXY STATEMENT FOR SPECIAL GENERAL MEETING OF SHAREHOLDERS OF
FRONTLINE LTD.
FRONTLINE LTD.
PROSPECTUS FOR
222,622,889 ORDINARY SHARES
222,622,889 ORDINARY SHARES
Dear Frontline Ltd. Shareholders:
You are cordially invited to attend the special general meeting of shareholders (the “Special General Meeting”) of
Frontline Ltd., which we refer to as “the Company,” “we,” “us,” “our” or “Frontline,” on , 2022, at , at . For purposes of clarity, in some places in this proxy statement/prospectus (“Proxy Statement/Prospectus”), we
refer to our company prior to the Redomiciliation (as defined below) as “Frontline (Bermuda)” and the re-domiciled Cyprus entity as “Frontline (Cyprus).”
At the Special General Meeting, our shareholders will be asked to consider and vote upon:
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a proposal (the “Redomiciliation Proposal”) to:
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| (a) |
re-domicile Frontline by way of discontinuation out of Bermuda and continue as a public company limited by shares incorporated in the Republic of Cyprus (“Cyprus”) under the
name of Frontline Plc (the “Redomiciliation”);
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| (b) |
approve an amendment to the Company’s current Amended and Restated Bye-Laws, to include a provision allowing for the Company’s redomiciliation out of Bermuda as required under
the laws of Cyprus, attached to this Proxy Statement/Prospectus as Annex A (the “Discontinuation Amendment”);
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| (c) |
adopt, upon the Redomiciliation taking effect by
issuance of the temporary certificate of continuation in Cyprus (the “Temporary Redomiciliation Certificate”), the Amended and Restated Memorandum and Articles of Association governed by the laws of Cyprus, attached to this Proxy
Statement/Prospectus as Annex B (the “Frontline Cyprus Amended and Restated Charter”), in place of Frontline’s current Memorandum of Association and Frontline’s current Amended and Restated Bye-Laws including as amended by the
proposed Discontinuation Amendment (the “Current Constitution”) and which will remove or amend those provisions of the Current Constitution that terminate or otherwise cease to be applicable as a result of the Redomiciliation;
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| (d) |
approve Frontline (Cyprus)’s appointment of as the authorized representative in Cyprus to effect the Redomiciliation and sign all necessary statutory
declarations;
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approve Frontline (Cyprus)’s registered address in Cyprus and Frontline (Cyprus)’s directors, secretary and auditors, each effective upon the Redomiciliation taking effect, as
described further in the accompanying Proxy Statement/Prospectus; and
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| 2. |
a proposal (the “Adjournment Proposal”) to adjourn the Special General Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if,
based upon the tabulated vote at the time of the Special General Meeting, there are not sufficient votes to approve one or more of the proposals presented at the Special General Meeting.
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Each of these proposals is more fully described in the accompanying Proxy Statement/Prospectus.
Reference is made to the definitive combination agreement and plan of merger (the “Combination Agreement”)
that Frontline entered into on July 10, 2022, with Euronav NV (“Euronav”). On the terms and subject to the conditions set forth in the Combination Agreement, Frontline has agreed after the completion of the Redomiciliation to make a voluntary
conditional exchange offer (the “Tender Offer”) for all outstanding shares of Euronav at an exchange ratio of 1.45 Frontline shares for 1.0 Euronav share (the “Consideration Shares”), with the intention that Frontline and Euronav shall initiate a
process whereby Euronav merges into Frontline (the “Merger”) with Frontline as the surviving entity (the “Combined Group”). The Redomiciliation is not conditioned upon the successful completion of the Tender Offer or the Merger or the other transactions contemplated by the Combination Agreement (collectively, the “Combination Transactions”). Our board of directors (“Board of Directors”) has unanimously approved the Redomiciliation.
The completion of the Redomiciliation (the “Redomiciliation Completion”) shall be conditional upon the following conditions
being fulfilled or waived pursuant to the terms of the Combination Agreement (the “Redomiciliation Conditions”) and applicable law: (a) Frontline becoming a tax resident in Cyprus; (b) the approval of the Redomiciliation Proposal by the Special
General Meeting having been received; (c) the issuance of the Temporary Redomiciliation Certificate from the Registrar of Companies and Official Receiver of the Republic of Cyprus (the “Cyprus Companies’ Registry”); and (d) the fulfilment of all
requirements under applicable law to ensure continued listing of Frontline on the New York Stock Exchange (the “NYSE”) and Oslo Stock Exchange (“OSE”), including but not limited to: (i) the registration statement on Form F-4, of which this Proxy
Statement/Prospectus forms a part, becoming effective under the Securities Act; and (ii) the Frontline (Cyprus) shares being approved for listing on NYSE, subject to the Redomiciliation Completion.
Our ordinary shares are currently listed on the NYSE and OSE, under
the symbol “FRO.” We will seek, and expect to receive, approval from NYSE and the OSE to trade the common stock of Frontline (Cyprus) under the same symbol after the Redomiciliation. We do not expect the Redomiciliation to have a material impact on
our results of operations or financial condition and we will continue to report the consolidated financial results in U.S. Dollars in accordance with U.S. GAAP. There will be some differences in your shareholder rights given the inherent
differences in the laws between the Bermuda and Cyprus. A detailed chart outlining those differences is included in the accompanying Prospectus/Proxy Statement in the section titled “Comparison of Bermuda and Cyprus Corporate Law.”
We are providing this Proxy Statement/Prospectus and accompanying proxy card to our shareholders in connection with the
solicitation of proxies to be voted at the Special General Meeting and at any adjournments or postponements of the Special General Meeting. Whether or not you plan to attend the Special General Meeting, we urge you to carefully read this Proxy
Statement/Prospectus (and any documents incorporated into this Proxy Statement/Prospectus by reference). Please pay particular attention to the section entitled “Risk Factors.”
Our Board of Directors unanimously recommends that our shareholders vote FOR all of the proposals
presented to our shareholders. When you consider the Board of Directors’ recommendation of these proposals, you should keep in mind that certain of our directors, executive officers and major shareholders may have interests in the Redomiciliation
that may conflict with your interests as a shareholder. See the section entitled “The Redomiciliation – Interests of Certain of Frontline’s Directors, Executive Officers and Major Shareholders in the Redomiciliation.”
Approval of the Redomiciliation Proposal and Adjournment Proposal requires the affirmative vote of more than 50% of the
votes cast by the holders of the ordinary shares of Frontline as of the record date present, in person or by proxy, and voting at the Special General Meeting.
Your vote is very important. If you are a holder of record, you must submit the enclosed proxy card.
Please vote as soon as possible to ensure that your vote is counted, regardless of whether you expect to attend the Special General Meeting in person. Please complete, sign, date and return the enclosed proxy card in the postage-paid envelope
provided.
If you hold your shares in “street name” through a bank, broker or other nominee, you will need to
follow the instructions provided to you by your bank, broker or other nominee to ensure that your shares are represented and voted at the Special General Meeting.
If you sign and return your proxy card without indicating how you wish to vote, your proxy will be voted in favor of each
of the proposals presented at the Special General Meeting. If you fail to return your proxy card or fail to instruct your bank, broker or other nominee how to vote, and do not attend the Special General Meeting in person, the effect will be that your
shares will not be counted for purposes of determining whether a quorum is present at the Special General Meeting and, if a quorum is present, will have no effect on the outcome of any vote on the proposals. If you are a shareholder of record and you
attend the Special General Meeting and wish to vote in person, you may withdraw your proxy and vote in person.
On behalf of our Board of Directors, I thank you for your support and look forward to the successful completion of the
Redomiciliation.
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Sincerely,
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, 2022
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Ola Lorentzon
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Chairman of the Board
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This Proxy Statement/Prospectus is dated , 2022 and is first being mailed to shareholders of
Frontline on or about that date.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES REGULATORY AGENCY HAS APPROVED OR DISAPPROVED THE TRANSACTIONS
DESCRIBED IN THIS PROXY STATEMENT/PROSPECTUS OR ANY OF THE SECURITIES TO BE ISSUED IN THE TENDER OFFER OR THE MERGER, PASSED UPON THE MERITS OR FAIRNESS OF THE TENDER OFFER OR THE MERGER OR RELATED TRANSACTIONS OR PASSED UPON THE ADEQUACY OR ACCURACY
OF THE DISCLOSURE IN THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY CONSTITUTES A CRIMINAL OFFENSE.
FRONTLINE LTD.
Par-la-Ville Place
14 Par-la-Ville Road
Hamilton, HM 08
Bermuda
NOTICE OF SPECIAL GENERAL MEETING OF SHAREHOLDERS
OF FRONTLINE LTD.
To Be Held On , 2022
OF FRONTLINE LTD.
To Be Held On , 2022
To the Shareholders of Frontline Ltd.:
NOTICE IS HEREBY GIVEN that a special general meeting of shareholders (the “Special General Meeting”) of Frontline Ltd., a
company incorporated under the laws of Bermuda (“Frontline” or the “Company”), will be held on , 2022, at , at unless adjourned or postponed to a later date. You are cordially invited to attend the Special General
Meeting for the following purposes:
| 1. |
The Redomiciliation Proposal - to consider and vote upon a proposal to:
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| (a) |
re-domicile Frontline by way of discontinuation out of Bermuda and continue as a public company limited by shares incorporated in the Republic of Cyprus (“Cyprus”) under the
name of Frontline Plc (the “Redomiciliation”);
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| (b) |
approve an amendment to the Company’s current Amended and Restated Bye-Laws, to include a provision allowing for the Company’s redomiciliation out of Bermuda as required under
the laws of Cyprus, attached to this Proxy Statement/Prospectus as Annex A (the “Discontinuation Amendment”);
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| (c) |
adopt, upon the Redomiciliation taking effect by issuance of the Temporary Redomiciliation Certificate, the Amended and
Restated Memorandum and Articles of Association governed by the laws of Cyprus, attached to this proxy statement/prospectus (the “Proxy Statement/Prospectus”) as Annex B (the “Frontline Cyprus Amended and Restated Charter”), in
place of Frontline’s current Memorandum of Association and Frontline’s current Amended and Restated Bye-Laws including as amended by the proposed Discontinuation Amendment (the “Current Constitution”) which will remove or amend those
provisions of the Current Constitution that terminate or otherwise cease to be applicable as a result of the Redomiciliation;
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| (d) |
approve Frontline (Cyprus)’s appointment of as the authorized representative in Cyprus to effect the Redomiciliation and sign all necessary statutory
declarations;
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| (e) |
approve Frontline (Cyprus)’s registered address in Cyprus and Frontline (Cyprus)’s directors, secretary and auditors, each effective upon the Redomiciliation taking effect, as
described further in the accompanying Proxy Statement/Prospectus; and
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2. The Adjournment Proposal - to consider and vote upon a proposal to adjourn the Special General Meeting to a later date
or dates, if necessary, to permit further solicitation and vote of proxies if, based upon the tabulated vote at the time of the Special General Meeting, there are not sufficient votes to approve one or more proposals presented at the special meeting
(the “Adjournment Proposal”).
Only holders of record of our ordinary shares at the close of business on , 2022 are entitled to notice of the
Special General Meeting and to vote at the Special General Meeting and any adjournments or postponements of the Special General Meeting. A complete list of our shareholders of record entitled to vote at the Special General Meeting will be available
for ten days before the Special General Meeting at our principal executive offices for inspection by shareholders during ordinary business hours for any purpose germane to the Special General Meeting.
Your attention is directed to the Proxy Statement/Prospectus accompanying this notice (including the annexes thereto) for a
more complete description of the proposed Redomiciliation and related transactions and each of our proposals. We encourage you to read the entire Proxy Statement/Prospectus carefully. You should also carefully
consider the risk factors described in the section entitled “Risk Factors.” If you have any questions or need assistance voting your shares, please call +1 (441) 295-6935. This notice of Special General Meeting is and the Proxy
Statement/Prospectus relating to the Redomiciliation will be available at .
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By Order of the Board of Directors,
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, 2022
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Ola Lorentzon
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Chairman of the Board
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TABLE OF CONTENTS
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FORWARD-LOOKING STATEMENTS
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QUESTIONS AND ANSWERS
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v
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SUMMARY
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1
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RISK FACTORS
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7
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SPECIAL GENERAL MEETING OF FRONTLINE SHAREHOLDERS
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40
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THE REDOMICILIATION
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43
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PROPOSAL NO. 1 - THE REDOMICILIATION PROPOSAL
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48
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PROPOSAL NO. 2 - THE ADJOURNMENT PROPOSAL
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49
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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50
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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51
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BUSINESS
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52
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MANAGEMENT
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70
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RELATED PARTY TRANSACTIONS
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74
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PRINCIPAL SHAREHOLDERS
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75
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DESCRIPTION OF SHARE CAPITAL
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76
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TAXATION
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84
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ACCOUNTING TREATMENT OF THE REDOMICILIATION
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91
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LEGAL MATTERS
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91
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EXPERTS
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91
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WHERE YOU CAN FIND MORE INFORMATION
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91
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INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
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92
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ANNEX A: DISCONTINUATION AMENDMENT TO AMENDED AND RESTATED BYE-LAWS
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A-1
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ANNEX B: PROPOSED FRONTLINE CYPRUS AMENDED AND RESTATED CHARTER
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B-1
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ANNEX C: PROXY CARD
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C-1
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This Proxy Statement/Prospectus is part of a registration statement on Form F-4, which incorporates important business and financial
information about Frontline Ltd. and its subsidiaries from documents filed with the U.S. Securities and Exchange Commission (the “SEC”) that have not been included in or delivered with this Proxy Statement/Prospectus. This information is available at
the website the SEC maintains at www.sec.gov, as well as from other sources. See the section of this Proxy Statement/Prospectus entitled “Where You Can Find More Information.” You also may request a free copy of these documents from us upon written
or oral request to Frontline Ltd., Par-la-Ville Place, 14 Par-la-Ville Road, Hamilton, HM Bermuda. To ensure timely delivery, you must request this information no later than five business days before the effectiveness
of the Redomiciliation, which we currently anticipate will become effective on or about , but the actual date may be extended.
FORWARD-LOOKING STATEMENTS
Matters discussed in this Proxy Statement/Prospectus, any prospectus supplement, and the documents incorporated by reference herein and
therein may constitute forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides safe harbor protections for forward-looking statements, which include statements concerning plans, objectives, goals, strategies, future
events or performance, and underlying assumptions and other statements, which are other than statements of historical facts.
We desire to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are including this
cautionary statement in connection with this safe harbor legislation. this Proxy Statement/Prospectus and any other written or oral statements made by us or on our behalf may include forward-looking statements, which reflect our current views with
respect to future events and financial performance. The words “believe,” “anticipate,” “intend,” “estimate,” “forecast,” “project,” “plan,” “potential,” “may,” “should,” “expect” and similar expressions identify forward-looking statements.
The forward-looking statements in this Proxy Statement/Prospectus, any prospectus supplement, and the documents incorporated by reference
herein and therein are based upon various assumptions, including, without limitation, management’s examination of historical operating trends, data contained in our records and data available from third parties. Although we believe that these
assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control, we cannot assure you that we will achieve
or accomplish these expectations, beliefs or projections.
In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this Proxy Statement/Prospectus, any
prospectus supplement, and the documents incorporated by reference herein and therein might not occur, and our actual results could differ materially from those anticipated in these forward-looking statements.
We undertake no obligation to publicly update or revise any forward-looking statement contained in this Proxy Statement/Prospectus, any
prospectus supplement, and the documents incorporated by reference herein and therein, whether as a result of new information, future events or otherwise, except as required by law.
In addition to these important factors and matters discussed elsewhere herein, and in the documents incorporated by reference herein,
important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include:
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our realization of the expected benefits of the Redomiciliation;
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the ability of the Company and Euronav to successfully complete the proposed combination on anticipated terms and timing, including, among other things, obtaining required shareholder and
regulatory approvals, unforeseen liabilities, future capital expenditures, revenues, expenses, earnings, synergies, economic performance, indebtedness, financial condition, losses, future prospects, business and management strategies,
expansion and growth of the Combined Group’s operations and other important conditions to the completion of the acquisition, risks relating to the integration of operations of the Company and Euronav and the possibility that the anticipated
synergies and other benefits of the proposed combination will not be realized or will not be realized within the expected timeframe, the outcome of any legal proceedings related to the proposed combination, the failure of counterparties to
fully perform their contracts with the Company or Euronav;
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the strength of world economies;
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fluctuations in currencies and interest rates;
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general market conditions, including fluctuations in charter hire rates and vessel values;
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changes in the supply and demand for vessels comparable to ours and the number of newbuildings under construction;
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the highly cyclical nature of the industry that we operate in;
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the loss of a large customer or significant business relationship;
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changes in worldwide oil production and consumption and storage;
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changes in the Company’s operating expenses, including bunker prices, drydocking, crew costs and insurance costs;
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planned, pending or recent acquisitions, business strategy and expected capital spending or operating expenses, including drydocking, surveys and upgrades;
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risks associated with any future vessel construction;
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our expectations regarding the availability of vessel acquisitions and our ability to complete acquisition transactions planned;
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our ability to successfully compete for and enter into new time charters or other employment arrangements for our existing vessels after our current time charters expire and our ability to
earn income in the spot market;
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availability of financing and refinancing, our ability to obtain financing and comply with the restrictions and other covenants in our financing arrangements;
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availability of skilled crew members other employees and the related labor costs;
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work stoppages or other labor disruptions by our employees or the employees of other companies in related industries;
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compliance with governmental, tax, environmental and safety regulation, any non-compliance with U.S. regulations;
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the impact of increasing scrutiny and changing expectations from investors, lenders and other market participants with respect to our Environmental, Social and Governance, or ESG, policies;
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Foreign Corrupt Practices Act of 1977, or FCPA, or other applicable regulations relating to bribery;
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the impact of the discontinuance of the London Interbank Offered Rate, or LIBOR, after June 30, 2023 on interest rates of our debt that reference LIBOR;
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general economic conditions and conditions in the oil industry;
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effects of new products and new technology in our industry, including the potential for technological innovation to reduce the value of our vessels and charter income derived therefrom;
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new environmental regulations and restrictions, whether at a global level stipulated by the International Maritime Organization, and/or imposed by regional or national authorities such as the
European Union or individual countries;
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ii
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vessel breakdowns and instances of off-hire;
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the impact of an interruption in or failure of our information technology and communications systems, including the impact of cyber-attacks, upon our ability to operate;
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potential conflicts of interest involving members of our Board of Directors and senior management;
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the failure of counter parties to fully perform their contracts with us;
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changes in credit risk with respect to our counterparties on contracts;
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our dependence on key personnel and our ability to attract, retain and motivate key employees;
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adequacy of insurance coverage;
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our ability to obtain indemnities from customers;
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changes in laws, treaties or regulations;
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the volatility of the price of our ordinary shares;
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our incorporation under the laws of Bermuda and the different rights to relief that may be available compared to other countries, including the United States;
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changes in governmental rules and regulations or actions taken by regulatory authorities;
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government requisition of our vessels during a period of war or emergency;
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potential liability from pending or future litigation and potential costs due to environmental damage and vessel collisions;
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the arrest of our vessels by maritime claimants;
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general domestic and international political conditions or events, including “trade wars”;
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any further changes in U.S. trade policy that could trigger retaliatory actions by the affected countries;
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potential disruption of shipping routes due to accidents, environmental factors, political events, international hostilities including the ongoing developments in the Ukraine region, acts by
terrorists or acts of piracy on ocean-going vessels;
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the impact of adverse weather and natural disasters;
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the length and severity of epidemics and pandemics, including the ongoing global outbreak of the novel coronavirus, or COVID-19, and its impact on the demand for seaborne transportation in the
tanker sector;
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business disruptions due to natural disasters or other disasters outside our control, such as the ongoing COVID-19 pandemic;
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other important factors described under “Risk Factors”; and
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iii
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other important factors described from time to time in the reports filed by the Company with the SEC, including the Annual Report on Form 20-F filed on March 17, 2022, or the 2021 Annual
Report, and the unaudited condensed interim financial statement and related Management’s Discussion and Analysis of our Financial Condition and Results of Operations for the six months ended June 30, 2022 on Form 6-K filed on September 9,
2022;
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We caution readers of this registration statement not to place undue reliance on these forward-looking statements.
All forward-looking statements made in this registration statement are qualified by these cautionary statements. These forward-looking
statements are made only as of the date of this registration statement, and we expressly disclaim any obligation to update or revise any forward-looking statements to reflect changes in assumptions, the occurrence of unanticipated events, changes in
future operating results over time or otherwise.
Please note in this registration statement, “we,” “us,” “our,” “Frontline” and the “Company,” all refer to Frontline Ltd. and its
subsidiaries, unless the context otherwise requires.
iv
QUESTIONS AND ANSWERS
The following questions and answers briefly address some commonly asked questions about the proposals to be presented at
the Special General Meeting, including with respect to the proposed Redomiciliation. The following questions and answers may not include all the information that is important to Frontline shareholders. You are urged to read carefully this entire
Proxy Statement/Prospectus, including the annexes and the other documents referred to herein.
Q: Why am I receiving this Proxy Statement/Prospectus?
A: We are proposing to change our jurisdiction of incorporation by discontinuing from Bermuda and
continuing and re-domiciling as a public limited liability company incorporated under the laws of Cyprus (the “Redomiciliation”). The Redomiciliation is not conditioned upon the successful completion of the Tender Offer or the Merger or the
Combination Transactions. Please see “Q: What conditions must be satisfied to complete the Redomiciliation?” and the corresponding answer for additional information with respect to certain conditions of the closing of the Redomiciliation. For more
information with respect to the Redomiciliation generally, please see “The Redomiciliation.”
Frontline’s shareholders are being asked to consider and vote upon the Redomiciliation Proposal to approve the Redomiciliation and the
transactions contemplated thereby and the Adjournment Proposal. Frontline shareholders are not being asked in this registration statement to consider or vote on the previously announced Combination Transactions with Euronav, which will be
contemplated in a separate registration statement and other documents filed with the SEC.
This Proxy Statement/Prospectus and its annexes contain important information about the Redomiciliation and the other matters to be acted upon
at the Special General Meeting. You should read this Proxy Statement/Prospectus and its annexes carefully and in their entirety.
Your vote is important. You are encouraged to submit your proxy as soon as possible after carefully reviewing this Proxy
Statement/Prospectus and its annexes.
Q:When and where is the Special General Meeting?
A: The Special General Meeting will be held at , on , 2022, at , or
such other date, time and place to which such meeting may be adjourned or postponed, for the purpose of considering and voting upon the proposals.
Q: What is being voted on at the Special General Meeting?
A: Below are the proposals as to which Frontline’s shareholders are being asked to vote:
(1) The Redomiciliation Proposal - a proposal to:
| (a) |
re-domicile Frontline by way of discontinuation out of Bermuda and continue as a public company limited by shares incorporated in the Republic of Cyprus (“Cyprus”) under the
name of Frontline Plc (the “Redomiciliation”);
|
| (b) |
approve an amendment to the Company’s current Amended and Restated Bye-Laws, to include a provision allowing for the Company’s redomiciliation out of Bermuda as required under
the laws of Cyprus, attached to this Proxy Statement/Prospectus as Annex A (the “Discontinuation Amendment”);
|
v
| (c) |
adopt, upon the Redomiciliation taking effect by issuance of the temporary certificate of continuation in Cyprus (the
“Temporary Redomiciliation Certificate”), the Amended and Restated Memorandum and Articles of Association governed by the laws of Cyprus, attached to this proxy statement/prospectus (the “Proxy Statement/Prospectus”) as Annex B (the
“Frontline Cyprus Amended and Restated Charter”), in place of Frontline’s Memorandum of Association and Frontline’s current Amended and Restated Bye-Laws including as amended by the proposed Discontinuation Amendment (the “Current
Constitution”) which will remove or amend those provisions of the Current Constitution that terminate or otherwise cease to be applicable as a result of the Redomiciliation;
|
| (d) |
approve Frontline (Cyprus)’s appointment of as the authorized representative in Cyprus to effect the Redomiciliation and sign all necessary statutory declarations;
|
| (e) |
approve Frontline (Cyprus)’s registered address in Cyprus and Frontline (Cyprus)’s directors, secretary and auditors, each effective upon the Redomiciliation taking effect, as
described further in the section entitled “Special General Meeting of Frontline Shareholders”; and
|
(2) The Adjournment Proposal - a proposal to adjourn the Special General Meeting
to a later date or dates, if necessary, to permit further solicitation and vote of proxies if, based upon the tabulated vote at the time of the Special General Meeting, there are not sufficient votes to approve one or more proposals presented at the
Special General Meeting.
Q: Are any of the proposals conditioned upon one another?
A: The Adjournment Proposal is not conditioned upon the approval of the Redomiciliation Proposal set
forth in this Proxy Statement/Prospectus and the Redomiciliation Proposal is not conditioned upon the approval of the Adjournment Proposal.
The Redomiciliation Completion shall be conditional upon the following Redomiciliation Conditions and applicable law: (a) Frontline becoming a
tax resident in Cyprus; (b) the approval of the Redomiciliation Proposal by the Special General Meeting having been received; (c) the issuance of the Temporary Redomiciliation Certificate from the Cyprus Companies’ Registry; and (d) the fulfilment of
all requirements under applicable law to ensure continued listing of Frontline on the NYSE and the OSE, including but not limited to: (i) the registration statement on Form F-4, of which this Proxy Statement/Prospectus forms a part, becoming
effective under the Securities Act; and (ii) the Frontline (Cyprus) shares being approved for listing on NYSE, subject to the Redomiciliation Completion. Neither of the proposals are conditioned upon the completion of the Tender Offer or the Merger.
Q: Why is Frontline providing shareholders with the opportunity to vote on the Redomiciliation?
A: Under Section 132G(2)(a) of the Bermuda Companies Act 1981, as amended, an exempted company shall
not be discontinued unless (i) a resolution of the shareholders is passed in general meeting approving the discontinuance or (ii) the discontinuance is approved in such manner as may be authorized by the bye-laws of Frontline (Bermuda).
vi
Q: What will happen in the Redomiciliation?
A: Upon effectiveness of the Redomiciliation, the rights of shareholders
of Frontline (Bermuda) will arise under Cyprus law and the Amended and Restated Memorandum and Articles of Association. The new Amended and Restated Memorandum and Articles of Association (the “Frontline Cyprus
Amended and Restated Charter”), as approved at the Special General Meeting, will be effective from the date the Temporary Redomiciliation Certificate is issued by the Cyprus Companies' Registry. The Company’s Current Constitution and Amended and
Restated Bye-Laws, as amended by the Discontinuation Amendment, as approved at the Special General Meeting, will be replaced in their entirety and abolished by operation of law on the date the Temporary Certificate of Redomiciliation is issued.
The Frontline Cyprus Amended and Restated Charter and Cyprus law contain provisions that differ in some respects from those in our Current Constitution and Bermuda law. In view of the differences between Cyprus law and Bermuda law, some of your
rights as a shareholder of Frontline (Cyprus) could differ materially from the rights you currently possess as a shareholder of Frontline (Bermuda). The Frontline Cyprus Amended and Restated Charter will be substantially the same as our Current
Constitution, subject to changes to conform to Cap.113 of the statutes of the Republic of Cyprus (the “Cyprus Companies Law”), (noting that the Frontline Cyprus Amended and Restated Charter will contain certain additional interim governance
provisions pursuant to the Combination Agreement). For more information with respect to the additional interim governance provisions, please see the section entitled “Summary—Recent Developments—The Combination
Agreement—Board of Directors and Executive Management”. See “Bermuda and Cyprus Corporate Law “where we describe material provisions under the law of Bermuda and the law of Cyprus relating to your
rights as a shareholder. The form of Frontline Cyprus Amended and Restated Charter of Frontline (Cyprus) is filed as Annex B to the registration statement of which this Proxy Statement/Prospectus is a part.
For additional information, please see “The Redomiciliation.”
Q: Who will be the directors and officers of Frontline (Cyprus) if the Redomiciliation is consummated?
A: Our executive officers will remain the same upon effectiveness of the Redomiciliation. Our current
executive officers are Lars H. Barstad (Chief Executive Officer of Frontline Management AS and our principal executive officer), and Inger M. Klemp (Chief Financial Officer of Frontline Management AS and our principal financial officer).
Our Board of Directors will continue as our Board of Directors upon effectiveness of the Redomiciliation. Our current Board is
composed of John Fredriksen, James O’Shaughnessy, Ola Lorentzon, Jens Martin Jensen, Ole B. Hjertaker, and Steen Jakobsen. Our Board of Directors expects to nominate one
Cypriot director prior to the effectiveness of the Redomiciliation. See “Summary—Recent Developments—The Combination Agreement—Board of
Directors and Executive Management.”
In addition, none of the members or the chairperson of our committees, including our Audit Committee, will change upon effectiveness of the
Redomiciliation.
However, for more information on the senior leadership and governance of the Combined Group (as defined below) if the Tender Offer and/or the
Merger are completed, please see “The Redomiciliation.”
Q: Following the Redomiciliation, will Frontline (Cyprus)’s securities trade on a stock exchange?
A: Our ordinary shares are currently listed on the NYSE and the OSE, under the symbol “FRO.” We will
seek, and expect to receive, on the closing of the Redomiciliation, approval from NYSE and the OSE to trade the common stock of Frontline (Cyprus) under the same symbol after the Redomiciliation. The completion of the Redomiciliation is conditioned
upon, among other things, continued listing of Frontline on NYSE and OSE.
vii
Q: What will the business of Frontline (Cyprus) be like following the Redomiciliation, assuming that the Redomiciliation is
approved?
A: Assuming the Redomiciliation is approved, following the Redomiciliation, the business of Frontline
(Cyprus) will be the same as Frontline (Bermuda). However, for more information on the business of the Combined Group if the Tender Offer and/or Merger are completed, please see “The Redomiciliation.”
Q: What conditions must be satisfied to complete the Redomiciliation?
A: The Redomiciliation Completion shall be conditional upon the following Redomiciliation Conditions
and applicable law: (a) Frontline becoming a tax resident in Cyprus; (b) the approval of the Redomiciliation Proposal by the Special General Meeting having been received; (c) the issuance of the Temporary Redomiciliation Certificate from the Cyprus
Companies’ Registry; and (d) the fulfilment of all requirements under applicable law to ensure continued listing of Frontline on the NYSE or the OSE, including but not limited to: (i) the registration statement on Form F-4, of which this Proxy
Statement/Prospectus forms a part, becoming effective under the Securities Act of 1933; and (ii) the Frontline (Cyprus) shares being approved for listing on NYSE, subject to the Redomiciliation Completion.
For purposes of clarity, in some places in this Proxy Statement/Prospectus, we refer to our company prior to the Redomiciliation as “Frontline
(Bermuda)” and the re-domiciled Cyprus entity as “Frontline (Cyprus).” For more information, please see the section entitled “The Redomiciliation.”
Q: Why is Frontline proposing the Redomiciliation Proposal?
A: Frontline believes that the Redomiciliation will, among other things, provide legal,
administrative, and other similar efficiencies. As a well-established shipping and ship management center, Cyprus is expected to provide many benefits to the Company, including but not limited to recruitment of experienced commercial and
administrative and management personnel, a comprehensive tonnage tax regime, approved by the European Union, and a geographically advantageous position between our key market time zones. In addition, the completion of the Redomiciliation is a
condition of launching and closing the Tender Offer and the Merger. For the purpose of the Redomiciliation, Frontline will adopt the Frontline Cyprus Amended and Restated Charter which will be filed with the Cyprus Companies’ Registry as part of the
Redomiciliation application and which will take effect upon the issuance of the Temporary Redomiciliation Certificate from the Cyprus Companies’ Registry. The Frontline Cyprus Amended and Restated Charter provides Frontline’s shareholders with the
same or substantially the same rights as prior to the Redomiciliation, subject to changes to conform to the Cyprus Companies Law (noting that the Frontline Cyprus Amended and Restated Charter will contain certain additional interim governance
provisions pursuant to the Combination Agreement). For additional information, see the sections entitled “The Redomiciliation” and “Proposal No. 1 - The Redomiciliation Proposal.”
Q: What are the federal income tax consequences of the Redomiciliation?
A: As a result of the Redomiciliation, Frontline will be changing its place of incorporation from
Bermuda to Cyprus. The Redomiciliation will constitute a tax-free reorganization within the meaning of Section 368(a)(1)(F) of the Code, in which the holders of Frontline ordinary shares will be deemed to exchange their shares for equivalent shares
of a Cyprus corporation. U.S. holders will not recognize taxable gain or loss as a result of the Redomiciliation for U.S. federal income tax purposes.
For a more detailed discussion, please see the sections entitled “Summary—Material
Tax Consequences of the Redomiciliation” and “Taxation.”
viii
Q: What changes are being made to Frontline’s Current Constitution in connection with the Redomiciliation?
A: Upon the Redomiciliation, Frontline will adopt the Frontline Cyprus Amended and Restated Charter,
which amends and removes the provisions of Frontline’s Current Constitution that terminates or otherwise become inapplicable because of the Redomiciliation and provides Frontline’s shareholders with the same or substantially the same rights as prior
to the Redomiciliation, subject to changes to conform to the Cyprus Companies Law (noting that the Frontline Cyprus Amended and Restated Charter will contain certain additional interim governance provisions pursuant to the Combination Agreement). For
a summary of the differences between our Current Constitution and Frontline Cyprus Amended and Restated Charter, see Annex B and the section entitled “Comparison of Bermuda Law to Cyprus Law.”
Q: What happens if I sell my Frontline ordinary shares before the Special General Meeting?
A: The record date for the Special General Meeting is earlier than the date that the Redomiciliation
is expected to be completed. If you transfer your Frontline ordinary shares after the record date, but before the Special General Meeting, unless the transferee obtains from you a proxy to vote those shares, you will retain your right to vote at the
Special General Meeting. If you transfer your Frontline ordinary shares prior to the record date, you will have no right to vote those shares at the Special General Meeting.
Q: What vote is required to approve the proposals presented at the Special General Meeting?
A: Approval of each of the proposals presented at the Special General Meeting requires the affirmative
vote of more than 50% of the votes cast by the holders of the ordinary shares of Frontline as of the record date present, in person or by proxy, and voting at the Special General Meeting. Failure of a Frontline shareholder to vote by proxy or to vote
in person at the Special General Meeting or the failure of a Frontline shareholder who holds his or her shares in “street name” through a broker or other nominee to give voting instructions to such broker or other nominee, or a broker non-vote, will
result in that shareholder’s shares not being counted toward the number of Frontline’s ordinary shares required to validly establish a quorum, but if a valid quorum is otherwise established, it will have no effect on the outcome of any vote on the
proposals. Abstentions will be counted in connection with the determination of whether a valid quorum is established, and broker non-votes will not be counted for purposes of establishing a quorum.
Q: How many votes do I have at the Special General Meeting?
A: Frontline’s shareholders are entitled to one vote at the Special General Meeting for each ordinary
share held of record at the close of business on , 2022, the record date for the Special General Meeting. As of the close of business on the record date, there were ordinary shares outstanding.
Q: What constitutes a quorum at the Special General Meeting?
A: At least two Frontline shareholders as of the record date present in person or by proxy and
entitled to vote at the Special General Meeting (whatever the number of shares held by them) constitute a quorum, provided however that if Frontline shall have only one shareholder, such shareholder, present in person or by proxy, shall constitute a
quorum. In the absence of a quorum, the chairman has the power to adjourn the Special General Meeting.
ix
Q: What interests do Frontline’s directors, executive officers and major shareholders have in the Redomiciliation?
Certain of our directors, executive officers and major shareholders may have interests in the Redomiciliation that may conflict with your
interests as a shareholder. C.K. Limited is the trustee of two trusts (the “Trusts”) settled by Mr. John Fredriksen, one of our directors. The Trusts indirectly hold all of the shares of Hemen Holding Limited (“Hemen”) and Greenwich Holdings
Limited, the sole shareholder of Hemen. Accordingly, C.K. Limited, as trustee, may be deemed to beneficially own the 79,321,042 ordinary shares of Frontline that are owned by Hemen and beneficially owned by Greenwich Holdings Limited representing
35.6% of the issued and outstanding ordinary shares of Frontline. Frontline owns 13,664,613 shares of Euronav. The Trusts also indirectly hold all of the shares of Famatown Finance Limited (“Famatown”) and Greenwich Holdings Limited, the sole
shareholder of Famatown. Accordingly, C.K. Limited, as trustee, may be deemed to beneficially own the 37,881,478 ordinary shares of Euronav that are beneficially owned by Famatown (24,216,865 Euronav shares) and Frontline (13,664,613 Euronav shares)
representing 19% of issued and outstanding shares of Euronav.
The beneficiaries of the Trusts are members of Mr. Fredriksen’s family. Mr. Fredriksen is neither a beneficiary nor a trustee of either Trust.
Therefore, Mr. Fredriksen has no economic interest in the ordinary shares of Frontline and ordinary shares of Euronav described above and Mr. Fredriksen disclaims any control over such ordinary shares of Frontline and ordinary shares of Euronav, save
for any indirect influence he may have with C.K. Limited, as the trustee of the Trusts, in his capacity as the settlor of the Trusts.
Hemen and Famatown and certain other entities related to them have agreed to take necessary corporate resolutions at shareholders meetings of
Frontline and Euronav using the voting rights attached to their shares to vote in favor of any resolution necessary to consummate the transactions outlined in the Combination Agreement, including the Redomiciliation. For more information, please see
the section entitled “The Redomiciliation – Interests of Certain of Frontline’s Directors, Executive Officers and Major Shareholders in the Redomiciliation.”
Q: When is the Redomiciliation expected to be completed?
A: It is currently anticipated that the Redomiciliation will be consummated as promptly as reasonably
possible following the Special General Meeting, provided that all other conditions to the Redomiciliation have been satisfied or waived. The Redomiciliation is subject to certain notification filings and approvals by authorities in Bermuda and Cyprus
and, as a result, may be subject to delay. For a description of the conditions to the completion of the Redomiciliation, see the section entitled “The Redomiciliation.”
Q: What do I need to do now?
A: You are urged to read carefully and consider the information contained in this Proxy
Statement/Prospectus, including the annexes, and to consider how the Redomiciliation will affect you as a shareholder. You should then vote as soon as possible in accordance with the instructions provided in this Proxy Statement/Prospectus and on the
enclosed proxy card or, if you hold Frontline’s ordinary shares through a brokerage firm, bank or other nominee, on the voting instruction form provided by the broker, bank or nominee.
x
Q: How do I vote?
A: If you were a holder of record of Frontline’s ordinary shares at the close of business on
, 2022, the record date for the Special General Meeting, you may vote with respect to the proposals in person at the Special General Meeting, or by completing, signing, dating and returning the enclosed proxy card in the postage-paid envelope
provided. If you hold your shares in “street name,” which means your shares are held of record by a broker, bank or other nominee, you should contact your broker, bank or nominee to ensure that votes related
to the shares you beneficially own are properly counted. In this regard, you must provide the record holder of your shares with instructions on how to vote your shares or, if you wish to attend the Special General Meeting and vote in person, obtain a
legal proxy from your broker, bank or nominee.
Q: Do I need to attend the Special General Meeting to vote my shares?
A: No. You are invited to attend the Special General Meeting to vote on the proposals described in
this Proxy Statement/Prospectus. However, you do not need to attend the Special General Meeting to vote your shares. Instead, you may submit your proxy by completing, signing, dating and returning the enclosed proxy card in the postage-paid envelope
provided. Your vote is important. Frontline encourages you to vote as soon as possible after carefully reading this Proxy Statement/Prospectus.
Q: What will happen if I abstain from voting or fail to vote at the Special General Meeting?
A: At the Special General Meeting, Frontline will count a properly executed proxy marked “ABSTAIN”
with respect to a particular proposal as present for purposes of determining whether a quorum is present. Assuming there is quorum, a failure to vote or an abstention will have no effect on the outcome of any vote on the proposals.
Q: What will happen if I sign and return my proxy card without indicating how I wish to vote?
A: Signed and dated proxies received by Frontline without an indication of how the shareholder intends
to vote on a proposal will be voted “FOR” each proposal described in this Proxy Statement/Prospectus.
Q: If I am not going to attend the Special General Meeting in person, should I return my proxy card instead?
A: Yes. Whether you plan to attend the Special General Meeting or not, please read this Proxy
Statement/Prospectus carefully, and vote your shares by completing, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided.
Q: If my shares are held in “street name,” will my broker, bank or nominee automatically vote my shares for me?
A: No. Under the rules of various national and regional securities exchanges, your broker, bank or
nominee cannot vote your shares with respect to non-discretionary matters, unless you provide instructions on how to vote in accordance with the information and procedures provided to you by your broker, bank or nominee. Frontline believes the
proposals presented to the shareholders at the Special General Meeting will be considered non-discretionary and therefore your broker, bank or nominee cannot vote your shares without your instruction. If you do not provide instructions with your
proxy, your bank, broker or other nominee may deliver a proxy card expressly indicating that it is NOT voting your shares; this indication that a bank, broker or nominee is not voting your shares is referred to as a “broker non-vote.” Broker non-votes will not be counted for the purpose of determining the existence of a quorum or for purposes of determining the number of votes cast at the Special General Meeting. Your bank, broker or other
nominee can vote your shares only if you provide instructions on how to vote. You should instruct your broker to vote your shares in accordance with directions you provide.
xi
Q: May I change my vote after I have mailed my signed proxy card?
A: Yes. You may change your vote by sending a later-dated, signed proxy card to Frontline’s proxy
solicitor, or the proxy solicitor, at , prior to the vote at the Special General Meeting, or attend the Special General Meeting and vote in person. You also may revoke your proxy by sending a notice of revocation to ,
provided such revocation is received prior to the vote at the Special General Meeting. If your shares are held in street name by a broker or other nominee, you must contact the broker or nominee to change your vote.
Q: What should I do if I receive more than one set of voting materials?
A: You may receive more than one set of voting materials, including multiple copies of this Proxy
Statement/Prospectus and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold
shares. If you are a holder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please complete, sign, date, and return each proxy card and voting instruction card that you receive in order to
cast your vote with respect to all of your shares.
Q: Who will solicit and pay the cost of soliciting proxies?
A: Frontline will pay the cost of soliciting proxies for the Special General Meeting. Frontline has
engaged the proxy solicitor, to assist in the solicitation of proxies for the Special General Meeting. Frontline has agreed to pay the proxy solicitor a fee of $15,000, plus disbursements. Frontline will reimburse the proxy solicitor for reasonable
out-of-pocket expenses and will indemnify the proxy solicitor and its affiliates against certain claims, liabilities, losses, damages and expenses. Frontline also will reimburse banks, brokers and other custodians, nominees and fiduciaries
representing beneficial owners of Frontline’s ordinary shares for their expenses in forwarding soliciting materials to beneficial owners of Frontline’s ordinary shares and in obtaining voting instructions from those owners. Frontline’s directors,
officers and employees may also solicit proxies by telephone, by facsimile, by mail, on the internet or in person. They will not be paid any additional amounts for soliciting proxies.
Q: Who can help answer my questions?
A: If you have questions about the proposals or if you need additional copies of this proxy
statement/prospectus or the enclosed proxy card, you should contact Frontline’s proxy solicitor:
You may also contact Frontline at:
Frontline Ltd.
Attn: James Ayers
Par-la-Ville Place
14 Par-la-Ville Road
Hamilton, HM 08, Bermuda
+1 (441) 295-6935
To obtain timely delivery, Frontline’s shareholders must request the materials no later than five business days prior to the Special General
Meeting.
You may also obtain additional information about Frontline from documents filed with the SEC by following the instructions in the section entitled
“Where You Can Find More Information.”
xii
SUMMARY
This summary provides an overview of selected information. We encourage you to read carefully the entire Registration Statement, of which this Proxy
Statement/Prospectus is a part, including the information under “Risk Factors.” As used throughout this Proxy Statement/Prospectus, the terms “Company,” “Frontline,” “we,” “our” and “us” refer to Frontline Ltd. Unless otherwise indicated, all
references to “dollars” and “$” in this Proxy Statement/Prospectus are to, and amounts are presented in, U.S. Dollars. For purposes of clarity, in some places in this Proxy Statement/Prospectus, we refer to our company prior to the
Redomiciliation as “Frontline (Bermuda)” and the re-domiciled Cyprus entity as “Frontline (Cyprus).”
Our Company
We are Frontline Ltd., an international shipping company incorporated in Bermuda as an exempted company under the Bermuda Companies Act of 1981 (the
“Companies Act”) on June 12, 1992 (Company No. EC-17460). Our registered and principal executive offices are located at Par-la-Ville Place, 14 Par-la-Ville Road, Hamilton, HM 08, Bermuda, and our telephone number at that address is +(1) 441 295
6935.
We are engaged primarily in the ownership and operation of oil and product tankers. We operate through subsidiaries located in Bermuda, India, the
Marshall Islands, Liberia, Norway, the United Kingdom and Singapore. We are also involved in the charter, purchase and sale of vessels.
As of August 31, 2022, the Company’s fleet consisted of 69 vessels, with an aggregate capacity of approximately 12.8 million dwt:
| (i) |
65 vessels owned by the Company (20 VLCCs, 27 Suezmax tankers, 18 LR2/Aframax tankers); and
|
| (iii) |
four vessels that are under the Company’s commercial management (two Suezmax tankers and two Aframax tankers).
|
Our Fleet
Set forth below is summary information concerning our fleet as of August 31, 2022.
|
Vessel
|
Built
|
Approximate Dwt.
|
Flag
|
Type of Employment(1)
|
|
Tonnage Owned
|
|
|
|
|
|
VLCCs
|
||||
|
Front Kathrine
|
2009
|
298,000
|
MI
|
Spot market
|
|
Front Queen
|
2009
|
298,000
|
MI
|
Spot market
|
|
Front Eminence
|
2009
|
321,000
|
MI
|
Spot market
|
|
Front Endurance
|
2009
|
321,000
|
MI
|
Spot market
|
|
Front Cecilie
|
2010
|
297,000
|
MI
|
Spot market
|
|
Front Signe
|
2010
|
297,000
|
MI
|
Spot market
|
|
Front Duke
|
2016
|
299,000
|
MI
|
Spot market
|
|
Front Duchess
|
2017
|
299,000
|
MI
|
Spot market
|
|
Front Earl
|
2017
|
303,000
|
MI
|
Spot market
|
|
Front Prince
|
2017
|
301,000
|
MI
|
Spot market
|
|
Front Empire
|
2018
|
303,000
|
MI
|
Spot market
|
|
Front Princess
|
2018
|
302,000
|
MI
|
Spot market
|
|
Front Defender
|
2019
|
299,000
|
MI
|
Spot market
|
|
Front Discovery
|
2019
|
299,000
|
MI
|
Spot market
|
|
Front Dynamic
|
2020
|
299,000
|
MI
|
Spot market
|
|
Front Driva
|
2019
|
319,000
|
MI
|
Spot market
|
|
Front Nausta
|
2019
|
319,000
|
MI
|
Spot market
|
|
Front Alta
|
2022
|
300,000
|
MI
|
Spot market
|
|
Front Tweed
|
2022
|
300,000
|
MI
|
Spot market
|
|
Front Tana
|
2022
|
300,000
|
MI
|
Spot market
|
1
|
Vessel
|
Built
|
Approximate Dwt.
|
Flag
|
Type of Employment(1)
|
|
Suezmax Tankers
|
||||
|
Front Ull
|
2014
|
157,000
|
MI
|
Spot market
|
|
Front Idun
|
2015
|
157,000
|
MI
|
Spot market
|
|
Front Thor
|
2010
|
157,000
|
MI
|
Spot market
|
|
Front Loki
|
2010
|
157,000
|
MI
|
Spot market
|
|
Front Odin
|
2010
|
157,000
|
MI
|
Spot market
|
|
Front Njord
|
2010
|
157,000
|
MI
|
Spot market
|
|
Front Balder
|
2009
|
156,000
|
MI
|
Spot market
|
|
Front Brage
|
2011
|
157,000
|
MI
|
Spot market
|
|
Front Crown
|
2016
|
157,000
|
MI
|
Spot market
|
|
Front Challenger
|
2016
|
157,000
|
MI
|
Spot market
|
|
Front Classic
|
2017
|
157,000
|
MI
|
Spot market
|
|
Front Clipper
|
2017
|
157,000
|
MI
|
Spot market
|
|
Front Crystal
|
2017
|
157,000
|
MI
|
Spot market
|
|
Front Coral
|
2017
|
158,000
|
MI
|
Spot market
|
|
Front Cosmos
|
2017
|
158,000
|
MI
|
Spot market
|
|
Front Cascade
|
2017
|
157,000
|
MI
|
Spot market
|
|
Front Sparta
|
2019
|
157,000
|
HK
|
Spot market
|
|
Front Samara
|
2019
|
157,000
|
HK
|
Time charter
|
|
Front Siena
|
2019
|
157,000
|
HK
|
Spot market
|
|
Front Singapore(2)
|
2019
|
157,000
|
HK
|
Time charter
|
|
Front Seoul
|
2019
|
157,000
|
HK
|
Spot market
|
|
Front Santiago(2)
|
2019
|
157,000
|
HK
|
Time charter
|
|
Front Savannah
|
2019
|
157,000
|
HK
|
Time charter
|
|
Front Suez
|
2019
|
157,000
|
HK
|
Spot market
|
|
Front Shanghai(2)
|
2019
|
157,000
|
HK
|
Time charter
|
|
Front Silkeborg
|
2019
|
157,000
|
HK
|
Spot market
|
|
Front Cruiser
|
2020
|
157,000
|
MI
|
Spot market
|
|
LR2/Aframax Tankers
|
|
|
|
|
|
Front Ocelot
|
2016
|
110,000
|
MI
|
Spot market
|
|
Front Cheetah
|
2016
|
110,000
|
MI
|
Spot market
|
|
Front Lynx
|
2016
|
110,000
|
MI
|
Spot market
|
|
Front Cougar
|
2016
|
110,000
|
MI
|
Spot market
|
|
Front Leopard
|
2016
|
110,000
|
MI
|
Spot market
|
|
Front Jaguar
|
2016
|
110,000
|
MI
|
Spot market
|
|
Front Altair
|
2016
|
110,000
|
MI
|
Spot market
|
|
Front Antares
|
2017
|
110,000
|
MI
|
Spot market
|
|
Front Vega
|
2017
|
110,000
|
MI
|
Spot market
|
|
Front Sirius
|
2017
|
110,000
|
MI
|
Spot market
|
|
Front Castor
|
2017
|
110,000
|
MI
|
Spot market
|
|
Front Pollux
|
2017
|
110,000
|
MI
|
Spot market
|
|
Front Capella
|
2017
|
110,000
|
MI
|
Spot market
|
|
Front Polaris
|
2018
|
110,000
|
MI
|
Spot market
|
|
Front Fusion
|
2021
|
110,000
|
MI
|
Spot market
|
|
Front Future
|
2021
|
110,000
|
MI
|
Spot market
|
|
Front Favour
|
2021
|
110,000
|
MI
|
Spot market
|
|
Front Feature(3)
|
2021
|
110,000
|
MI
|
Spot market
|
| 1. |
Time Charter includes those contracts with durations in excess of six months.
|
| 2. |
These vessels were chartered out on time charters in August 2019. In July and August 2022, two of the initial five Suezmax tankers were redelivered upon completion of the time charters and
the remaining three Suezmax tankers are expected to be redelivered in September 2022.
|
| 3. |
In August 2022, the Company entered into a fixed rate time charter to a third party on a three-year time charter.
|
Key to Flags:
MI – Marshall Islands, HK – Hong Kong.
2
Recent Developments
On May 28, 2022, the Company announced that it agreed to acquire in privately negotiated share exchange transactions with certain
shareholders of Euronav a total of 5,955,705 shares in Euronav, representing 2.95% of the outstanding shares in Euronav, in exchange for a total of 8,337,986 ordinary shares of Frontline, which is equivalent to 1.4 ordinary shares of Frontline
for every one share of Euronav. Frontline received the $0.06 dividend that was paid on June 8, 2022 by Euronav in respect of these 5,955,705 shares.
On June 10, 2022, the Company announced that it agreed to acquire in privately negotiated transactions with certain shareholders of Euronav a total of
7,708,908 shares in Euronav, representing 3.82% of the outstanding shares in Euronav, in exchange for a total of 10,753,924 shares in Frontline, which is equivalent to 1.395 shares of Frontline for every one share of Euronav. In connection with
the above-referenced privately negotiated share exchange transactions, Frontline has entered into a share lending arrangement with Hemen to facilitate settlement of such transactions. Pursuant to such arrangement, Hemen delivered an aggregate of
19,091,910 Frontline shares to the exchanging Euronav holders and Frontline agreed to issue to Hemen the same number of restricted shares of Frontline in full satisfaction of the share lending arrangement. In August 2022, Frontline issued
19,091,910 shares to Hemen in full settlement of the share lending arrangement. Following this issuance, Frontline has a total of 222,622,889 shares issued and outstanding.
In August 2022, the Company entered into a fixed rate time charter-out contract for one LR2/Aframax tanker to a third party on a three-year time charter, at
a daily base rate of $31,500.
In August 2022, the Company took delivery of the VLCC newbuilding, Front Tana, from HHI and drew down
$65.0 million under its senior secured term loan facility of up to $65.0 million with ING Bank to partially finance the delivery.
Borrowing Activities
In July 2022, the Company entered into a senior secured term loan facility in an amount of up to $252.4 million with a number of banks to refinance an
existing term loan facility with total balloon payments of $233.4 million due in the first quarter of 2023. The new facility has a tenor of 5 years, carries an interest rate of SOFR plus a margin of 180 basis points, and has an amortization
profile of approximately 18 years commencing on the delivery date from the yard. The existing facility carried an interest rate of LIBOR plus a margin of 190 basis points. The facility was fully drawn down in August 2022 and $223.9 million of the
refinanced facility has been recorded in long-term debt as of June 30, 2022.
3
The Combination Agreement
Entry into a Definitive Combination Agreement and Plan of Merger
On July 10, 2022, Frontline entered into a definitive combination agreement for a stock-for-stock combination with Euronav based on an exchange ratio of
1.45 Frontline-shares for every 1.0 Euronav-share (the “Combination”), which was unanimously approved by all the members of Frontline’s Board of Directors and by all members of Euronav’s Supervisory Board.
On the terms and subject to the conditions set forth in the Combination Agreement, Frontline will relocate from Bermuda to Cyprus by way of Frontline being
discontinued out of Bermuda and continuing its existence in Cyprus as a Cyprus public limited liability company (the Redomiciliation referenced in the registration statement on Form F-4, of which this Proxy Statement/Prospectus forms a part),
Frontline shall after the completion of the Redomiciliation make a voluntary conditional exchange offer for all outstanding shares of Euronav at an exchange ratio of 1.45 Frontline shares for 1.0 Euronav share (the “Consideration Shares”), and
Frontline and Euronav shall initiate a process whereby Euronav merges into Frontline (the “Merger”) with Frontline as the surviving entity (the “Combined Group”). Assuming all Euronav shares are tendered in the Tender Offer, the Tender Offer will
result in Euronav shareholders, excluding both Frontline and Famatown, owning approximately 48% of the issued share capital of the Combined Group and Frontline shareholders, including Famatown, owning approximately 52%.
This transaction is subject to customary conditions precedent, certain of which are described herein, including the completion of the Redomiciliation and
certain other important conditions in relation to the Tender Offer and the Merger. The Redomiciliation is not conditioned on the completion of the Tender Offer, the Merger or the Combination Transactions.
Certain conditions to the Combination Agreement
The Redomiciliation Completion shall be conditional upon the following Redomiciliation Conditions and applicable law: (a)
Frontline becoming a tax resident in Cyprus; (b) the approval of the Redomiciliation Proposal by the Special General Meeting having been received; (c) the issuance of the Temporary Redomiciliation Certificate from the Cyprus Companies’ Registry;
and (d) the fulfilment of all requirements under applicable law to ensure continued listing of Frontline on the NYSE and the OSE, including but not limited to: (i) the registration statement on Form F-4, of which this Proxy Statement/Prospectus
forms a part, becoming effective under the Securities Act; and (ii) the Frontline (Cyprus) shares being approved for listing on NYSE, subject to the Redomiciliation Completion.
Completion of the Tender Offer is subject to customary closing conditions, including, among others specified in the Combination Agreement, (i) the
Redomiciliation having occurred, (ii) the approval of the listing of the Consideration Shares on Euronext Brussels, NYSE and OSE subject to completion of the Tender Offer, (iii) the receipt of required regulatory approvals, (iv) Frontline owning
post Tender Offer at least 50% +1 of all the outstanding shares in Euronav (excluding treasury shares unable to be tendered) and (v) the absence of any material adverse change as set forth under the Combination Agreement.
Completion of the Merger is subject to customary closing conditions, including, among others specified in the Combination Agreement, the approval of the
shareholders of Frontline and Euronav at the respective shareholders meeting convened for the purpose of voting to approve the Merger.
Frontline shareholders are not being asked in this registration statement to vote on the Tender Offer and Merger, which will be contemplated in a separate registration statement and other documents filed with the SEC.
Undertakings by certain shareholders in Frontline
Hemen and other entities related to it own and beneficially own an aggregate of 35.6% of Frontline’s ordinary shares. Famatown and other entities related
to it own and beneficially own an aggregate of 19% of Euronav’s ordinary shares. Hemen and Famatown and other entities related to them have agreed to take necessary corporate resolutions and at shareholders meetings of Frontline and Euronav use
the voting rights attached to their shares to vote in favor of any resolution necessary to consummate the transactions outlined in the Combination Agreement, including the Redomiciliation.
4
Board of Directors and Executive Management
Our Board of Directors will continue as our Board of Directors upon effectiveness of the Redomiciliation. Our current Board is composed of John Fredriksen,
James O’Shaughnessy, Ola Lorentzon, Jens Martin Jensen, Ole B. Hjertaker, and Steen Jakobsen. Our Board of Directors expects to nominate one Cypriot director prior to the effectiveness of the Redomiciliation. If and when the Tender Offer is
closed, unless Frontline holds 75% or more of Euronav’s outstanding shares (excluding treasury shares held by Euronav unable to be tendered in the Tender Offer) upon completion of the Tender Offer, the period between completion of the Tender
Offer and the completion of the Merger or the completion of the squeeze-out or 30 months from the last tender offer settlement, whichever is earlier, a one-tier board comprising a maximum of seven directors will be implemented by Frontline, with
the following appointment and nomination rights: three of the current independent directors of Euronav will be appointed to the Frontline’s board as independent directors, Hemen will have the right to nominate (i) three non-independent directors
as long as its shareholding in Frontline is greater than or equal to 20% of the shares outstanding in Frontline, (ii) two non-independent directors if its shareholding in Frontline is lower than 20% of the shares
outstanding in Frontline but greater than or equal to 15% of the shares outstanding in Frontline, and (iii) one non-independent director if its shareholding in Frontline is lower than 15% of the shares outstanding in Frontline but greater than
or equal to 7.5% of the shares outstanding in Frontline (but shall have no nomination or appointment right if its shareholding in Frontline is lower than 7.5%), and one new independent director, who will also serve as chairman of
Frontline, will be identified by Euronav and Hemen jointly, whereby Frontline’s Nomination Committee shall – in its public recommendation – confirm that such composition is to be retained for at least 30 months in Frontline’s corporate interest
and to set out respective reasoning for such composition and the importance and relevance of at least each of the current independent directors of Euronav for Frontline’s board of directors.
After completion of the Tender Offer, if Frontline holds 75% or more of Euronav’s outstanding shares (excluding treasury shares held by Euronav unable to be
tendered in the Tender Offer), or after completion of the Merger or completion of the squeeze-out, a one-tier board comprising a maximum of seven directors will be implemented by Frontline for a period ending 54 months after completion of the
Tender Offer or completion of the merger if no Tender Offer took place prior thereto, with the following appointment and nomination rights: three of the current independent directors of Euronav will be appointed to Frontline’s board as
independent directors, Hemen will have the right to nominate (i) two non-independent directors as long as its shareholding in Frontline is greater than or equal to 15% of the shares outstanding in Frontline, and
(ii) one non-independent director if its shareholding in Frontline is lower than 15% of the shares outstanding in Frontline but greater than or equal to 7.5% of the shares outstanding in Frontline (but shall have no nomination or appointment
right if its shareholding in Frontline is lower than 7.5%) and two new independent directors, including the chairman of the board of Frontline, will be identified by Euronav and Hemen jointly.
Mr. Hugo De Stoop, the Chief Executive Officer of Euronav, will be appointed as Chief Executive Officer of Frontline upon completion of the Tender Offer.
Termination
The Combination Agreement provides for certain termination rights for both Frontline and Euronav, including the automatic termination in case completion of
the Merger has not taken place before the date falling three years after completion of the Tender Offer.
No Solicitation; Withdrawal of Board of Directors Recommendation
The Combination Agreement provides that, during the period from the date of the Combination Agreement until the completion of the Tender Offer, or until the
earlier termination of the Combination Agreement in accordance with its terms each of Frontline and Euronav will be subject to certain restrictions on its ability to solicit, seek, initiate or encourage the making of any inquiry, expression of
interest, proposal or offer relating to certain alternative acquisition proposals from third parties, subject to customary exceptions. Each of Frontline and Euronav will also be, subject to certain exceptions, restricted in its ability to
withdraw, condition or amend the recommendation of its Board of Directors.
The foregoing description of the Combination Agreement and the transactions contemplated thereby is not complete and is subject to and qualified in its
entirety by reference to the Combination Agreement, a copy of which is annexed hereto as Exhibit 2.1.
5
INFORMATION ABOUT EURONAV NV
Euronav is an independent tanker company engaged in the ocean transportation and storage of crude oil. The company is headquartered in Antwerp, Belgium, and
has offices throughout Europe and Asia. Euronav is listed on Euronext Brussels and on the NYSE under the symbol “EURN.” Euronav employs its fleet both on the spot and period market. VLCCs on the spot market are traded in the Tankers International
pool of which Euronav is one of the major partners. Euronav’s owned and operated fleet consists of two V-Plus vessels, 40 VLCCs (with further three under construction), 24 Suezmaxes (of which two vessels time chartered in) with a further three
under construction and 2 FSO vessels.
THE REDOMICILIATION
General
We intend to change our jurisdiction of incorporation from Bermuda to Cyprus, and we refer to this change as the “Redomiciliation.”
Upon the issuance of the Temporary Redomiciliation Certificate by the Cyprus Companies’ Registry, we will be domesticated and continue
as a Cyprus company with the name “Frontline Plc.”. Under Bermuda and Cyprus law, the Redomiciliation into Cyprus is deemed effective upon the issuance of the Temporary Redomiciliation Certificate by the Cyprus Companies’ Registry and the Company
will be deemed to be a Cypriot company, subject to the Cypriot Companies Law from such date. After the Redomiciliation becomes effective, we will deliver a copy of the Temporary Redomiciliation Certificate to the Registrar in Bermuda. For more
information please see the section entitled “The Redomiciliation.”
Comparison of Shareholder Rights
The Redomiciliation will change our jurisdiction of incorporation from Bermuda to Cyprus and, as a result, our constitutional documents
will change and will be governed by Cyprus rather than Bermuda law. There are differences between the governing corporate law of Bermuda and Cyprus. We describe these and other changes in more detail under “The Redomiciliation—Shareholder Rights”
below. However, our business, assets and liabilities on a consolidated basis, as well as our Board of Directors and executive officers, will be the same upon completion of the Redomiciliation as they are prior to the Redomiciliation.
Redomiciliation Share Conversion
Under our Memorandum of Association, our authorized share capital consists of 500,000,000 ordinary
shares, par value $1.00 per share. The number of ordinary shares issued and outstanding as of August 31, 2022 is 222,622,889.
In the Redomiciliation, each ordinary share of Frontline (Bermuda) that is issued and outstanding immediately prior to the effective
time of the Redomiciliation will automatically convert by operation of law into one ordinary share in the share capital of Frontline (Cyprus), at the same par value. It is not necessary for shareholders of Frontline (Bermuda) who currently hold
share certificates to exchange their existing share certificates for certificates of ordinary shares of Frontline (Cyprus). See “The Redomiciliation—Redomiciliation Share Conversion” below.
Effects and Advantages of the Redomiciliation
Our Board of Directors believes that there are advantages of the Redomiciliation. As a well-established shipping and ship management
center, Cyprus is expected to provide many benefits to the Company, including but not limited to recruitment of experienced commercial and administrative and management personnel, a comprehensive tonnage tax regime, approved by the European
Union, and a geographically advantageous position between our key market time zones. In addition, the completion of the Redomiciliation is a condition of launching and closing the Tender Offer and the Merger. Please see “The
Redomiciliation—Effects and Advantages of the Redomiciliation.”
Material Tax Consequences of the Redomiciliation
We do not believe that we or our shareholders will be subject to taxation in Bermuda or Cyprus as a result of the Redomiciliation.
Specifically, in relation to Cyprus tax law provisions, no taxing circumstances arise at the time of the Redomiciliation of Frontline (Cyprus) and, consequently, no tax liabilities arise as a result of any provision under Cyprus tax law. However,
the provisions of Cyprus tax law shall apply on the assessment of the incomes of Frontline (Cyprus) once it becomes a Cyprus tax resident, which may result in a higher tax rate being applied to taxable profits, depending on the nature of such
profits and/or income. Similarly, the provisions of the Cyprus tax law and double tax treaties shall apply in relation to the distributions of profits to the company to its shareholders.
We expect the Redomiciliation to qualify as a tax-free “reorganization” for purposes of U.S. federal income tax matters and, as such, we
expect that neither we nor U.S. Holders will be subject to U.S. federal income taxation as a result of the Redomiciliation. See “Taxation.”
6
RISK FACTORS
Any investment in our securities involves a high degree of risk, including the risks described below. The risks and
uncertainties described below are not the only risks and uncertainties we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations. If any of the following risks
actually occur, our business, financial condition and results of operations could suffer. As a result, the trading price of our shares could decline, perhaps significantly, and you could lose all or part of your investment. The risks discussed below
also include forward-looking statements and our actual results may differ substantially from those discussed in these forward-looking statements. See the section entitled “Forward-Looking Statements.”
Risk Factor Summary
We are engaged in the seaborne transportation of crude oil and oil products. Some of the risks summarized below and discussed in greater detail in the following
pages relate principally to the industry in which we operate, shipping generally, and to our business. Other risks relate principally to the ownership of our securities. The occurrence of any of the events described in this section could
significantly and negatively affect our business, financial condition, operating results and ability to pay dividends on our shares, or the trading price of our shares.
| • |
Upon the completion of the Redomiciliation, your rights as a shareholder of Frontline will arise under Cyprus law and the Company’s constitutional documents and we will be required to adopt
new constitutional documents in accordance with Cyprus law.
|
| • |
The Redomiciliation may result in adverse tax consequences for you.
|
| • |
There is no assurance when or if the Tender Offer or the Merger will be completed.
|
| • |
The Combined Group may not realize all of the anticipated benefits of the Merger.
|
| • |
If the tanker industry, which historically has been cyclical and volatile, declines in the future, our revenue, earnings and available cash flow may be adversely affected.
|
| • |
Any decrease in shipments of crude oil may adversely affect our financial performance.
|
| • |
An over-supply of tanker capacity may lead to reductions in charter rates, vessel values and profitability.
|
| • |
A shift in consumer demand from oil towards other energy sources or changes to trade patterns for crude oil or refined oil products may have a material adverse effect on our business.
|
| • |
Technological innovation and quality and efficiency requirements from our customers could reduce our charterhire income and the value of our vessels.
|
| • |
We rely on our and our ship managers’ information systems to conduct our business, and failure to protect these systems against security breaches could adversely affect our business and
results of operations, including on our vessels. Additionally, if these systems fail or become unavailable for any significant period of time, our business could be harmed.
|
| • |
Increasing scrutiny and changing expectations from investors, lenders and other market participants with respect to our Environmental, Social and Governance (“ESG”) policies may impose
additional costs on us or expose us to additional risks.
|
| • |
Risks involved with operating ocean-going vessels could result in the loss of life or harm to our seafarers, environmental accidents or affect our business and reputation, which could have a
material adverse effect on our results of operations and financial condition.
|
7
| • |
If economic conditions throughout the world deteriorate or become more volatile, it could impede our operations. Political instability, terrorist or other attacks, war, international
hostilities and public health threats can affect the tanker industry, which may adversely affect our business.
|
| • |
If our vessels call at ports located in countries or territories that are the subject of sanctions or embargoes imposed by the U.S., the European Union, the United Nations or other
governments, it could lead to monetary fines or penalties and adversely affect our reputation and the market for our ordinary shares.
|
| • |
Compliance with safety and other vessel requirements imposed by classification societies may be costly and could reduce our net cash flows and net income.
|
| • |
We are subject to complex laws and regulations, including environmental laws and regulations that can increase our liability and adversely affect our business, results of operations and
financial condition.
|
| • |
We are dependent on the spot market and any decrease in spot charter rates in the future may adversely affect our earnings and our ability to pay dividends.
|
| • |
Changes in the price of fuel, or bunkers, may adversely affect our profits.
|
| • |
The operation of tankers involves certain unique operational risks.
|
| • |
Because the market value of our vessels may fluctuate significantly, we may incur losses when we sell vessels which may adversely affect our earnings or could cause us to incur impairment
charges.
|
| • |
We may be unable to successfully compete with other vessel operators for charters, which could adversely affect our results of operations and financial position.
|
8
| • |
We may be unable to comply with the covenants contained in our loan agreements, which could affect our ability to conduct business.
|
| • |
Failure to comply with the U.S. Foreign Corrupt Practices Act and other anti-corruption laws could result in fines, criminal penalties and an adverse effect on our business.
|
| • |
We may not be able to obtain financing on terms acceptable to us or at all, which may negatively impact our business.
|
| • |
We may be required to record a further goodwill impairment loss, which could have a material adverse effect on our results of operations and financial position.
|
| • |
If we do not set aside funds and are unable to borrow or raise funds for vessel replacement at the end of a vessel’s useful life our revenue will decline, which would adversely affect our
business, results of operations, financial condition and ability to pay dividends.
|
| • |
Certain of our directors, executive officers and major shareholders may have interests that are different from the interests of our other shareholders, including Hemen, which may be able to
exercise significant influence over us.
|
| • |
We may be unable to attract and retain key management personnel in the tanker industry, which may negatively impact the effectiveness of our management and our results of operation.
|
| • |
We may not have adequate insurance to compensate us if our vessels are damaged or lost.
|
9
| • |
Because our offices and most of our assets are outside the United States, you may not be able to bring suit against us, or enforce a judgment obtained against us in the United States.
|
| • |
United States tax authorities could treat the Company as a “passive foreign investment company,” which could have adverse United States federal income tax consequences to United States
shareholders.
|
| • |
We may not qualify for an exemption under Section 883 of the Code, and may therefore have to pay tax on United States source income, which would reduce our earnings.
|
| • |
The price of our ordinary shares historically has been volatile.
|
| • |
Future sales of our ordinary shares could have an adverse effect on our share price.
|
Risks Relating to the Change in Our Place of Incorporation
Currently, your rights as a shareholder of Frontline arise under Bermuda law as well as our existing Bermuda Current Constitution and Amended and Restated Bye-Laws. Upon effectiveness of the Redomiciliation, your rights as a shareholder of Frontline will arise under Cyprus law and the new Frontline Cyprus Amended and
Restated Charter and we will be required to adopt new constitutional documents in the form of the Frontline Cyprus Amended and Restated Charter in accordance with Cyprus law.
Upon effectiveness of the Redomiciliation, the rights of shareholders of Frontline (Bermuda) will arise under Cyprus law and the Frontline
Cyprus Amended and Restated Charter. The Frontline Cyprus Amended and Restated Charter, as approved at the Special General Meeting, will be effective from the date the Temporary Redomiciliation Certificate is issued by the Cyprus Companies' Registry.
The Company’s Current Constitution and Amended and Restated Bye-Laws, as amended by the Discontinuation Amendment, as approved at the Special General Meeting, will be abolished by operation of law on the date
the Temporary Certificate of Redomiciliation is issued and replaced in their entirety with the Frontline Cyprus Amended and Restated Charter. The Frontline Cyprus Amended and Restated Charter and Cyprus law contain provisions that differ in some
respects from those in our current constitutional documents and Bermuda law. In view of the differences between Cyprus law and Bermuda law, some of your rights as a shareholder of Frontline (Cyprus) could
differ materially from the rights you currently possess as a shareholder of Frontline (Bermuda). The Frontline Cyprus Amended and Restated Charter will be substantially the same as our Current Constitution, subject to changes to conform to the Cyprus
Companies Law (noting that the Frontline Cyprus Amended and Restated Charter will contain certain additional interim governance provisions pursuant to the Combination Agreement). See “Bermuda and Cyprus Corporate Law “where we describe material
provisions under the law of Bermuda and the law of Cyprus relating to your rights as a shareholder. The form of Frontline Cyprus Amended and Restated Charter of Frontline (Cyprus) is filed as Annex B to the registration statement of which
this Proxy Statement/Prospectus is a part.
After the Redomiciliation, Frontline (Cyprus) will be partly subject to the mandatory take-over provisions as set out in the Norwegian Securities Trading Act
chapter 6, and partly to the provisions set out in the Public Takeover Bids for the Acquisition of Securities of Companies and Related Matters Law (Law 41(I)/2007) as amended by law
47(I)/2009 and 7(Ι)/2015 of Cyprus.
The threshold at which the mandatory bid obligations are triggered, including possible exemptions from the obligation to present a bid (including possible
exemptions for subsequent sale of shares), is subject to Cyprus law, pursuant to which a mandatory takeover bid is required where a person indirectly or directly acquires (together with persons acting in concert with the aforementioned person) a
percentage of 30% or more of the existing voting rights in the Company.
10
Reaching this threshold, the shareholder shall make an unconditional general offer for the purchase of the remaining shares in Frontline (Cyprus). The
obligation to make an unconditional offer also applies where a shareholder, directly or indirectly, already holds 30% or more but less than 50%, of the voting rights in Frontline (Cyprus) (i.e. that the shareholder held such amount of shares prior to
listing or have inherited such shares) and such shareholder intends to increase the said percentage.
If the shareholder holds more than 50% of the voting rights, the Cyprus authorities might, subject to application from the relevant shareholder, exempt such
shareholder from the bidding obligation, if the proposed acquisition does not affect the rights of the minority shareholders of Frontline (Cyprus).
The takeover supervisory authority with respect to the threshold is the Cyprus Securities and Exchange Commission.
Questions concerning consolidation of shareholdings in relation to the threshold at which the mandatory bid obligation is triggered are subject to Cyprus law.
The bidding process, including questions concerning the compensation offered in connection with the bid, in particular the bid price, the bid procedure, information on the bidder’s decision to present a bid, the content of the offer document and the
publication of the bid, is subject to Norwegian law, i.e. the Norwegian Securities Trading Act. The takeover supervisory authority with respect to these issues is Oslo Børs, and the offer is subject to approval by Oslo Børs before submission to the
shareholders. Where an agreement on acquisition of shares triggers the bid obligation, the shareholder shall without delay notify the takeover supervisory authority and Frontline (Cyprus) accordingly. The notification shall state whether a bid will
be made to buy the remaining shares in Frontline (Cyprus). The takeover supervisory authority shall make the notification available to the public.
The bid shall be made without undue delay and at the latest four weeks after the mandatory bid obligation was triggered, and shall encompass all the remaining
shares of Frontline (Cyprus). The bid price must be at least as high as the highest price paid or agreed to be paid by the offeror in the six-month period prior to the date the above threshold was exceeded, but equal to the market price if the market
price was clearly higher when the threshold was exceeded. In the event that the acquirer thereafter, but prior to the expiration of the bid period acquires, or agrees to acquire, additional shares at a higher price, the acquirer is obliged to restate
its bid at that higher price. The bid shall state a time limit for shareholders to accept the bid, not to be shorter than four weeks or longer than six weeks.
The offeror is required to make an offer document complying with Norwegian law, and such document requires approval by the takeover supervisory authority (Oslo
Børs) before the bid is made public.
In the mandatory bid, all shares of Frontline (Cyprus) must be treated equally. The mandatory bid must be made in cash or contain a cash
alternative at least equal in value to any non-cash offer.
The Redomiciliation may result in adverse tax consequences for you.
The Redomiciliation will be treated as a tax-free reorganization within the meaning of Section 368(a)(1)(F) of the Code, in which the
holders of Frontline ordinary shares will be deemed to exchange their shares for equivalent shares of a Cyprus corporation. U.S. holders will not recognize taxable gain or loss as a result of the Redomiciliation for U.S. federal income tax purposes.
U.S. holders should consult their own tax advisors regarding The Redomiciliation.
11
Risks Relating to the Tender Offer or the Merger
There is no assurance when or if the Tender Offer or the Merger will be completed.
Completion of the Tender Offer is subject to customary closing conditions, including, among others specified in the
Combination Agreement, (i) the Redomiciliation having occurred, (ii) the approval of the listing of the Consideration Shares on Euronext Brussels, NYSE and OSE subject to completion of the Tender Offer, (iii) the receipt of required regulatory
approvals, (iv) Frontline owning post Tender Offer at least 50% +1 of all the outstanding shares in Euronav (excluding treasury shares unable to be tendered) and (v) the absence of any material adverse change as set forth under the Combination
Agreement.
The completion of the Merger is subject to the satisfaction or waiver of a number of conditions as set forth in the Combination Agreement,
including, among others, the completion of the Redomiciliation. There can be no assurance as to when these conditions will be satisfied or waived, if at all, or that other events will not intervene to delay or result in the failure to complete the
Merger. Each party’s obligation to complete the Merger is also subject to the accuracy of the representations and warranties of the other party (subject to certain qualifications and exceptions) and the performance in all material respects of the
other party’s covenants under the Combination Agreement.
As a result of these conditions, in addition to complexities related to the exchange process and settlement, there is no assurance that the
Tender Offer or the Merger will be completed on the terms or timeline currently contemplated, or at all.
Failure to complete the Tender Offer or Merger would prevent Frontline and Euronav from realizing the anticipated benefits of the Tender Offer
or Merger, respectively. Each company would also remain liable for significant transaction costs, including legal, accounting and financial advisory fees. Any delay in completing the Tender Offer or Merger may significantly reduce the benefits that
Frontline and Euronav expect to achieve if they successfully complete the Tender Offer and/or Merger within the expected timeframe and integrate their respective businesses.
The Combined Group may not realize all of the anticipated benefits of the Tender Offer and Merger.
Frontline believes that the Tender Offer and Merger will provide benefits to the Combined Group, including, but not limited to, creating a
leading independent large crude tanker operator with an anticipated market capitalization of more than $4 billion, based on market values of Frontline and Euronav as of July 8, 2022 (as adjusted for the shares in Euronav currently held by Frontline);
shaping a new era of sustainable shipping with best-in-class decarbonisation targets through leveraging the companies’ extensive and complementary platforms and capabilities; and enhancing performance through incremental synergies. However, there is
a risk that some or all of the expected benefits of the Tender Offer and Merger may fail to materialize, or may not occur within the time periods anticipated. The realization of such benefits may be affected by a number of factors, many of which are
beyond the control of Frontline, including but not limited to the strength or weakness of the economy and competitive factors in the areas where Frontline and Euronav do business, the effects of competition in the markets in which Frontline and
Euronav operate, and the impact of changes in the laws and regulations regulating the seaborne transportation or refined petroleum products industries or affecting domestic or foreign operations. The challenge of coordinating previously separate
businesses makes evaluating the business and future financial prospects of the Combined Group following the Tender Offer and Merger difficult. Frontline and Euronav have operated and, until completion of the Tender Offer and Merger, will continue to
operate, independently. The success of the Tender Offer and Merger, including anticipated benefits and cost savings, will depend, in part, on the ability to successfully integrate the operations of both companies in a manner that results in various
benefits, including, among other things, an expanded market reach and operating efficiencies, and that does not materially disrupt existing relationships nor result in decreased revenues or dividends. The past financial performance of each of
Frontline and Euronav may not be indicative of their future financial performance. Realization of the anticipated benefits in the Tender Offer and Merger will depend, in part, on the Combined Group’s ability to successfully integrate Frontline and
Euronav businesses. The Combined Group will be required to devote significant management attention and resources to integrating its business practices and support functions. The diversion of management’s attention and any delays or difficulties
encountered in connection with the Tender Offer and Merger and the coordination of the two companies’ operations could have an adverse effect on the business, financial results, financial condition or the share price of the Combined Group following
the Tender Offer and Merger. The coordination process may also result in additional and unforeseen expenses.
Failure to realize all of the anticipated benefits of the Tender Offer and Merger may impact the financial performance of the Combined Group,
the price of Frontline’s ordinary shares and the ability of Frontline to pay dividends, if any, on its ordinary shares. The declaration of dividends by Frontline, if any, will be at the discretion of its Board of Directors in accordance with
Frontline’s dividend policy.
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Certain tax risks relating to the Tender Offer and the Merger
Frontline and Euronav intend for the
Merger to qualify as a tax-free reorganization for U.S. federal income tax purposes. Neither Frontline nor Euronav has sought, and neither will seek, any ruling from the Internal Revenue Service regarding the Merger. As a condition to closing,
Seward & Kissel LLP will deliver an opinion to the effect that the Merger will constitute a tax-free reorganization for U.S. federal income tax purposes. There can be no assurance that the Internal Revenue Service will not assert, or that a
court would not sustain, a position that the Merger fails to qualify as a tax-free reorganization for U.S. federal income tax purposes. If the Merger were to fail to qualify as a tax-free reorganization for U.S. federal income tax purposes,
shareholders of Euronav could be subject to tax on gains, if any, realized upon the exchange of Euronav ordinary shares for Frontline ordinary shares. Conversely, if consistent with the intention of Frontline and Euronav, the Merger qualifies as a
tax-free reorganization, shareholders of Euronav will not be permitted to recognize a loss, if any, realized upon the exchange of Euronav ordinary shares for Frontline ordinary shares.
In addition, failure to complete the Merger may result in adverse tax consequences to Euronav shareholders that tendered shares pursuant to the
Tender Offer. In the event of a failure to complete the Merger, Euronav shareholders that are U.S. persons will be required to recognized gain or loss to the extent of the difference between (x) the value of the Frontline shares received pursuant to
the Tender Offer at the time of the exchange and (y) the U.S. persons’ adjusted U.S. federal income tax bases in their Euronav shares. Euronav shareholders should consult their own tax advisors in relation to the Tender Offer and the Merger.
Risks Related to Our Industry
If the tanker industry, which historically has been cyclical and volatile, declines in the future, our revenues, earnings
and available cash flow may be adversely affected.
Historically, the tanker industry has been highly cyclical, with volatility in profitability, charter rates and asset values resulting from
changes in the supply of, and demand for, tanker capacity and changes in the supply of and demand for oil and oil products. These factors may adversely affect the rates payable and the amounts we receive in respect of our vessels. Our ability to
re-charter our vessels on the expiration or termination of their current spot and time charters and the charter rates payable under any renewal or replacement charters will depend upon, among other things, economic conditions in the tanker market and
we cannot guarantee that any renewal or Amended and Restated Charters we enter into will be sufficient to allow us to operate our vessels profitably. Our revenues are affected by our strategy to employ some of our vessels on time charters, which have
a fixed income for a pre-set period of time as opposed to trading ships in the spot market where their earnings are heavily impacted by the supply and demand balance. If we are not able to obtain new contracts in direct continuation with existing
charters or for newly acquired vessels, or if new contracts are entered into at charter rates substantially below the existing charter rates or on terms otherwise less favorable compared to existing contracts terms, our revenues and profitability
could be adversely affected.
The factors that may influence demand for tanker capacity include:
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Supply of and demand for oil and oil products;
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global and regional economic and political conditions, including developments in international trade, national oil reserves policies, fluctuations in industrial and agricultural production;
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national policies regarding strategic oil inventories (including if strategic reserves are set at a lower level in the future as oil decreases in the energy mix);
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regional availability of refining capacity and inventories compared to geographies of oil production regions;
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changes in seaborne and other transportation patterns, including changes in the distances over which tanker cargoes are transported by sea;
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increases in the production of oil in areas linked by pipelines to consuming areas, the extension of existing, or the development of new, pipeline systems in markets we may serve, or the
conversion of existing non-oil pipelines to oil pipelines in those markets;
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currency exchange rates, most importantly versus USD;
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weather and acts of God and natural disasters;
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competition from alternative sources of energy and from other shipping companies and other modes of transport;
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international sanctions, embargoes, import and export restrictions, nationalizations, piracy, terrorist attacks and armed conflicts, including the recent conflict between Russia and Ukraine;
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legal and regulatory changes including regulations adopted by supranational authorities and/or industry bodies, such as safety and environmental regulations and requirements by major oil
companies; and
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diseases and viruses, affecting livestock and humans, including pandemics, such as the COVID-19 outbreak.
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The factors that influence the supply of tanker capacity include:
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current and expected purchase orders for tankers;
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the number and size of newbuilding orders and deliveries, as may be impacted by the availability of financing for new vessels and shipping activity;
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the number of shipyards and ability of shipyards to deliver vessels;
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any potential delays in the delivery of newbuilding vessels and/or cancellations of newbuilding orders;
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availability of financing for new vessels and shipping activity;
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the degree of recycling of older vessels, depending, amongst other things, on recycling rates and international recycling regulations;
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the number of vessel casualties;
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technological advances in tanker design and capacity;
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tanker freight rates, which are affected by factors that may affect the rate of newbuilding, swapping and laying up of tankers;
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port and canal congestion;
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slow-steaming of vessels;
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the price of steel and vessel equipment;
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the number of conversions of tankers to other uses or conversions of other vessels to tankers;
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the number of tankers that are out of service, namely those that are laid-up, dry docked, awaiting repairs or otherwise not available for hire;
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business disruptions, including supply chain disruptions and congestion, due to natural or other disasters or otherwise, such as the ongoing COVID-19 pandemic, and any lockdown measures
imposed by governments in regions whose economic conditions have a direct correlation demand for tanker products, including China;
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changes in government and industry environmental and other regulations that may limit the useful lives of tankers;
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changes in national or international regulations that may effectively cause reductions in the carrying capacity of vessels or early obsolescence of tonnage.
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environmental concerns and uncertainty around new regulations in relation to, amongst others, new technologies which may delay the ordering of new vessels; and
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government subsidies of shipbuilding;
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In addition to the prevailing and anticipated freight rates, factors that affect the rate of newbuilding, scrapping and laying-up include
newbuilding prices, secondhand vessel values in relation to scrap prices, costs of bunkers and other operating costs, costs associated with classification society surveys, normal maintenance costs, insurance coverage costs, and the efficiency and age
profile of the existing tanker fleet. The factors affecting the supply and demand for tankers have been volatile and are outside of our control, and the nature, timing and degree of changes in industry conditions are unpredictable, including those
discussed above. Market conditions were volatile in 2021 and continued volatility may reduce demand for transportation of oil over longer distances and increase the supply of tankers to carry that oil, which may have a material adverse effect on our
business, financial condition, results of operations, cash flows, ability to pay dividends and existing contractual obligations.
Any decrease in shipments of crude oil may adversely affect our financial performance.
The demand for our oil tankers derives primarily from demand for Arabian Gulf, West African, North Sea, Caribbean, Russian and US Shale crude
oil, which, in turn, primarily depends on the economies of the world’s industrial countries and competition from alternative energy sources. Any decrease in shipments of crude oil or change in trade patterns from the above-mentioned geographical
areas would have a material adverse effect on our financial performance. Among the factors which could lead to such a decrease are:
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increased crude oil production from other areas;
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increased refining capacity in the Arabian Gulf or West Africa;
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increased use of existing and future crude oil pipelines in the Arabian Gulf or West Africa;
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a decision by oil-producing nations to increase their crude oil prices or to further decrease or limit their crude oil production;
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armed conflict between Ukraine and Russia and the resultant sanctions;
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armed conflict in the Arabian Gulf and West Africa and political or other factors; and
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the development, availability and the costs of nuclear power, natural gas, coal and other alternative sources of energy.
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In addition, volatile economic conditions affecting world economies may result in reduced consumption of oil products and a decreased demand for
our vessels and lower charter rates, which could have a material adverse effect on our earnings and our ability to pay dividends.
An over-supply of tanker capacity may lead to reductions in charter rates, vessel values and profitability.
In recent years, shipyards have produced a large number of new tankers. If the capacity of new vessels delivered exceeds the capacity of tankers
being scrapped and converted to non-trading tankers, tanker capacity will increase. If the supply of tanker capacity increases and the demand for tanker capacity does not increase correspondingly, charter rates could materially decline. A reduction
in charter rates and the value of our vessels may have a material adverse effect on our results of operations, our ability to pay dividends and our compliance with current or future covenants in any of our agreements.
A shift in consumer demand from oil towards other energy sources or changes to trade patterns for crude oil or refined oil
products may have a material adverse effect on our business.
A significant portion of our earnings are related to the oil industry. A shift in or disruption of consumer demand from oil towards other energy
sources such as electricity, natural gas, liquified natural gas, hydrogen or ammonia will potentially affect the demand for our vessels. A shift from the use of internal combustion engine vehicles may also reduce the demand for oil. These factors
could have a material adverse effect on our future performance, results of operations, cash flows and financial position
“Peak oil” is the year when the maximum rate of extraction of oil is reached. Recent forecasts of “peak oil” range from 2019 to the 2040s,
depending on economics and how governments respond to global warming. Irrespective of “peak oil”, the continuing shift in consumer demand from oil towards other energy resources such as wind energy, solar energy, hydrogen energy or nuclear energy,
which shift appears to be accelerating as a result of the COVID-19 situation, as well shift in government commitments and support for energy transition programs, may have a material adverse effect on our future performance, results of operations,
cash flows and financial position.
Seaborne trading and distribution patterns are primarily influenced by the relative advantage of the various sources of production, locations of
consumption, pricing differentials and seasonality. Changes to the trade patterns of crude oil or refined oil products may have a significant negative or positive impact on the ton-mile and therefore the demand for our tankers. This could have a
material adverse effect on our future performance, results of operations, cash flows and financial position.
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Technological innovation and quality and efficiency requirements from our customers could reduce our charterhire income and
the value of our vessels.
Our customers, in particular those in the oil industry, have a high and increasing focus on quality and compliance standards with their
suppliers across the entire supply chain, including the shipping and transportation segment. Our continued compliance with these standards and quality requirements is vital for our operations. The charterhire rates and the value and operational life
of a vessel are determined by a number of factors including the vessel’s efficiency, operational flexibility and physical life. Efficiency includes speed, fuel economy and the ability to load and discharge cargo quickly. Flexibility includes the
ability to enter harbors, utilize related docking facilities and pass through canals and straits. The length of a vessel’s physical life is related to its original design and construction, its maintenance and the impact of the stress of operations.
If new tankers are built that are more efficient or more flexible or have longer physical lives than our vessels or utilize more environmentally sustainable propulsion technologies, competition from these more technologically advanced vessels could
adversely affect the amount of charterhire payments we receive for our vessels and the resale value of our vessels could significantly decrease. Similarly, technologically advanced vessels may be needed to comply with future environmental laws, the
investment in which along with the foregoing could have a material adverse effect on our results of operations, charterhire payments and resale value of vessels. This could have an adverse effect on our results of operations, cash flows, financial
condition and ability to pay dividends.
We rely on our and our ship managers’ information systems to conduct our business, and failure to protect these systems
against security breaches could adversely affect our business and results of operations, including on our vessels. Additionally, if these systems fail or become unavailable for any significant period of time, our business could be harmed.
We rely on our computer systems and network infrastructure across our operations, including on our vessels. The safety and security of our
vessels and efficient operation of our business, including processing, transmitting and storing electronic and financial information, are dependent on computer hardware and software systems, which are increasingly vulnerable to security breaches and
other disruptions. Any significant interruption or failure of our information systems or any significant breach of security could adversely affect our business and results of operations.
Our vessels rely on information systems for a significant part of their operations, including navigation, provision of services, propulsion,
machinery management, power control, communications and cargo management. We have in place safety and security measures on our vessels and onshore operations to secure our vessels against cyber-security attacks and any disruption to their information
systems. However, these measures and technology may not adequately prevent security breaches despite our continuous efforts to upgrade and address the latest known threats. A disruption to the information system of any of our vessels could lead to,
among other things, wrong routing, collision, grounding and propulsion failure.
Beyond our vessels, we rely on industry accepted security measures and technology to securely maintain confidential and proprietary information
maintained on our information systems. However, these measures and technology may not adequately prevent security breaches. The technology and other controls and processes designed to secure our confidential and proprietary information, detect and
remedy any unauthorized access to that information were designed to obtain reasonable, but not absolute, assurance that such information is secure and that any unauthorized access is identified and addressed appropriately. Such controls may in the
future fail to prevent or detect, unauthorized access to our confidential and proprietary information. In addition, the foregoing events could result in violations of applicable privacy and other laws. If confidential information is inappropriately
accessed and used by a third party or an employee for illegal purposes, we may be responsible to the affected individuals for any losses they may have incurred as a result of misappropriation. In such an instance, we may also be subject to regulatory
action, investigation or liable to a governmental authority for fines or penalties associated with a lapse in the integrity and security of our information systems. Furthermore, from May 25, 2018, data breaches on personal data, as defined in the
General Data Protection Regulation 2016/679 (EU), could lead to administrative fines up to €20 million or up to 4% of the total worldwide annual turnover of the company, whichever is higher.
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Our operations, including our vessels, and business administration could be targeted by individuals or groups seeking to sabotage or disrupt
such systems and networks, or to steal data, and these systems may be damaged, shutdown or cease to function properly (whether by planned upgrades, force majeure, telecommunications failures, hardware or software break-ins or viruses, other
cyber-security incidents or otherwise). For example, the information systems of our vessels may be subject to threats from hostile cyber or physical attacks, phishing attacks, human errors of omission or commission, structural failures of resources
we control, including hardware and software, and accidents and other failures beyond our control. The threats to our information systems are constantly evolving, and have become increasingly complex and sophisticated. Furthermore, such threats change
frequently and are often not recognized or detected until after they have been launched, and therefore, we may be unable to anticipate these threats and may not become aware in a timely manner of such a security breach, which could exacerbate any
damage we experience.
We may be required to expend significant capital and other resources to protect against and remedy any potential or existing security breaches
and their consequences. A cyber-attack could result in significant expenses to investigate and repair security breaches or system damages and could lead to litigation, fines, other remedial action, heightened regulatory scrutiny and diminished
customer confidence. In addition, our remediation efforts may not be successful and we may not have adequate insurance to cover these losses.
The unavailability of the information systems or the failure of these systems to perform as anticipated for any reason could disrupt our
business and could have a material adverse effect on our business, results of operations, cash flows and financial condition.
Moreover, cyber-attacks against the Ukrainian government and other countries in the region have been reported in connection with the recent
conflicts between Russia and Ukraine. To the extent such attacks have collateral effects on global critical infrastructure or financial institutions, such developments could adversely affect our business, operating results and financial condition. At
this time, it is difficult to assess the likelihood of such threat and any potential impact at this time.
Increasing scrutiny and changing expectations from investors, lenders and other market participants with respect to our
Environmental, Social and Governance (“ESG”) policies may impose additional costs on us or expose us to additional risks.
Companies across all industries are facing increasing scrutiny relating to their ESG policies. Investor advocacy groups, certain institutional
investors, investment funds, lenders and other market participants are increasingly focused on ESG practices and in recent years have placed increasing importance on the implications and social cost of their investments. The increased focus and
activism related to ESG and similar matters may hinder access to capital, as investors and lenders may decide to reallocate capital or to not commit capital as a result of their assessment of a company’s ESG practices. Companies which do not adapt to
or comply with investor, lender or other industry shareholder expectations and standards, which are evolving, or which are perceived to have not responded appropriately to the growing concern for ESG issues, regardless of whether there is a legal
requirement to do so, may suffer from reputational damage, costs related to litigation, and the business, financial condition, and/or stock price of such a company could be materially and adversely affected.
We may face increasing pressures from investors, lenders and other market participants, who are increasingly focused on climate change, to
prioritize sustainable energy practices, reduce our carbon footprint and promote sustainability. As a result, we may be required to implement more stringent ESG procedures or standards so that our existing and future investors and lenders remain
invested in us and make further investments in us, especially given the highly focused and specific trade of crude oil transportation in which we are engaged. Such ESG corporate transformation calls for an increased resource allocation to serve the
necessary changes in that sector, increasing costs and capital expenditure. If we do not meet these standards, our business and/or our ability to access capital could be harmed.
Additionally, certain investors and lenders may exclude oil transport companies, such as us, from their investing portfolios altogether due to
ESG factors. These limitations in both the debt and equity capital markets may affect our ability to grow as our plans for growth may include accessing the equity and debt capital markets. If those markets are unavailable, or if we are unable to
access alternative means of financing on acceptable terms, or at all, we may be unable to implement our business strategy, which would have a material adverse effect on our financial condition and results of operations and impair our ability to
service our indebtedness. Further, it is likely that we will incur additional costs and require additional resources to monitor, report and comply with wide ranging ESG requirements. The occurrence of any of the foregoing could have a material
adverse effect on our business and financial condition.
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Risks Related to Shipping Generally
Risks involved with operating ocean-going vessels could result in the loss of life or harm to our seafarers, environmental
accidents or affect our business and reputation, which could have a material adverse effect on our results of operations and financial condition.
The operation of an ocean-going vessel carries inherent risks. These risks include the possibility of:
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loss of life or harm to seafarers;
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a marine disaster;
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environmental accidents;
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cargo and property losses or damage; and
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business interruptions caused by mechanical failure, human error, war, terrorism, piracy, political action in various countries, labor strikes, or adverse weather conditions
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Any of these circumstances or events could increase our costs or lower our revenues. The involvement of our vessels in an accident or oil spill
or other environmental disaster may harm our reputation as a safe and reliable tanker operator. In June 2019 an explosion occurred on the Front Altair shortly after the vessel had passed through the Strait of
Hormuz in the Persian Gulf. The 23 crew members onboard the Front Altair were unharmed after being rescued by a cargo vessel. The Company deployed emergency responders in a timely manner, who extinguished the
fire on the vessel within hours of the incident and took precautions to limit any pollution. The vessel remained afloat and was successfully towed for repairs which were completed in November 2019. We procure insurance for our fleet against those
risks that we believe the shipping industry commonly insures, which include hull and machinery insurance, protection and indemnity insurance covering environmental damage and pollution insurance, freight, demurrage and defense insurance which
provides coverage to shipowners and operators for legal and other costs incurred in relation to disputes that are uninsured and war risk insurance. The total cost of repairs and related services to the Company in the year ended December 31, 2019 in
connection with the Front Altair incident was $2.3 million, excluding amounts paid directly by our insurers, all of which has been recovered under our insurance policies. In addition the Company has
recovered $3.7 million under its loss of hire insurance. This incident did not have a material impact on the Company’s results of operations or cash flows.
If economic conditions throughout the world deteriorate or become more volatile, it could impede our operations.
There has historically been a strong link between the development of the world economy and demand for energy, including oil and gas. An extended
period of deterioration in the outlook for the world economy could reduce the overall demand for oil and gas and for our services. While market conditions have improved, continued adverse and developing economic and governmental factors, together
with the concurrent volatility in charter rates and vessel values, may have a material adverse effect on our results of operations, financial condition and cash flows, and could cause the price of our ordinary shares to decline.
Our ability to secure funding is dependent on well-functioning capital markets and on an appetite to provide funding to the shipping industry.
At present, capital markets are well-functioning and funding is available for the shipping industry. However, if global economic conditions worsen or lenders for any reason decide not to provide debt financing to us, we may not be able to secure
additional financing to the extent required, on acceptable terms or at all. If additional financing is not available when needed, or is available only on unfavorable terms, we may be unable to meet our obligations as they come due, or we may be
unable to enhance our existing business, complete additional vessel acquisitions or otherwise take advantage of business opportunities as they arise. Relatedly, certain banks have reduced or ceased lending for oil cargoes, which could have an adverse
economic impact on our customers.
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If there is an economic slowdown in the Asia Pacific region, especially in China, it may have a negative effect on us of the recent slowdown in
the rest of the world. In recent history, China has had one of the world’s fastest growing economies in terms of gross domestic product, or GDP, which had a significant impact on shipping demand. The growth rate of China’s GDP for the year ended
December 31, 2021, however, was approximately 8.1%, up from the growth rate of 2.3% for the year ended December 31, 2020. Following the emergence of the COVID-19, China experienced reduced industrial activity with temporary closures of factories and
other facilities, labor shortages and restrictions on travel. As such, China and other countries in the Asia Pacific region may experience slowed or even negative economic growth in the future. Our financial condition and results of operations, as
well as our future prospects, would likely be impeded by an economic downturn in any of these countries.
In addition, President Xi Jinping committed his country to achieving carbon neutrality by 2060 at the UN General Assembly despite that carbon
emissions are currently a prominent part of China’s economic and industrial structure as it relies heavily on nonrenewable energy sources, generally lacks energy efficiency, and has a rapidly growing energy demand. Depending on how China attempts to
achieve carbon neutrality by 2060, including through the reduction in the use of oil, an overall increase in the use of nonrenewable energy as part of the energy consumption mix and through other means, any reduction in the demand for oil and oil
products and our tanker vessels could have a material adverse effect on our business, cash flows and results of operations.
Further, governments may turn to trade barriers to protect their domestic industries against foreign imports, thereby depressing shipping
demand. In particular, leaders in the United States have indicated that the United States may seek to implement more protective trade measures. The results of the 2020 presidential election in the United States have created significant uncertainty
about the future relationship between the United States, China and other exporting countries, including with respect to trade policies, treaties, government regulations and tariffs. For example, in March 2018, former President Trump announced tariffs
on imported steel and aluminum into the United States that could have a negative impact on international trade generally and in January 2019, the United States announced sanctions against Venezuela, which may have an effect on its oil output and in
turn affect global oil supply. However, it is not yet clear how the United States administration under President Biden may deviate from the former administration’s protectionist foreign trade policies. Protectionist developments, or the perception
that they may occur, may have a material adverse effect on global economic conditions, and may significantly reduce global trade. Moreover, increasing trade protectionism may cause an increase in (a) the cost of goods exported from regions globally,
(b) the length of time required to transport goods and (c) the risks associated with exporting goods. Such increases may significantly affect the quantity of goods to be shipped, shipping time schedules, voyage costs and other associated costs, which
could have an adverse impact on the shipping industry, and therefore, our charterers and their business, operating results and financial condition and could thereby affect their ability to make timely charter hire payments to us and to renew and
increase the number of their time charters with us. This could have a material adverse effect on our business, results of operations, financial condition and our ability to pay any cash distributions to our shareholders.
We face risks attendant to changes in economic environments, changes in interest rates and instability in the banking and
securities markets around the world, among other factors. We cannot predict how long the current market conditions will last. These recent and developing economic and governmental factors may have a material adverse effect on our results of
operations and financial condition and may cause the price of our ordinary shares to decline.
Prospective investors should consider the potential impact, uncertainty and risk associated with the development in the wider global economy.
Further economic downturn in any of these countries could have a material effect on our future performance, results of operations, cash flows and financial position.
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Political instability, terrorist or other attacks, war, international hostilities and public health threats can affect the
tanker industry, which may adversely affect our business.
We conduct most of our operations outside of the United States, and our business, results of operations, cash flows, financial condition and
available cash may be adversely affected by changing economic, political and government conditions in the countries and regions where our vessels are employed or registered. Moreover, we operate in a sector of the economy that is likely to be
adversely impacted by the effects of political conflicts.
Currently, the world economy faces a number of challenges, including trade tensions between the United States and China, stabilizing growth in
China, geopolitical events, such as Brexit, continuing threat of terrorist attacks around the world, continuing instability and conflicts and other recent occurrences in the Middle East, Ukraine, and in other geographic areas and countries, as well
as the public health concerns stemming from the ongoing COVID-19 outbreak.
In the past, political instability has also resulted in attacks on vessels, mining of waterways and other efforts to disrupt international
shipping, particularly in the Arabian Gulf region and most recently in the Black Sea in connection with the recent conflicts between Russian and Ukraine. Acts of terrorism and piracy have also affected vessels trading in regions such as the South
China Sea and the Gulf of Aden off the coast of Somalia. Any of these occurrences could have a material adverse impact on our future performance, results of operation, cash flows and financial position.
Beginning in February of 2022, President Biden and several European leaders announced various economic sanctions against Russia in
connection with the aforementioned conflicts in the Ukraine region, which may adversely impact our business. On March 8, 2022, President Biden issued an executive order prohibiting the import of certain Russian energy products into the United
States, including crude oil, petroleum, petroleum fuels, oils, liquefied natural gas and coal. Additionally, a recent executive order prohibits all new investments in Russia by U.S. persons. Our business could
also be adversely impacted by trade tariffs, trade embargoes or other economic sanctions that limit trading activities by the United States or other countries against countries in the Middle East, Asia or elsewhere as a result of terrorist attacks,
hostilities or diplomatic or political pressures. Any violations of sanctions by our charter parties, any extension or worsening of the conflict in these regions, as well as any significant sanctions resulting from the conflicts that affect, among
other things, the performance of our charter party agreements specifically or the tanker industry more generally, may have a material adverse impact on our future performance, results of operations, cash flows and financial position.
In addition, public health threats, such as COVID-19, influenza and other highly communicable diseases or viruses, outbreaks of which have from
time to time occurred in various parts of the world in which we operate, including China, Japan and South Korea, which may even become pandemics, such as the COVID-19 virus, could lead to a significant decrease of demand for the transportation of
crude oil. Such events may also adversely impact our operations, including timely rotation of our crews, the timing of completion of any outstanding or future newbuilding projects or repair works in drydock, as well as the operations of our
customers. Delayed rotation of crew may adversely affect the mental and physical health of our crew and the safe operation of our vessels as a consequence.
21
Our financial results and operations have been and may continue to be adversely affected by the ongoing
outbreak of COVID-19, and related governmental responses thereto.
In response to the outbreak of COVID-19 in late 2019, governments and governmental agencies around the world took numerous actions, including
travel bans, quarantines, and other emergency public health measures, and a number of countries implemented lockdown measures which resulted in a significant reduction in global economic activity and extreme volatility in the global financial
markets. By 2021, however. many of these measures were relaxed. Nonetheless, we cannot predict whether and to what degree emergency public health and other measures will be reinstituted in the event of any resurgence in the COVID-19 virus or any
variants or subvariants thereof. If the COVID-19 pandemic continues on a prolonged basis or becomes more severe, the adverse impact on the global economy and the rate environment for tankers and other cargo vessels may deteriorate further and our
operations and cash flows may be negatively impacted. Relatively weak global economic conditions during periods of volatility have and may continue to have a number of adverse consequences for tankers and other shipping sectors, including, among
other things:
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low charter rates, particularly for vessels employed on short-term time charters or in the spot market;
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decreases in the market value of tankers and limited second-hand market for the sale of vessels;
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limited financing for vessels;
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loan covenant defaults; and
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declaration of bankruptcy by certain vessel operators, vessel owners, shipyards and charterers.
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The COVID-19 pandemic and measures to contain its spread have negatively impacted regional and global economies and trade patterns in markets in
which we operate, the way we operate our business, and the businesses of our charterers and suppliers. These negative impacts could continue or worsen, even after the pandemic diminishes or ends. Companies, including us, have also taken precautions,
such as requiring employees to work remotely and imposing travel restrictions, while some other businesses have been required to close entirely. Moreover, we face significant risks to our personnel and operations due to the COVID-19 pandemic. Our
crews face risk of exposure to COVID-19 as a result of travel to ports in which cases of COVID-19 have been reported. Our shore-based personnel likewise face risk of such exposure, as we maintain offices in areas that have been impacted by the spread
of COVID-19.
Measures against COVID-19 in a number of countries have restricted crew rotations on our vessels, which may continue or become more severe. As a
result, in 2021, we experienced and may continue to experience disruptions to our normal vessel operations caused by increased deviation time associated with positioning our vessels to countries in which we can undertake a crew rotation in compliance
with such measures. Delays in crew rotations have led to issues with crew fatigue and may continue to do so, which may result in delays or other operational issues. We have had and expect to continue to have increased expenses due to incremental fuel
consumption and days in which our vessels are unable to earn revenue in order to deviate to certain ports on which we would ordinarily not call during a typical voyage. We may also incur additional expenses associated with testing, personal
protective equipment, quarantines, and travel expenses such as airfare costs in order to perform crew rotations in the current environment. In 2021, delays in crew rotations have also caused us to incur additional costs related to crew bonuses paid
to retain the existing crew members on board and may continue to do so. We estimate that the Company incurred additional crew and other related expenses of $5.5 million in 2021 as a result of the COVID-19 pandemic (2020: $3.2 million).
22
The COVID-19 pandemic and measures in place against the spread of the virus have led to a highly difficult environment in which to dispose of
vessels given difficulty to physically inspect vessels. The impact of COVID-19 has also resulted in reduced industrial activity globally, and more specifically in China, with temporary closures of factories and other facilities, labor shortages and
restrictions on travel. We believe these disruptions along with other seasonal and market factors, including lower demand for some of the cargoes we carry, have contributed to lower tanker rates in 2021. See Item 5 of our 2021 Annual Report for
further details of the impact of reduced rates on the Company.
Epidemics may also affect personnel operating payment systems through which we receive revenues from the chartering of our vessels or pay for
our expenses, resulting in delays in payments. We continue to focus on our employees’ well-being, whilst making sure that their operations continue undisrupted and at the same time, adapting to the new ways of operating. As such employees are
encouraged or in certain cases required to operate remotely which significantly increases the risk of cyber security attacks.
The occurrence or continued occurrence of any of the foregoing events or other epidemics or an increase in the severity or duration of the
COVID-19 or other epidemics could have a material adverse effect on our business, results of operations, cash flows, financial condition, value of our vessels, and ability to pay dividends.
If our vessels may call at ports located in countries or territories that are the subject of sanctions or embargoes imposed
by the U.S. government, the European Union, the United Nations or other governmental authorities, it could lead to monetary fines or penalties and adversely affect our reputation and the market for our ordinary shares.
None of our vessels called on ports located in countries or territories that are the subject of country-wide or territory-wide sanctions or
embargoes imposed by the U.S. government or other applicable governmental authorities (“Sanctioned Jurisdictions”) in 2021 and through the date of this Proxy Statement/Prospectus in violation of applicable sanctions or embargo laws. While we intend
to maintain compliance with all applicable sanctions and embargo laws during 2022 and thereafter, and we endeavor to take precautions reasonably designed to mitigate such risks, it is possible that, in the future, our vessels may call on ports
located in Sanctioned Jurisdictions on charterers’ instructions and/or without our consent. If such activities result in a violation of sanctions or embargo laws, we could be subject to monetary fines, penalties, or other sanctions, and our
reputation and the market for our ordinary shares could be adversely affected.
The applicable sanctions and embargo laws and regulations vary in their application, as they do not all apply to the same covered persons or
proscribe the same activities, and such sanctions and embargo laws and regulations may be amended or expanded over time. Current or future counterparties of ours may be affiliated with persons or entities that are or may be in the future the subject
of sanctions imposed by the United States, EU and/or other international bodies. If we determine that such sanctions require us to terminate existing or future contracts to which we, or our subsidiaries, are party or if we are found to be in
violation of such applicable sanctions, our results of operations may be adversely affected or we may suffer reputational harm.
Although we believe that we have been in compliance with all applicable sanctions and embargo laws and regulations in 2021 and through the date
of this Proxy Statement/Prospectus, and intend to maintain such compliance, there can be no assurance that we will be in compliance in the future, particularly as the scope of certain laws may be unclear and may be subject to changing
interpretations. Any such violation could result in fines, penalties or other sanctions that could severely impact our ability to access U.S. capital markets and conduct our business, and could result in some investors deciding, or being required, to
divest their interest, or not to invest, in us. In addition, certain institutional investors may have investment policies or restrictions that prevent them from holding securities of companies that have contracts with countries or territories
identified by the U.S. government as state sponsors of terrorism. The determination by these investors not to invest in, or to divest from, our common stock may adversely affect the price at which our common stock trades. Moreover, our charterers may
violate applicable sanctions and embargo laws and regulations as a result of actions that do not involve us or our vessels, and those violations could in turn negatively affect our reputation. Investor perception of the value of our common stock may
be adversely affected by the consequences of war, the effects of terrorism, civil unrest and governmental actions in countries or territories that we operate in.
23
Compliance with safety and other vessel requirements imposed by classification societies may be costly and could reduce our
net cash flows and net income.
The hull and machinery of every commercial vessel must be certified as being “in class” by a classification society authorized by its country of
registry. The classification society certifies that a vessel is safe and seaworthy in accordance with the applicable rules and regulations of the country of registry of the vessel and the Safety of Life at Sea Convention. All of our vessels are
certified as being “in class” by all the applicable Classification Societies (e.g., American Bureau of Shipping, Lloyd’s Register of Shipping or DNV GL).
A vessel must undergo annual surveys, intermediate surveys and special surveys. In lieu of a special survey, a vessel’s machinery may be placed
on a continuous survey cycle, under which the machinery would be surveyed periodically over a five-year period. We expect our vessels to be on special survey cycles for hull inspection and continuous survey cycles for machinery inspection. Every
vessel is also required to be drydocked every two and a half to five years for inspection of its underwater parts.
Compliance with the above requirements may result in significant expense. If any vessel does not maintain its class or fails any annual,
intermediate or special survey, the vessel will be unable to trade between ports and will be unemployable and uninsurable, which could cause us to be in violation of certain covenants in our loan agreements. Any such inability to carry cargo or be
employed, or any such violation of covenants, could have a material adverse effect on our business, results of operations, cash flows, financial condition and ability to pay dividends.
We are subject to complex laws and regulations, including environmental laws and regulations that can increase our liability
and adversely affect our business, results of operations and financial condition.
Our operations will be subject to numerous laws and regulations in the form of international conventions and treaties, national, state and local
laws and national and international regulations in force in the jurisdictions in which our vessels operate or are registered, which can significantly affect the ownership and operation of our vessels. Compliance with such laws and regulations, where
applicable, may require installation of costly equipment or operational changes and may affect the resale value or useful lives of our vessels. Compliance with such laws and regulations may require us to obtain certain permits or authorizations prior
to commencing operations. Failure to obtain such permits or authorizations could materially impact our business results of operations, financial conditions and ability to pay dividends by delaying or limiting our ability to accept charterers. We may
also incur additional costs in order to comply with other existing and future regulatory obligations, including, but not limited to, costs relating to air emissions including greenhouse gases, the management of ballast waters, maintenance and
inspection, development and implementation of emergency procedures and insurance coverage or other financial assurance of our ability to address pollution incidents.
A failure to comply with applicable laws and regulations may result in administrative and civil penalties, criminal sanctions or the suspension
or termination of our operations. Environmental requirements can also affect the resale value or useful lives of our vessels, could require a reduction in cargo capacity, ship modifications or operational changes or restrictions, could lead to
decreased availability of insurance coverage for environmental matters or could result in the denial of access to certain jurisdictional waters or ports or detention in certain ports. Under local, national and foreign laws, as well as international
treaties and conventions, we could incur material liabilities, including clean-up obligations and natural resource damages liability, in the event that there is a release of hazardous materials from our vessels or otherwise in connection with our
operations. Environmental laws often impose strict liability for remediation of spills and releases of oil and hazardous substances, which could subject us to liability, without regard to whether we were negligent or at fault. We could also become
subject to personal injury or property damage claims relating to the release of hazardous substances associated with our existing or historic operations. Violations of, or liabilities under, environmental requirements can result in substantial
penalties, fines and other sanctions, including, in certain instances, seizure or detention of our vessels, and could harm our reputation with current or potential charterers of our tankers. We will be required to satisfy insurance and financial
responsibility requirements for potential oil (including marine fuel) spills and other pollution incidents. Although we have insurance to cover certain environmental risks, there can be no assurance that such insurance will be sufficient to cover all
such risks or that any claims will not have a material adverse effect on our business, financial condition, results of operations and cash flows.
24
In addition, many environmental requirements are designed to reduce the risk of pollution, such as from oil spills, and our compliance with
these requirements could be costly. To comply with these and other regulations, including: (i) the sulfur emission requirements of Annex VI of the International Convention for the Prevention of Marine Pollution from Ships, or “MARPOL”, which
instituted a global 0.5% (lowered from 3.5% as of January 1, 2020) sulfur cap on marine fuel consumed by a vessel, unless the vessel is equipped with a scrubber, and (ii) the International Convention for the Control and Management of Ships’ Ballast
Water and Sediments of the International Maritime Organization, or IMO, which requires vessels to install expensive ballast water treatment systems, or BWTS, we may be required to incur additional costs to meet new maintenance and inspection
requirements, develop contingency plans for potential spills, and obtain insurance coverage. The increased demand for low sulfur fuels may increase the costs of fuel for our vessels that do not have scrubbers. Additional conventions, laws and
regulations may be adopted that could limit our ability to do business or increase the cost of doing business and which may materially and adversely affect our operations.
Effective January 1, 2020, the IMO, implemented a new regulation for a 0.50% global sulfur cap on marine fuels for vessels without scrubbers
(the “IMO 2020 Regulations”). Under this new global cap, vessels are required to use marine fuels with a sulfur content of no more than 0.50% against the former regulations specifying a maximum of 3.50% sulfur in an effort to reduce the emission of
sulfur oxide into the atmosphere.
We have incurred increased costs to comply with these revised standards. Additional or new conventions, laws and regulations may be adopted that
could require, among others, the installation of expensive emission control systems and could adversely affect our business, results of operations, cash flows and financial condition. Low sulfur fuel is more expensive than standard marine fuel
containing 3.5% sulfur content and may become more expensive or difficult to obtain as a result of increased demand. If the cost differential between low sulfur fuel and high sulfur fuel is significantly higher than anticipated, or if low sulfur fuel
is not available at ports on certain trading routes, it may not be feasible or competitive to operate our vessels on certain trading routes without installing scrubbers or without incurring deviation time to obtain compliant fuel. Scrubbers may not
be available to be installed on such vessels at a favorable cost or at all if we seek them at a later date. Further, there is risk that if the fuel spread between high sulfur fuel oil and low sulfur fuel oil decreases, we may not be able to recover
the investments we have made in our scrubbers with our expected timeframes or at all. As of June 30, 2022, 32 of the vessels owned by the Company are fitted with scrubbers, of which 16 vessels were delivered to the Company with scrubbers fitted, and
seven further scrubber installations are planned in 2022 and one further installation is planned for 2023. In addition, four newbuildings are to be fitted with scrubbers, of which one was delivered in August 2022. As of June 30, 2022, the Company has
incurred $78.0 million since 2018 on the purchase and installation of scrubbers on 21 vessels, of which four were sold in 2021 and four were sold in 2022 and the leases on two vessels were terminated in 2022.
Furthermore, depending on the date of the International Oil Pollution Prevention, or IOPP, renewal survey, existing vessels constructed before
September 8, 2017 must comply with the updated D-2 standard on or after September 8, 2019. For most vessels, compliance with the D-2 standard will involve installing on-board systems to treat ballast water and eliminate unwanted organisms. Ships
constructed on or after September 8, 2017 are to comply with the D-2 standards on or after September 8, 2017. As of June 30, 2022, the Company has incurred $20.5 million since 2018 to comply with these regulations.
Furthermore, United States regulations are currently changing. Although the 2013 Vessel General Permit, or VGP program and the U.S. National
Invasive Species Act, or NISA, are currently in effect to regulate ballast discharge, exchange and installation, the Vessel Incidental Discharge Act, or VIDA, which was signed into law on December 4, 2018, requires that the U.S. Environmental
Protection Agency, or EPA, develop national standards of performance for approximately 30 discharges, similar to those found in the VGP within two years. On October 26, 2020, the EPA published a Notice of Proposed Rulemaking for Vessel Incidental
Discharge National Standards of Performance under VIDA. By approximately 2022, the U.S. Coast Guard must develop corresponding implementation, compliance and enforcement regulations regarding ballast water. The new regulations could require the
installation of new equipment, which may cause us to incur substantial costs.
We continue to evaluate different options in complying with IMO and other rules and regulations.
Please see “Environmental and Other Regulations in the Shipping Industry” for a discussion of the environmental and other regulations applicable
to us.
25
If we fail to comply with international safety regulations, we may be subject to increased liability, which may adversely
affect our insurance coverage and may result in a denial of access to, or detention in, certain ports.
The operation of our vessels is affected by the requirements set forth in the IMO’s International Safety Management Code, (the “ISM Code”). The
ISM Code requires shipowners, ship managers and bareboat charterers to develop and maintain an extensive “Safety Management System” that includes the adoption of a safety and environmental protection policy setting forth instructions and procedures
for safe operation and describing procedures for dealing with emergencies. If we fail to comply with the ISM Code, we may be subject to increased liability, including the invalidation of existing insurance or a decrease of available insurance
coverage for our affected vessels and such failure may result in a denial of access to, or detention in, certain ports. The U.S. Coast Guard and European Union authorities enforce compliance with the ISM and International Ship and Port Facility
Security Code, or the ISPS Code, and prohibit non-compliant vessels from trading in U.S. and European Union ports. This could have a material adverse effect on our future performance, results of operations, cash flows and financial position. Given
that the IMO continues to review and introduce new regulations, it is impossible to predict what additional regulations, if any, may be passed by the IMO and what effect, if any, such regulations might have on our operations.
Because such conventions, laws, and regulations are often revised, we cannot predict the ultimate cost of complying with such conventions, laws
and regulations or the impact thereof on the resale prices or useful lives of our vessels. Additional conventions, laws and regulations may be adopted which could limit our ability to do business or increase the cost of our doing business and which
may materially adversely affect our operations. We are required by various governmental and quasi-governmental agencies to obtain certain permits, licenses, certificates, and financial assurances with respect to our operations.
Please see “Environmental and Other Regulations in the Shipping Industry” for a discussion of the environmental and other regulations applicable
to us.
Maritime claimants could arrest or attach one or more of our vessels, which could interrupt our cash flow.
Crew members, suppliers of goods and services to a vessel, shippers of cargo and other parties may be entitled to a maritime lien against a
vessel for unsatisfied debts, claims or damages. In many jurisdictions, a maritime lien-holder may enforce its lien by “arresting” or “attaching” a vessel through judicial or foreclosure proceedings. The arrest or attachment of one or more of our
vessels could result in a significant loss of earnings for the related off-hire period.
In addition, in jurisdictions where the “sister ship” theory of liability applies, such as South Africa, a claimant may arrest the vessel which
is subject to the claimant’s maritime lien and any “associated” vessel, which is any vessel owned or controlled by the same owner. In countries with “sister ship” liability laws, claims might be asserted against us or any of our vessels for
liabilities of other vessels that we own
Governments could requisition our vessels during a period of war or emergency resulting in a loss of earnings.
A government of a vessel’s registry could requisition for title or seize one or more of our vessels. Requisition for title occurs when a
government takes control of a vessel and becomes the owner. A government could also requisition one or more of our vessels for hire. Requisition for hire occurs when a government takes control of a vessel and effectively becomes the charterer at
dictated charter rates. Generally, requisitions occur during a period of war or emergency. Government requisition of one or more of our vessels could have a material adverse effect on our business, results of operations, cash flows, financial
condition and ability to pay dividends.
26
Risks Related to Our Business
We are dependent on the spot market and any decrease in spot market rates in the future may adversely affect our earnings
and our ability to pay dividends.
As of August 31, 2022, 61 of the 65 vessels which are owned by us were employed in the spot market or on short-term or variable rate time
charters, and we are therefore exposed to fluctuations in spot market charter rates.
Although the number of vessels in our fleet that participate in the spot market will vary from time to time, we anticipate that a significant
portion of our fleet will participate in this market. As a result, our financial performance will be significantly affected by conditions in the tanker spot market and only our vessels that operate under fixed-rate time charters may, during the
period such vessels operate under such time charters, provide a fixed source of revenue to us.
Historically, the tanker market has been volatile as a result of the many conditions and factors that can affect the price, supply and demand
for tanker capacity. The spot market may fluctuate significantly based upon supply of and demand of vessels and cargoes. The successful operation of our vessels in the competitive spot market depends upon, among other things, obtaining profitable
charters and minimizing, to the extent possible, time spent waiting for charters and time spent in ballast. The spot market is very volatile, and, in the past, there have been periods when spot rates have declined below the operating cost of vessels.
If future spot market rates decline or stay at current depressed levels, then we may be unable to operate our vessels trading in the spot market profitably, meet our obligations, including payments on indebtedness, or to pay dividends in the future.
Furthermore, as charter rates in the spot market are fixed for a single voyage, which may last up to several weeks, during periods in which charter rates are rising, we will generally experience delays in realizing the benefits from such increases.
Our ability to renew the charters on our vessels on the expiration or termination of our current charters, or on vessels that we may acquire in
the future, or the charter rates payable under any Amended and Restated Charters and vessel values will depend upon, among other things, economic conditions in the sectors in which our vessels operate at that time, changes in the supply and demand
for vessel capacity and changes in the supply and demand for the seaborne transportation of energy resources.
A drop in spot market rates may provide an incentive for some charterers to default on their charters, and the failure of
our counterparties to meet their obligations could cause us to suffer losses or otherwise adversely affect our business.
We have entered into various contracts, including charter parties with our customers, which subject us to counterparty risks. The ability of
each of the counterparties to perform its obligations under a contract with us or contracts entered into on our behalf will depend on a number of factors that are beyond our control and may include, among other things, general economic conditions,
the condition of the shipping sector, the overall financial condition of the counterparty, charter rates received for tankers and the supply and demand for commodities. Should a counterparty fail to honor its obligations under any such contracts, we
could sustain significant losses that could have a material adverse effect on our business, financial condition, results of operations, cash flows and ability to pay dividends. As of June 30, 2022, five of our vessels which are owned by us are
currently on time charters with a fixed rate element. The time charters have a remaining duration of less than one year.
Often, when we enter into a time charter, the rates under that charter are fixed for the term of the charter. If the spot market rates or
short-term time charter rates in the tanker industry become significantly lower than the time charter equivalent rates that some of our charterers are obligated to pay us under our existing charters, the charterers may have incentive to default under
that charter or attempt to renegotiate the charter. If our charterers fail to pay their obligations, we would have to attempt to re-charter our vessels, which if re-chartered at lower rates, may affect our ability to operate our vessels profitably
and may affect our ability to comply with current or future covenants contained in our loan agreements.
27
Changes in the price of fuel, or bunkers, may adversely affect our profits.
For vessels on voyage charters, fuel oil, or bunkers, is a significant, if not the largest, expense. Changes in the price of fuel may adversely
affect our profitability to the extent we have vessels on voyage charters. The price and supply of fuel is unpredictable and fluctuates based on events outside our control, including geopolitical developments, such as those in the Ukraine region,
supply and demand for oil and gas, actions by the Organization of Petroleum Exporting Countries, or OPEC, and other oil and gas producers, war and unrest in oil producing countries and regions, regional production patterns and environmental concerns.
Any future increase in the cost of fuel may reduce the profitability and competitiveness of our business versus other forms of transportation, such as truck or rail.
The operation of tankers involves certain unique operational risks.
The operation of tankers has unique operational risks associated with the transportation of oil. An oil spill may cause significant
environmental damage, and a catastrophic spill could exceed the insurance coverage available. Compared to other types of vessels, tankers are exposed to a higher risk of damage and loss by fire, whether ignited by a terrorist attack, collision, or
other cause, due to the high flammability and high volume of the oil transported in tankers.
Further, our vessels and their cargoes will be at risk of being damaged or lost because of events such as marine disasters, bad weather and
other acts of God, business interruptions caused by mechanical failures, grounding, fire, explosions and collisions, human error, war, terrorism, piracy and other circumstances or events. Changing economic, regulatory and political conditions in some
countries, including political and military conflicts, have from time to time resulted in attacks on vessels, mining of waterways, piracy, terrorism, labor strikes and boycotts. These hazards may result in death or injury to persons, loss of revenues
or property, the payment of ransoms, environmental damage, higher insurance rates, damage to our customer relationships and market disruptions, delay or rerouting.
If our vessels suffer damage, they may need to be repaired at a drydocking facility. The costs of drydock repairs are unpredictable and may be
substantial. We may have to pay drydocking costs that our insurance does not cover at all or in full. The loss of revenues while these vessels are being repaired and repositioned, as well as the actual cost of these repairs, may adversely affect our
business and financial condition. In addition, space at drydocking facilities is sometimes limited and not all drydocking facilities are conveniently located. We may be unable to find space at a suitable drydocking facility or our vessels may be
forced to travel to a drydocking facility that is not conveniently located relative to our vessels’ positions. The loss of earnings while these vessels are forced to wait for space or to travel to more distant drydocking facilities may adversely
affect our business and financial condition. Further, the total loss of any of our vessels could harm our reputation as a safe and reliable vessel owner and operator. If we are unable to adequately maintain or safeguard our vessels, we may be unable
to prevent any such damage, costs or loss which could negatively impact our business, financial condition, results of operations, cash flows and ability to pay dividends.
Because the market value of our vessels may fluctuate significantly, we may incur losses when we sell vessels which may
adversely affect our earnings or could cause us to incur impairment charges.
The fair market value of vessels may increase and decrease depending on but not limited to the following factors:
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general economic and market conditions affecting the shipping industry;
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the balance between supply of and demand for vessels of a certain size;
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competition from other shipping companies;
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the availability of other modes of transportation;
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cost of newbuildings;
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28
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shipyard capacity;
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governmental or other regulations;
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changes in environmental and other regulations that may limit the useful lives of vessels;
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distressed asset sales, including newbuilding contract sales below acquisition costs due to lack of financing;
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types, sizes and ages of vessels;
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prevailing level of charter rates;
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the need to upgrade secondhand and previously owned vessels as a result of charterer requirements; and
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technological advances in vessel design or equipment or otherwise.
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During the period a vessel is subject to a charter, we might not be permitted to sell it to take advantage of increases in vessel values without
the charterers’ agreement. If we sell a vessel at a time when ship prices have fallen, the sale may be at less than the vessel’s carrying amount on our financial statements, with the result that we could incur a loss and a reduction in earnings. In
addition, if we determine at any time that a vessel’s future limited useful life and earnings require us to impair its value on our financial statements, that could result in a charge against our earnings and a reduction of our shareholders’ equity.
It is possible that the market value of our vessels will decline in the future and could adversely affect our ability to comply with current or future financial covenants contained in our loan agreements or other financing arrangements. Any
impairment charges incurred as a result of declines in charter rates and other market deterioration could negatively affect our business, financial condition, operating results or the trading price of our ordinary shares.
Conversely, if vessel values are elevated at a time when we wish to acquire additional vessels, the cost of acquisition may increase and this
could adversely affect our business, results of operations, cash flow and financial condition.
We may be unable to successfully compete with other vessel operators for charters, which could adversely affect our results
of operations and financial position.
The operation of tankers and transportation of crude and petroleum products is extremely competitive. Through our operating subsidiaries we
compete with other vessel owners (including major oil companies as well as independent companies), and, to a lesser extent, owners of other size vessels. The tanker market is highly fragmented. It is possible that we could not obtain suitable
employment for our vessels, which could adversely affect our results of operations and financial position.
Our fixed rate time charters may limit our ability to benefit from any improvement in charter rates, and at the same time,
our revenues may be adversely affected if we do not successfully employ our vessels on the expiration of our charters.
As of June 30, 2022, five of our vessels which are owned by us are currently on fixed rate charters with an initial duration in excess of six
months. While our fixed rate time charters generally provide more reliable revenues, they also limit the portion of our fleet available for spot market voyages during an upswing in the tanker industry cycle, when spot market voyages might be more
profitable. By the same token, we cannot assure you that we will be able to successfully employ our vessels in the future or renew existing charters at rates sufficient to allow us to operate our business profitably or meet our obligations. A decline
in charter or spot rates or a failure to successfully charter our vessels could have a material adverse effect on our business, financial condition, results of operations and ability to pay dividends.
29
Purchasing and operating secondhand vessels may result in increased operating costs and vessels off-hire, which could
adversely affect our earnings.
Our long-term business strategy also includes growth through the acquisition of secondhand vessels. Even following a physical inspection of
secondhand vessels prior to purchase, we do not have the same knowledge about their condition and cost of any required (or anticipated) repairs than we would have had if these vessels had been built for and operated exclusively by us. Accordingly, we
may not discover defects or other problems with such vessels prior to purchase. Any hidden defects, when detected may be expensive to repair, and if not detected, may result in accidents or other incidents for which we may become liable to third
parties. Also, when purchasing secondhand vessels, we typically do not receive the benefit of any builder warranties if the vessels we buy are older than one year.
In general, the costs to maintain a vessel in good operating condition increase with the age of the vessel. As of the June, 2022 average age of
our fleet is approximately 6 years. As our fleet ages we will incur increased costs. Older vessels are typically less fuel efficient than more recently constructed vessels due to improvements in engine and hull technology. Governmental regulations,
safety and other equipment standards related to the age of vessels may require expenditures for alterations or the addition of new equipment to some of our vessels and may restrict the type of activities in which these vessels may engage. We cannot
assure you that, as our vessels age, market conditions will justify those expenditures or enable us to operate our vessels profitably during the remainder of their useful lives. As a result, regulations and standards could have a material adverse
effect on our business, financial condition, results of operations, cash flows and ability to pay dividends.
Delays or defaults by the shipyards in the construction of our newbuildings could increase our expenses and diminish our net
income and cash flows.
As of June 30, 2022, we had contracts for four newbuilding vessels. Vessel construction projects are generally subject to risks of delay that
are inherent in any large construction project, which may be caused by numerous factors, including shortages of equipment, materials or skilled labor, unscheduled delays in the delivery of ordered materials and equipment or shipyard construction,
failure of equipment to meet quality and/or performance standards, financial or operating difficulties experienced by equipment vendors or the shipyard, unanticipated actual or purported change orders, inability to obtain required permits or
approvals, design or engineering changes and work stoppages and other labor disputes, adverse weather conditions or any other events of force majeure. Significant delays could adversely affect our financial position, results of operations and cash
flows. Additionally, failure to complete a project on time may result in the delay of revenue from that vessel, and we will continue to incur costs and expenses related to delayed vessels, such as supervision expense and interest expense for the
issued and outstanding debt.
We may be unable to locate suitable vessels for acquisition which would adversely affect our ability to expand our fleet.
Changing market and regulatory conditions may limit the availability of suitable vessels because of customer preferences or because vessels are
not or will not be compliant with existing or future rules, regulations and conventions. Additional vessels of the age and quality we desire may not be available for purchase at prices we are prepared to pay or at delivery times acceptable to us, and
we may not be able to dispose of vessels at reasonable prices, if at all. If we are unable to purchase and dispose of vessels at reasonable prices in response to changing market and regulatory conditions, our business may be adversely affected.
As we expand our fleet, we may not be able to recruit suitable employees and crew for our vessels which may limit our growth
and cause our financial performance to suffer.
As we expand our fleet, we will need to recruit suitable crew, shoreside, administrative and management personnel. We may not be able to
continue to hire suitable employees as we expand our fleet of vessels. If we are unable to recruit suitable employees and crews, we may not be able to provide our services to customers, our growth may be limited and our financial performance may
suffer.
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Increased inspection procedures, tighter import and export controls and new security regulations could increase costs and
cause disruption of our business.
International shipping is subject to security and customs inspection and related procedures in countries of origin, destination and
trans-shipment points. Under the U.S. Maritime Transportation Security Act of 2002, the U.S. Coast Guard issued regulations requiring the implementation of certain security requirements aboard vessels operating in waters subject to the jurisdiction
of the United States and at certain ports and facilities. These security procedures can result in delays in the loading, offloading or trans-shipment and the levying of customs duties, fines or other penalties against exporters or importers and, in
some cases, carriers. Future changes to the existing security procedures may be implemented that could affect the tanker sector. These changes have the potential to impose additional financial and legal obligations on carriers and, in certain cases,
to render the shipment of certain types of goods uneconomical or impractical. These additional costs could reduce the volume of goods shipped, resulting in a decreased demand for vessels and have a negative effect on our business, revenues and
customer relations.
Volatility of LIBOR and potential changes of the use of LIBOR as a benchmark could affect our profitability, earnings and
cash flow.
As certain of our current financing agreements have, and our future financing arrangements may have, floating interest rates, typically based on
LIBOR, movements in interest rates could negatively affect our financial performance. The publication of U.S. Dollar LIBOR for the one-week and two-month U.S. Dollar LIBOR tenors ceased on December 31, 2021, and the ICE Benchmark Administration
(“IBA”), the administrator of LIBOR, with the support of the United States Federal Reserve and the United Kingdom’s Financial Conduct Authority, announced the publication of all other U.S. Dollar LIBOR tenors will cease on June 30, 2023. The United
States Federal Reserve concurrently issued a statement advising banks to cease issuing U.S. Dollar LIBOR instruments after 2021. As such, any new loan agreements we enter into will not use LIBOR as an interest rate, and we will need to transition our
existing loan agreements from U.S. Dollar LIBOR to an alternative reference rate prior to June 2023.
In response to the anticipated discontinuation of LIBOR, working groups are converging on alternative reference rates. The Alternative Reference
Rate Committee, a committee convened by the Federal Reserve that includes major market participants, has proposed an alternative rate to replace U.S. Dollar LIBOR: the Secured Overnight Financing Rate, or “SOFR.” At this time, it is not possible to
predict how markets will respond to SOFR or other alternative reference rates. The impact of such a transition from LIBOR to SOFR or another alternative reference rate could be significant for us.
In order to manage our exposure to interest rate fluctuations under LIBOR, SOFR or any other alternative rate, we have and may from time-to-time
use interest rate derivatives to effectively fix some of our floating rate debt obligations. No assurance can however be given that the use of these derivative instruments, if any, may effectively protect us from adverse interest rate movements. The
use of interest rate derivatives may affect our results through mark to market valuation of these derivatives. Also, adverse movements in interest rate derivatives may require us to post cash as collateral, which may impact our free cash position.
Interest rate derivatives may also be impacted by the transition from LIBOR to SOFR or other alternative rates.
The discontinuation of LIBOR presents a number of risks to our business, including volatility in applicable interest rates among our financing
agreements, potential increased borrowing costs for future financing agreements or unavailability of or difficulty in attaining financing, which could in turn have an adverse effect on our profitability, earnings and cash flow.
We may be unable to comply with the covenants contained in our loan agreement, which could affect our ability to conduct our
business.
As of June 30, 2022, we had $2,328.4 million of outstanding debt. Certain of our debt facilities require us or our subsidiaries to maintain the
following financial covenants; minimum value of vessels, value-adjusted equity, positive working capital, and a certain level of free cash.
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Because some of these ratios are dependent on the market value of vessels, should vessel values materially decline in the future, we may be
required to take action to reduce our debt, provide additional security or to act in a manner contrary to our business objectives to meet any such financial ratios and satisfy any such financial covenants. Events beyond our control, including changes
in the economic and business conditions in the shipping markets in which we operate, may affect our ability to comply with these covenants. We cannot assure you that we will meet these ratios or satisfy our financial or other covenants or that our
lenders will waive any failure to do so.
These financial and other covenants may adversely affect our ability to finance future operations or limit our ability to pursue certain
business opportunities or take certain corporate actions. The covenants may also restrict our flexibility in planning for changes in our business and the industry and make us more vulnerable to economic downturns and adverse developments. A breach of
any of the covenants in, or our inability to maintain the required financial ratios under the credit facilities would prevent us from borrowing additional money under our credit facilities and could result in a default under our credit facilities. If
a default occurs under our credit facilities, the lenders could elect to declare the issued and outstanding debt, together with accrued interest and other fees, to be immediately due and payable and foreclose on the collateral securing that debt,
which could constitute all or substantially all of our assets.
Failure to comply with the U.S. Foreign Corrupt Practices Act and other anti-corruption laws could result in fines, criminal
penalties and an adverse effect on our business.
We may operate in a number of countries throughout the world, including countries known to have a reputation for corruption. We are committed to
doing business in accordance with applicable anti-corruption laws and have adopted a code of business conduct and ethics which is consistent and in full compliance with the U.S. Foreign Corrupt Practices Act of 1977, or the FCPA and other
anti-bribery legislation. We are subject, however, to the risk that we, our affiliated entities or our or their respective officers, directors, employees and agents may take actions determined to be in violation of such anti-corruption laws,
including the FCPA. Any such violation could result in substantial fines, sanctions, civil and/or criminal penalties, curtailment of operations in certain jurisdictions, and might adversely affect our business, results of operations or financial
condition. In addition, actual or alleged violations could damage our reputation and ability to do business. Furthermore, detecting, investigating, and resolving actual or alleged violations is expensive and can consume significant time and attention
of our senior management. Though we have implemented monitoring procedures and required policies, guidelines, contractual terms and audits, these measures may not prevent or detect failures by our agents or intermediaries regarding compliance.
As an exempted company incorporated under Bermuda law, our operations are subject to economic substance requirements.
The Economic Substance Act 2018 and the Economic Substance Regulations 2018 of Bermuda (the “Economic Substance Act” and the “Economic Substance
Regulations”, respectively) became operative on December 31, 2018. The Economic Substance Act applies to every registered entity in Bermuda that engages in a relevant activity and requires that every such entity shall maintain a substantial economic
presence in Bermuda. Relevant activities for the purposes of the Economic Substance Act are banking business, insurance business, fund management business, financing and leasing business, headquarters business, shipping business, distribution and
service center business, intellectual property holding business and conducting business as a holding entity.
The Bermuda Economic Substance Act provides that a registered entity that carries on a relevant activity complies with economic substance
requirements if (a) it is directed and managed in Bermuda, (b) its core income-generating activities (as may be prescribed) are undertaken in Bermuda with respect to the relevant activity, (c) it maintains adequate physical presence in Bermuda, (d)
it has adequate full time employees in Bermuda with suitable qualifications and (e) it incurs adequate operating expenditure in Bermuda in relation to the relevant activity.
A registered entity that carries on a relevant activity is obliged under the Bermuda Economic Substance Act to file a declaration in the
prescribed form with the Bermuda Registrar of Companies (the “Registrar”) on an annual basis.
If we fail to comply with our obligations under the Bermuda Economic Substance Act or any similar law applicable to us in any other
jurisdictions, we could be subject to financial penalties and spontaneous disclosure of information to foreign tax officials in related jurisdictions and may be struck from the register of companies in Bermuda or such other jurisdiction. Any of these
actions could have a material adverse effect on our business, financial condition and results of operations.
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Risks Related to Our Company
Incurrence of expenses or liabilities may reduce or eliminate cash distributions.
In December 2015, our Board of Directors approved implementing a dividend policy to distribute quarterly dividends to shareholders equal to or close to earnings per share adjusted for non-recurring
items. No cash dividends were declared in 2021. We declared cash dividends of $0.15 per share in relation to the second quarter of 2022. The amount and timing of dividends will depend on our earnings, financial condition, cash position, Bermuda
law affecting the payment of distributions and other factors. However, we could incur other expenses or contingent liabilities that would reduce or eliminate the cash available for distribution by us as dividends. In addition, the timing and
amount of dividends, if any, is at the discretion of our Board of Directors. We cannot guarantee that our Board of Directors will declare dividends in the future; however, we may declare or pay cash dividends or other cash distributions not
exceeding $0.15 per Frontline share during the period from the signing of the Combination Agreement until the earlier of the completion of the Tender Offer or termination of the Combination Agreement (the “Interim Period”), which has been
declared in relation to the second quarter of 2022 as mentioned above, provided that if Frontline declares or pays cash dividends or other cash distributions in excess $0.15 per share with a record date prior to the expiry of the Interim Period
then Frontline agrees to pay such excess amount multiplied by 1.45 in respect of each outstanding share in Euronav.
We may not be able to obtain financing on terms acceptable to us or at all, which may negatively impact our business.
We cannot guarantee that we will be able to obtain additional financing at all or on terms acceptable to us. If adequate funds are not
available, we may have to reduce expenditures for investments in new and existing projects, which could hinder our growth, prevent us from realizing potential revenues from prior investments and have a negative impact on our cash flows and results of
operations.
We may be required to record a further goodwill impairment loss, which could have a material adverse effect on our results
of operations and financial position.
We are required to assess goodwill for impairment at least on an annual basis, or more frequently, if indicators are present or changes in
circumstances suggest that impairment may exist. Our future operating performance may be affected by potential impairment charges related to goodwill. The process of evaluating the potential impairment of goodwill is subjective and requires
significant judgment at many points during the analysis. A description of our critical accounting policies and estimates can be found in “Item 5. Operating and Financial Review and Prospects”.
As of June 30, 2022, we had $112.5 million of goodwill on our balance sheet. Any goodwill impairment loss would negatively impact our results of
operations and financial position.
The aging of our fleet may result in increased operating costs or loss of hire in the future, which could adversely affect
our earnings.
In general, the costs to maintain a vessel in good operating condition increase with the age of the vessel. As of June 30, 2022, the average age
of our tanker fleet, owned, leased or chartered-in by us, is approximately 6 years. As our fleet ages, we will incur increased costs. Older vessels are typically less fuel-efficient and more costly to maintain than more recently constructed vessels
due to improvements in engine technology. Cargo insurance rates also increase with the age of a vessel, making older vessels less desirable to charterers. Governmental regulations, including environmental regulations, safety or other equipment
standards related to the age of vessels may require expenditures for alterations, or the addition of new equipment, to our vessels and may restrict the type of activities in which our vessels may engage. As our vessels age, market conditions might
not justify those expenditures or enable us to operate our vessels profitably during the remainder of their useful lives.
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If we do not set aside funds and are unable to borrow or raise funds for vessel replacement at the end of a vessel’s useful
life our revenue will decline, which would adversely affect our business, results of operations, financial condition and ability to pay dividends.
If we do not set aside funds and are unable to borrow or raise funds for vessel replacement, we will be unable to replace the vessels in our
fleet upon the expiration of their remaining useful lives. Our cash flows and income are dependent on the revenues earned by the chartering of our vessels. If we are unable to replace the vessels in our fleet upon the expiration of their useful
lives, our business, results of operations, financial condition and ability to pay dividends would be adversely affected. Any funds set aside for vessel replacement will not be available for cash distributions and dividends.
Certain of our directors, executive officers and major shareholders may have interests that are different from the interests
of our other shareholders, including Hemen, which may be able to exercise significant influence over us.
Certain of our directors, executive officers and major shareholders may have interests that are different from, or are in addition to, the
interests of our other shareholders. In particular, Hemen and certain related companies whose shares are indirectly held by trusts settled by Mr. Fredriksen, our Director, for the benefit of his family beneficially own 79,321,042, or 35.6%, of our
ordinary shares as of August 31, 2022.
Hemen is also a principal shareholder of a number of other large publicly traded companies involved in various sectors of the shipping and oil
services industries, or the Hemen related companies. In addition, certain of our directors, including Mr. Lorentzon, Mr. Fredriksen, Mr. O’Shaughnessy, Mr. Jakobsen and Mr. Jensen, also serve on the boards of one or more of the Hemen related
companies, including but not limited to, Golden Ocean Group Limited, or Golden Ocean, SFL Corporation Ltd, or SFL, Archer Limited, Avance Gas Holding Ltd. and Flex LNG Ltd. There may be real or apparent conflicts of interest with respect to matters
affecting Hemen and other Hemen related companies whose interests in some circumstances may be adverse to our interests.
For so long as Hemen owns a significant percentage of our outstanding ordinary shares, it may be able to exercise significant influence over us
and will be able to strongly influence the outcome of shareholder votes on other matters, including the adoption or amendment of provisions in our articles of incorporation or bye-laws and approval of possible mergers, amalgamations, control
transactions and other significant corporate transactions. This concentration of ownership may have the effect of delaying, deferring or preventing a change in control, merger, amalgamations, consolidation, takeover or other business combination.
This concentration of ownership could also discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of us, which could in turn have an adverse effect on the market price of our ordinary shares. Hemen may
not necessarily act in accordance with the best interests of other shareholders. The interests of Hemen may not coincide with the interests of other holders of our ordinary shares. To the extent that conflicts of interests may arise, Hemen may vote
in a manner adverse to us or to you or other holders of our securities.
As referenced above, Hemen and other entities related to it own and beneficially own an aggregate of 35.6% of Frontline’s ordinary shares.
Famatown and other entities related to it own and beneficially own an aggregate of 19% of Euronav’s ordinary shares. Hemen and Famatown and other entities related to them have agreed to take necessary corporate resolutions and at shareholders
meetings of Frontline and Euronav use the voting rights attached to their shares to vote in favor of any resolution necessary to consummate the transactions outlined in the Combination Agreement, including the Redomiciliation.
We may be unable to attract and retain key management personnel in the tanker industry, which may negatively impact the
effectiveness of our management and our results of operation.
Our success depends to a significant extent upon the abilities and efforts of our senior executives and Mr. Fredriksen, for the management of
our activities and strategic guidance. While we believe that we have an experienced management team, the loss or unavailability of one or more of our senior executives and Mr. Fredriksen, for any extended period of time could have an adverse effect
on our business and results of operations.
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If labor interruptions are not resolved in a timely manner, they could have a material adverse effect on our business,
results of operations, cash flows, financial condition and available cash.
As of June 30, 2022, we employed approximately 78 people in our offices in Bermuda, the United Kingdom, Singapore, Norway and China. We contract
with independent ship managers to manage and operate our vessels, including the crewing of those vessels. If not resolved in a timely and cost-effective manner, industrial action or other labor unrest could prevent or hinder our operations from being
carried out as we expect and could have a material adverse effect on our business, results of operations, cash flows, financial condition and available cash.
We may not have adequate insurance to compensate us if our vessels are damaged or lost.
We procure insurance for our fleet against those risks that we believe the shipping industry commonly insures. These insurances include hull and
machinery insurance; protection and indemnity insurance, which include environmental damage and pollution insurance coverage; freight, demurrage and defense insurance, which provides cover to shipowners and operators for legal and other costs
incurred in relation to disputes that are uninsured; and war risk insurance. We can give no assurance that we will be adequately insured against all risks and we cannot guarantee that any particular claim will be paid, even if we have previously
recorded a receivable or revenue in respect of such claim. Our insurance policies may contain deductibles for which we will be responsible and limitations and exclusions, which may increase our costs or lower our revenues.
We cannot assure you that we will be able to obtain adequate insurance coverage for our vessels in the future or renew such policies on the same
or commercially reasonable terms, or at all. For example, more stringent environmental regulations have in the past led to increased costs for, and in the future, may result in the lack of availability of, protection and indemnity insurance against
risks of environmental damage or pollution. Any uninsured or underinsured loss could harm our business, results of operations, cash flows, financial condition and ability to pay dividends. In addition, our insurance may be voidable by the insurers as
a result of certain of our actions, such as our vessels failing to maintain certification with applicable maritime self-regulatory organizations. Further, we cannot assure you that our insurance policies will cover all losses that we incur, or that
disputes over insurance claims will not arise with our insurance carriers. Any claims covered by insurance would be subject to deductibles, and since it is possible that a large number of claims may be brought, the aggregate amount of these
deductibles could be material. In addition, our insurance policies may be subject to limitations and exclusions, which may increase our costs or lower our revenues, which may have a material adverse effect on our business, results of operations, cash
flows, financial condition and ability to pay dividends.
We may be subject to calls because we obtain some of our insurance through protection and indemnity associations.
We may be subject to increased premium payments, or calls, if the value of our claim records, the claim records of our fleet managers, and/or
the claim records of other members of the protection and indemnity associations through which we receive insurance coverage for tort liability (including pollution-related liability) significantly exceed projected claims. In addition, our protection
and indemnity associations may not have enough resources to cover claims made against them. Our payment of these calls could result in significant expense to us, which could have a material adverse effect on our business, results of operations, cash
flows, financial condition and ability to pay dividends.
Because our offices and most of our assets are outside the United States, you may not be able to bring suit against us, or
enforce a judgment obtained against us in the United States.
Our executive offices, administrative activities and the majority of our assets are located outside the United States. In
addition, our directors and officers are not residents of the United States. As a result, it may be more difficult for investors to effect service of process within the United States upon us, or to enforce both in the United States and outside the
United States judgments against us in any action, including actions predicated upon the civil liability provisions of the federal securities laws of the United States.
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A judgment obtained in any court of the United States (in this paragraph, a “Judgment”) would not automatically be enforced by the courts
of Cyprus. In order to enforce a Judgment in Cyprus, a new legal process must be initiated before a court of competent jurisdiction in Cyprus. A summary judgment may be available and in deciding whether to issue such summary judgment, the Cypriot
courts may have regard to the following considerations:
(i) that the Judgment was not obtained or alleged to have been
obtained by fraud;
(ii) the process and decision of the relevant court of the
United States was not contrary to natural or constitutional justice under the laws of Cyprus and the enforcement of the Judgment would not be contrary to public policy as understood by the Cypriot courts or constitute the enforcement of a judgment
of a penal or taxation nature;
(iii) the Judgment is final and conclusive and is for a debt or
a definite sum of money;
(iv) the jurisdiction of the relevant court of the United
States has been exercised in circumstances which, as a matter of Cypriot law, a Cypriot court will recognize as justifying enforcement of the Judgment;
(v) the procedural rules of the relevant court of the United
States in relation to the obtaining of the Judgment have been observed; and
(vi) the Judgment is not inconsistent with a judgment of a
Cypriot court in respect of the same matter.
The Cyprus Court will not examine the merits of the case. If the action is successful, the claimant can proceed with the following enforcement methods
provided the company has assets in Cyprus: (i) writ of execution of movables, (ii) writ for sale of immovable property, (iii) registration of encumbrance over immovable property, (iv) garnishee/third party debt order, and (v) injunction and other
orders encumbering the interests of the company as judgement debtor. Alternatively, the judgement creditor has the option of delivering a statutory demand for payment of the liquidated judgement amount within 21 days. In case of failure to comply,
the judgement creditor has the right to file a winding up petition to the Court.
United States tax authorities could treat the Company as a “passive foreign investment company,” which could have adverse
United States federal income tax consequences to United States shareholders.
A foreign corporation will be treated as a “passive foreign investment company,” or PFIC, for United States federal income tax purposes if
either (1) at least 75% of its gross income for any taxable year consists of certain types of “passive income” or (2) at least 50% of the average value of the corporation’s assets produce or are held for the production of those types of “passive
income.” For purposes of these tests, “passive income” includes dividends, interest, and gains from the sale or exchange of investment property and rents and royalties other than rents and royalties which are received from unrelated parties in
connection with the active conduct of a trade or business. For purposes of these tests, income derived from the performance of services does not constitute “passive income.” United States shareholders of a PFIC are subject to a disadvantageous United
States federal income tax regime with respect to certain distributions they receive from the PFIC and the gain, if any, they derive from the sale or other disposition of their shares in the PFIC.
Based on our current and proposed method of operation, we do not believe that we are, have been or will be a PFIC with respect to any taxable
year. In this regard, we intend to treat the gross income we derive or are deemed to derive from our time chartering and voyage chartering activities as services income, rather than rental income. Accordingly, we believe that our income from these
activities does not constitute “passive income,” and the assets that we own and operate in connection with the production of that income do not constitute assets that produce, or are held for the production of, “passive income.”
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Although there is no direct legal authority under the PFIC rules addressing our method of operation there is substantial legal authority
supporting our position consisting of case law and United States Internal Revenue Service, or the IRS, pronouncements concerning the characterization of income derived from time charters and voyage charters as services income for other tax purposes.
However, it should be noted that there is also authority which characterizes time charter income as rental income rather than services income for other tax purposes. Accordingly, no assurance can be given that the IRS or a court of law will accept
our position, and there is a risk that the IRS or a court of law could determine that we are a PFIC. Moreover, no assurance can be given that we would not constitute a PFIC for any future taxable year if there were to be changes in the nature and
extent of our operations.
If the IRS were to find that we are or have been a PFIC for any taxable year, our United States shareholders will face adverse United States
federal income tax consequences. Under the PFIC rules, unless those shareholders make an election available under the United States Internal Revenue Code of 1986, as amended, or the Code (which election could itself have adverse consequences for such
shareholders, as discussed below under “Taxation-United States Federal Income Tax Considerations”), such shareholders would be liable to pay United States federal income tax at the then prevailing income tax rates on ordinary income plus interest
upon excess distributions and upon any gain from the disposition of our ordinary shares, as if the excess distribution or gain had been recognized ratably over the shareholder’s holding period of our ordinary shares. See “Taxation-United States
Federal Income Tax Considerations-Passive Foreign Investment Company Status and Significant Tax Consequences” for a more comprehensive discussion of the United States federal income tax consequences to United States shareholders if we are treated as
a PFIC.
We may not qualify for an exemption under Section 883 of the Code, and may therefore have to pay tax on United States source
income, which would reduce our earnings.
Under the Code, 50% of the gross shipping income of a vessel owning or chartering corporation, such as ourselves and our subsidiaries, that is
attributable to transportation that begins or ends, but that does not both begin and end, in the United States, may be subject to a 4% United States federal income tax without allowance for deduction, unless that corporation qualifies for exemption
from tax under Section 883 of the Code and the applicable Treasury Regulations promulgated thereunder.
We believe we qualify for this statutory tax exemption for the 2021 taxable year.
However, we may not qualify for exemption under Section 883 in future taxable years. There are factual circumstances beyond our control that
could cause us to lose the benefit of this tax exemption and become subject to United States federal income tax on our United States source shipping income. For example, if Hemen, who we believe to be a non-qualified shareholder, were to, in
combination with other non-qualified shareholders with a 5% or greater interest in our ordinary shares, come to own 50% or more of our outstanding ordinary shares for more than half the days during the taxable year, we would not qualify for exemption
under Section 883 for such taxable year. Due to the factual nature of the issues involved, there can be no assurances on our tax-exempt status or that of any of our subsidiaries.
If we are not entitled to exemption under Section 883 of the Code for any taxable year, we could be subject during those years to an effective
2% United States federal income tax on gross shipping income derived during such a year that is attributable to the transport of cargoes to or from the United States. The imposition of this tax would have a negative effect on our business and would
result in decreased earnings available for distribution to our shareholders.
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Risks Related to an Investment in Our Securities
The price of our ordinary shares historically has been volatile.
The trading price and volume of our ordinary shares has been and may continue to be subject to large fluctuations. The market price and volume
of our ordinary shares may increase or decrease in response to a number of events and factors, including:
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investor reaction to our business strategy;
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our continued compliance with the listing standards of the NYSE and the OSE;
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trends in our industry and the markets in which we operate;
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changes in the market price of the services we provide;
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the introduction of new technologies or products by us or by our competitors;
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changes in expectations as to our future financial performance, including financial estimates by securities analysts and investors;
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operating results that vary from the expectations of securities analysts and investors;
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announcements by us or our competitors of significant contracts, acquisitions, strategic partnerships, joint ventures, financings or capital commitments;
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our ability or inability to raise additional capital and the terms on which we raise it;
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regulatory or legal developments in the United States and other countries, especially changes in laws or regulations applicable to our industry;
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significant changes in the performance of the stock markets in general;
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sales of our ordinary shares by us or our stockholders;
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general economic and competitive conditions;
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changes in key management personnel; and
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other events or factors, including those resulting from such events, or the prospect of such events, including war, terrorism and other international conflicts, public health issues, including
health epidemics or pandemics, such as the ongoing COVID-19 pandemic, adverse weather and climate conditions that could disrupt our operations or result in political or economic instability.
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This volatility may adversely affect the prices of our ordinary shares regardless of our operating performance. To the extent that the price of
our ordinary shares declines, our ability to raise funds through the issuance of equity or otherwise use our ordinary shares as consideration will be reduced. These factors may limit our ability to implement our operating and growth plans.
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Future sales of our ordinary shares could have an adverse effect on our share price.
In order to finance our future operations and growth, we may have to incur substantial additional indebtedness and possibly issue additional
equity securities. Future ordinary share issuances, directly or indirectly through convertible or exchangeable securities, options or warrants, will generally dilute the ownership interests of our existing ordinary shareholders, including their
relative voting rights and could require substantially more cash to maintain the then existing level, if any, of our dividend payments to our ordinary shareholders, as to which no assurance can be given. Preferred shares, if issued, will generally
have a preference on dividend payments, which could prohibit or otherwise reduce our ability to pay dividends to our ordinary shareholders. Our debt will be senior in all respects to our ordinary shareholders, will generally include financial and
operating covenants with which we will be required to comply and will include acceleration provisions upon defaults thereunder, including our failure to make any debt service payments, and possibly under other debt. Because our decision to issue
equity securities or incur debt in the future will depend on a variety of factors, including market conditions and other matters that are beyond our control, we cannot predict or estimate the timing, amount or form of our capital raising activities
in the future. Such activities could, however, cause the price of our ordinary shares to decline significantly.
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SPECIAL GENERAL MEETING OF FRONTLINE SHAREHOLDERS
The Frontline Special General Meeting
Frontline is furnishing this Proxy Statement/Prospectus to you as part of the solicitation of proxies by its Board of
Directors for use at the Special General Meeting to be held on , 2022, and at any adjournment or postponement thereof. This Proxy Statement/Prospectus is first being furnished to Frontline’s shareholders on or about , 2022. This
Proxy Statement/Prospectus provides you with information you need to know to be able to vote or instruct your vote to be cast at the Special General Meeting.
Date, Time and Place of Special General Meeting
The Special General Meeting will be held at , on , 2022, at , located at ,
or such other date, time and place to which such meeting may be adjourned or postponed, for the purpose of considering and voting upon the proposals.
Purpose of Special General Meeting
At the Special General Meeting, Frontline will ask the Frontline shareholders to vote in favor of the following proposals:
(1) The Redomiciliation Proposal - a proposal to:
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re-domicile Frontline by way of discontinuation out of Bermuda and continue as a public company limited by shares incorporated in the Republic of Cyprus (“Cyprus”) under the
name of Frontline Plc (the “Redomiciliation”);
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| (b) |
approve an amendment to the Company’s current Amended and Restated Bye-Laws, to include a provision allowing for the Company’s redomiciliation out of Bermuda as required under
the laws of Cyprus, attached to this Proxy Statement/Prospectus as Annex A (the “Discontinuation Amendment”);
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| (c) |
adopt, upon the Redomiciliation taking effect by issuance of the Temporary Redomiciliation Certificate, the Amended and
Restated Memorandum and Articles of Association governed by the laws of Cyprus, attached to this proxy statement/prospectus (the “Proxy Statement/Prospectus”) as Annex B (the “Frontline Cyprus Amended and Restated Charter”), in
place of Frontline’s Memorandum of Association and Frontline’s current Amended and Restated Bye-Laws including as amended by the proposed Discontinuation Amendment (the “Current Constitution”) which will remove or amend those provisions of
the Current Constitution that terminate or otherwise cease to be applicable as a result of the Redomiciliation;
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| (d) |
approve Frontline (Cyprus)’s appointment of as the authorized representative in Cyprus to effect the Redomiciliation and sign all necessary statutory
declarations;
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| (e) |
approve Frontline (Cyprus)’s registered address in Cyprus and Frontline (Cyprus)’s directors, secretary and auditors, each effective upon the Redomiciliation taking effect, as
described further in the accompanying Proxy Statement/Prospectus; and
|
(2) The Adjournment Proposal - a proposal to adjourn the Special General Meeting to a later date or dates, if necessary, to
permit further solicitation and vote of proxies if, based upon the tabulated vote at the time of the Special General Meeting, there are not sufficient votes to approve one or more proposals presented at the Special General Meeting.
40
Recommendation of Frontline Board of Directors
Frontline’s Board of Directors believes that both the Redomiciliation Proposal and Adjournment Proposal to be presented at the
Special General Meeting is in the best interests of Frontline and its shareholders and unanimously recommends that its shareholders vote “FOR” both the proposals.
Record Date and Voting
You will be entitled to vote or direct votes to be cast at the Special General Meeting if you owned ordinary shares at the
close of business on , 2022, which is the record date for the Special General Meeting. You are entitled to one vote for each ordinary share that you owned as of the close of business on the record date. If your shares are held in “street
name” or are in a margin or similar account, you should contact your broker, bank or other nominee to ensure that votes related to the shares you beneficially own are properly counted. On the record date, there were ordinary shares
outstanding.
Voting Your Shares
Each ordinary share that you hold in your name entitles you to one vote on both of the proposals for the Special General
Meeting. Your one or more proxy cards show the number of ordinary shares that you hold.
If you are a holder of record, there are two ways to vote your ordinary shares at the Special General Meeting:
| • |
You can vote by completing, signing and returning the enclosed proxy card in the postage-paid envelope provided. If you hold your shares in “street name” through a bank, broker
or other nominee, you will need to follow the instructions provided to you by your bank, broker or other nominee to ensure that your shares are represented and voted at the applicable Special General Meeting(s). If you vote by proxy card,
your “proxy,” whose name is listed on the proxy card, will vote your shares as you instruct on the proxy card. If you sign and return the proxy card but do not give instructions on how to vote your shares, your ordinary shares will be voted,
as recommended by Frontline’s Board of Directors. With respect to proposals for the Special General Meeting, that means: “FOR” the Redomiciliation Proposal and “FOR” the Adjournment Proposal.
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| • |
You can attend the Special General Meeting and vote in person. You will be given a ballot when you arrive. However, if your ordinary shares are held in the name of your broker,
bank or other nominee, you must get a proxy from the broker, bank or other nominee. That is the only way we can be sure that the broker, bank or nominee has not already voted your ordinary shares.
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Who Can Answer Your Questions About Voting Your Shares
If you have any questions about how to vote or direct a vote in respect of your ordinary shares, you may contact Frontline’s
proxy solicitor:
41
Quorum and Vote Required for Proposals
A quorum of Frontline’s shareholders is necessary for a validly constituted meeting. A quorum will be present at the
Special General Meeting if at least two Frontline shareholders as of the record date entitled to vote at the Special General Meeting (whatever the number of shares held by them), are present, in person or by proxy, provided however that if
Frontline shall have only one shareholder, such shareholder, present in person or by proxy, shall constitute a quorum. Special General Meeting.
The approval of both the Redomiciliation Proposal and Adjournment Proposal requires the affirmative vote of more than 50%
of the votes cast by the holders of the ordinary shares of Frontline as of the record date present, in person or by proxy, and voting at the Special General Meeting. Accordingly, a shareholder’s failure to vote by proxy or to vote in person at the
Special General Meeting, an abstention from voting, or a broker non-vote will have no effect on the outcome of any vote on the proposals.
The Adjournment Proposal is not conditioned upon the approval of the Redomiciliation Proposal and the Redomiciliation
Proposal is not conditioned upon the approval of the Adjournment Proposal.
Abstentions and Broker Non-Votes
Under the rules of various national and regional securities exchanges, your broker, bank or nominee cannot vote your
shares with respect to non-discretionary matters unless you provide instructions on how to vote in accordance with the information and procedures provided to you by your broker, bank or nominee. Frontline believes the proposals presented to its
shareholders will be considered non-discretionary and therefore your broker, bank or nominee cannot vote your shares without your instruction. If you do not provide instructions with your proxy, your bank, broker or other nominee may deliver a
proxy card expressly indicating that it is NOT voting your shares; this indication that a bank, broker or nominee is not voting your shares is referred to as a “broker non-vote.”
Abstentions will be counted for purposes of determining the presence of a quorum at the Special General Meeting.
Abstentions and broker non-votes will have no effect on the outcome of any vote on the proposals.
Revocability of Proxies
If you have submitted a proxy to vote your ordinary shares and wish to change your vote, you may do so by delivering a
later-dated, signed proxy card to , Frontline’s proxy solicitor, or the proxy solicitor, prior to the date of the Special General Meeting or by voting in person at the Special General Meeting. Attendance at the Special General Meeting
alone will not change your vote. You also may revoke your proxy by sending a notice of revocation to: .
Appraisal or Dissenters’ Rights
No appraisal or dissenters’ rights are available to holders of Frontline’s ordinary shares or warrants in connection with
the Redomiciliation.
Solicitation of Proxies
Frontline will pay the cost of soliciting proxies for the Special General Meeting. Frontline has engaged the proxy
solicitor to assist in the solicitation of proxies for the Special General Meeting. Frontline has agreed to pay the proxy solicitor a fee of $15,000, plus disbursements. Frontline will reimburse the proxy solicitor for reasonable out-of-pocket
expenses and will indemnify the proxy solicitor and its affiliates against certain claims, liabilities, losses, damages and expenses. Frontline also will reimburse banks, brokers and other custodians, nominees and fiduciaries representing
beneficial owners of ordinary shares for their expenses in forwarding soliciting materials to beneficial owners of ordinary shares and in obtaining voting instructions from those owners. Frontline’s directors, officers and employees may also
solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional amounts for soliciting proxies.
Share Ownership
As of the record date, Hemen and other entities related to it own and beneficially own an aggregate of 35.6% of
Frontline’s ordinary shares. Famatown and other entities related to it own and beneficially own an aggregate of 19% of Euronav’s ordinary shares. Hemen and Famatown and other entities related to them have agreed to take necessary corporate
resolutions and at shareholders meetings of Frontline and Euronav use the voting rights attached to their shares to vote in favor of any resolution necessary to consummate the transactions outlined in the Combination Agreement, including the
Redomiciliation.
42
THE REDOMICILIATION
General
Pursuant to section 132(G) of the Bermuda Companies Act 1981, as amended, a Bermuda exempted company can make an application to be
continued in a jurisdiction outside Bermuda. The jurisdiction into which a company is to be continued must be either an appointed jurisdiction or a jurisdiction approved by the Bermuda Minister of Finance upon application by a company for the
purposes of its discontinuance. As Cyprus is not currently an appointed jurisdiction for purposes of discontinuance from Bermuda, we have applied for and been granted ministerial approval in respect of Cyprus as the jurisdiction to which Frontline is
to be continued in accordance with section 132G(2)(e)(ii) of the Companies Act 1981.
A meeting of the Board of Directors of the Company must be held to approve the discontinuance and a general meeting of the members must be
convened to authorise the continuation of the Company in the foreign jurisdiction.
In connection with the Redomiciliation, we have applied for, and received, approval of the Company name in Cyprus from the Cyprus
Companies’ Registry, and we expect to take the following additional steps: (i) draft the Amended and Restated Charter of the Company as per the requirements of Cyprus law, in the Greek language and to be additionally translated into English; (ii)
obtain a certificate of good standing from Bermuda with apostille, in the Greek language and to be translated into English by a sworn translator; (iii) obtain a confirmation of notice provided to the applicable Bermudan authorities on Bermuda of
initial incorporation for registration as company continuing in Cyprus with apostille (we expect the Registrar will issue a Certificate of Discontinuance after it receives the Temporary Redomiciliation Certificate issued by the Cyprus Companies’
Registry); (iv) obtain shareholders’ resolution with apostille by which the shareholders of Frontline (Bermuda) validly resolve pursuant to Bermuda law: (a) to re-domicile Frontline (Bermuda) by way of discontinuation out of Bermuda and continue as a
company incorporated in the Republic of Cyprus (b) to transfer the registered address to Cyprus; (c) to adopt the name under which the Company will continue in Cyprus; (d) to abolish the Current Constitution and Amended and Restated Bye-Laws of the
Company including as amended by the Discontinuation Amendment and approve the replacement of the same by the adoption of the Frontline Cyprus Amended and Restated Charter which will become effective upon issuance of the Temporary Redomiciliation
Certificate and which will be filed with the Cyprus Companies’ Registry as part of the application for the Redomiciliation; (v) obtain confirmation on any consent from employees or creditors if needed under Bermuda law (understood not to be needed
under Bermuda law); (vi) obtain statutory declarations signed by all directors of Frontline (Bermuda) or a director duly authorized by the board of directors of Frontline (Bermuda) stating that the Company is solvent and able to meet all of its
liabilities and obligations and that the discontinuance would not adversely affect the interests or rights of bona fide creditors and shareholders; (vii) obtain a statutory declaration by a duly authorized director of Frontline (Bermuda) or by a
person to whom the representation of the company has been assigned confirming (a) the name of the company in Bermuda and the name under which its will continue to exist in Cyprus, (b) the jurisdiction in which the company has been incorporated and
its date of incorporation, (c) the resolution or equivalent document deciding that Frontline will be incorporated as continuing in Cyprus, (d) that Frontline has given official notice to the Bermuda authorities of its intention to be registered as
continuing in the Republic (accompanied by a receipt of such official notification), and (e) no administrative or criminal proceedings have been commenced against the company for the contravention of Bermuda law; (viii) obtain a statutory declaration
by a duly authorized director of Frontline (Bermuda) or by a person to whom the representation of the company has been assigned which confirms the solvency of the company and that there are no circumstances which could affect in a negative and
substantial manner the solvency of the company in a period of 12 months from the date of submission of the application for continuation of the company in Cyprus; (ix) obtain irrevocable deed polls signed by all directors of Frontline (Bermuda) and by
a director on behalf of Frontline (Bermuda) in respect of the service of legal process; (x) obtain a sworn statement from the directors or a director authorized by the board of directors of Frontline (Bermuda) that inter
alia there are no administrative or criminal proceedings have been initiated against the Company for infringement of the laws of Bermuda; (xi) obtain the latest prospectus of the Company pursuant to Section 354D(2)(a) of the Cyprus Companies
Law; (xii) obtain the approval of continued listing on the NYSE and OSE; (xiii) obtain sworn affidavits of a director or equivalent authorized person of Frontline (Bermuda), confirming certain information on the Company and solvency of the Company,
and attaching items (iv), (v); and (xiv) file with the Registrar a notice of discontinuance attaching information required under section 132H(1) of the Companies Act 1981. If the Company carries on activities which require a license or authorization
is required in both Cyprus and Bermuda, the Company must provide the Cypriot Registrar with the consent from the authority competent to provide such license/approval, prior to the Redomiciliation. It must also obtain any licenses which are required
in Cyprus. Once all necessary documentation is obtained or produced and the Redomiciliation application is submitted to the Cyprus Companies’ Registry, if the Cyprus Companies’ Registry is satisfied with the same, the Temporary Redomiciliation
Certificate will be issued by the Cyprus Companies’ Registry within circa ten days. Thereafter, an original and apostilled Final Deletion Certificate from Bermuda (which is the Certificate of Discontinuance issued by the Registrar) must be filed with
the Cyprus Companies’ Registry within six months of issuance of the Temporary Redomiciliation Certificate (with the possibility of a three-month extension for good cause) and circa one to two weeks following submission, a final redomiciliation
certificate will be issued by the Cyprus Companies Registry. The Cyprus final redomiciliation certificate will become effective upon submission of the Final Deletion Certificate from Bermuda. The Redomiciliation must become effective at the same time
in both jurisdictions.
43
Upon the issuance of the Temporary Redomiciliation Certificate by the Cyprus Companies’ Registry, we will be domesticated and continue as
a Cyprus company with the name “Frontline Plc.” Under Bermuda and Cyprus law, the Redomiciliation into Cyprus is deemed effective upon the issuance of the Temporary Redomiciliation Certificate by the Cyprus Companies’ Registry and the Company will
be deemed to be a Cypriot company, subject to the Cypriot Companies Law from such date. After the Redomiciliation becomes effective, we will deliver a copy of the Temporary Redomiciliation Certificate to the Registrar in Bermuda.
The Redomiciliation Completion shall be conditional upon the following Redomiciliation Conditions and applicable law: (a) Frontline
becoming a tax resident in Cyprus; (b) the approval of the Redomiciliation Proposal by the Special General Meeting having been received; (c) the issuance of the Temporary Redomiciliation Certificate from the Cyprus Companies’ Registry; and (d) the
fulfilment of all requirements under applicable law to ensure continued listing of Frontline on the NYSE or the OSE, including but not limited to: (i) the registration statement on Form F-4, of which this Proxy Statement/Prospectus forms a part,
becoming effective under the Securities Act of 1933; and (ii) the Frontline (Cyprus) shares being approved for listing on NYSE, subject to the Redomiciliation Completion. Subject to the Redomiciliation Conditions being satisfied or waived in
accordance with the Combination Agreement, the Redomiciliation Completion shall take place upon a temporary re-domiciliation certificate being issued by the Cyprus Companies’ Registry.
At the Redomiciliation Completion, Frontline shall: (a) deliver to Euronav documentation evidencing the fulfilment of the Redomiciliation
Conditions insofar as it relates to the approvals/consents/licenses/permits to be obtained by Frontline; (b) deliver to Euronav a copy of the Temporary Redomiciliation Certificate issued by the Cyprus Companies’ Registry; and (c) deliver to Euronav
evidence, satisfactory to Euronav acting reasonably, that Frontline is deemed tax resident in Cyprus.
After the Redomiciliation Completion, Frontline shall file any post-effective amendments in respect of Frontline’s registration
statements as necessary with the SEC to allow Frontline (Cyprus) to continue to utilize such registration statements.
Within 30 days of the issuance of a Temporary Re-domiciliation Certificate by the Cyprus Companies’ Registry, Frontline shall deliver to
Euronav: (a) a copy of the Certificate of Discontinuance issued by the Registrar in respect of Frontline’s discontinuance; and (b) deliver to Euronav a copy of the final certificate of continuation into Cyprus issued by the Cyprus Companies’
Registry.
The Redomiciliation is not conditioned on the completion of the Tender Offer, the Merger or the Combination Transactions.
Interests of Certain of Frontline’s Directors, Executive Officers and Major Shareholders in the Redomiciliation.
When you consider the recommendation of Frontline’s Board of Directors in favor of approval of the Redomiciliation Proposal, you should
keep in mind that certain of Frontline’s directors, executive officers and major shareholders may have interests in the Redomiciliation that are different from, or in addition to, your interests as a shareholder.
Reference is made to the Combination Agreement that Frontline entered into on July 10, 2022 with Euronav. On the terms and subject to the
conditions set forth in the Combination Agreement, Frontline has agreed after the completion of the Redomiciliation make a voluntary conditional exchange offer (the “Tender Offer”) for all outstanding shares of Euronav at an exchange ratio of 1.45
Frontline shares for 1.0 Euronav share, and Frontline and Euronav shall initiate a process whereby Euronav merges into Frontline with Frontline as the surviving entity (the “Merger”).
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While the Redomiciliation is not conditioned upon the successful completion of the Merger or the Tender Offer or the Combination
Transactions, the completion of the Tender Offer is subject to customary closing conditions, including, among others specified in the Combination Agreement, the Redomiciliation having occurred.
As referenced above, Hemen and other entities related to it own and beneficially own an aggregate of 35.6% of Frontline’s ordinary shares.
Famatown and other entities related to it own and beneficially own an aggregate of 19% of Euronav’s ordinary shares. Hemen and Famatown and other entities related to them have agreed to take necessary corporate resolutions and at shareholders
meetings of Frontline and Euronav use the voting rights attached to their shares to vote in favor of any resolution necessary to consummate the transactions outlined in the Combination Agreement, including the Redomiciliation.
Background for the Redomiciliation
Our senior management and Board of Directors believes that the Redomiciliation will, among other things, provide legal, administrative, and
other similar efficiencies. In addition, the completion of the Redomiciliation is a condition of launching and closing the Tender Offer and the Merger. For the purpose of the Redomiciliation, Frontline will adopt the Frontline Cyprus Amended and
Restated Charter which will be filed with the Cyprus Companies’ Registry as part of the Redomiciliation application and which will take effect upon the issuance of the Temporary Redomiciliation Certificate from the Cyprus Companies’ Registry. The
Frontline Cyprus Amended and Restated Charter provides Frontline’s shareholders with the same or substantially the same rights as prior to the Redomiciliation, subject to changes to conform to the Cyprus Companies Law (noting that the Frontline
Cyprus Amended and Restated Charter will contain certain additional interim governance provisions pursuant to the Combination Agreement).
Our Board of Directors considered several possible new jurisdictions for the Company’s domicile and concluded that a Cyprus domicile would
best serve the Company’s goals and interests.
Effects and Advantages of the Redomiciliation
Our Board of Directors believes that there are advantages of the Redomiciliation. As a well-established shipping and ship management
center, Cyprus is expected to provide many benefits to the Company, including but not limited to recruitment of experienced commercial and administrative and management personnel, a comprehensive tonnage tax regime, approved by the European Union,
and a geographically advantageous position between our key market time zones. In addition, the completion of the Redomiciliation is a condition of launching and closing the Tender Offer and the Merger. Please see “The Redomiciliation—Effects and
Advantages of the Redomiciliation.”
Additionally, pursuant to the Cyprus Companies Law Cap. 113, the Frontline Cyprus Amended and Restated Charter, which we will adopt at the
Special General Meeting, will be rendered effective immediately upon issue of the Temporary Redomiciliation Certificate by the Cyprus Companies’ Registry.
The effective date of the discontinuance from Bermuda pursuant to section 132H of the Bermuda Companies Act 1981, as amended, is the date
that our continuance in Cyprus is effective pursuant to the laws of Cyprus and such discontinuance and continuance shall not be deemed to: (a) create a new legal entity or (b) prejudice or affect the continuity of the body corporate which was
formerly Frontline (Bermuda).
From the date of Redomiciliation, the Company continues as a body corporate for all purposes as if incorporated and registered as a limited
liability company under and subject to the law of Cyprus. The Company then has: (a) the capacity to perform all the functions of a public limited liability company; (b) the capacity to sue and to be sued; (c) perpetual succession; and (d) the power
to acquire, hold and dispose of property.
45
As a matter of Cyprus law, the registration of the Company in Cyprus shall be void and without legal effect pursuant to the Cyprus
Companies Law if it is done with the aim of: (a) creating a new legal entity; (b) causing harm or affecting the continuation of the Company as a body corporate; (c) affecting the property of the Company and the manner in which the Company shall
retain all of its property, rights, debts and obligations; (d) rendering defective any legal or other proceedings that were commenced or are about to be commenced against the Company; or (e) acquitting or preventing any conviction, decision, opinion,
order debt, debenture or obligation which is pending or which will become pending or any reason that exists against the Company or against any shareholder, director, officer or persons to whom the management or representation of the Company has been
assigned.
Accordingly, although the Redomiciliation will effect a change in our jurisdiction of incorporation, and other changes of a legal nature,
including our adoption of new constitutional documents, which will become effective immediately upon issue of the Temporary Redomiciliation Certificate, which are described in this Proxy Statement/Prospectus, the business, assets and liabilities of
Frontline and its subsidiaries on a consolidated basis, as well as our principal locations and fiscal year, will be the same upon effectiveness of the Redomiciliation as they are currently before the Redomiciliation.
No Change in Management or Our Board of Directors Immediately After Effectiveness of the Redomiciliation
Our executive officers will remain the same upon effectiveness of the Redomiciliation. Our current executive officers are Lars H. Barstad
(Chief Executive Officer of Frontline Management AS and our principal executive officer), and Inger M. Klemp (Chief Financial Officer of Frontline Management AS and our principal financial officer).
Our Board of Directors will continue as our Board of Directors upon effectiveness of the Redomiciliation. Our current Board is composed of
John Fredriksen, James O’Shaughnessy, Ola Lorentzon, Jens Martin Jensen, Ole B. Hjertaker, and Steen Jakobsen. Our Board of Directors expects to nominate one Cypriot director prior to the effectiveness of the Redomiciliation.
In addition, none of the members or the chairperson of our committees, including our Audit Committee, will change upon effectiveness of the
Redomiciliation.
Redomiciliation Share Conversion
In the Redomiciliation, each of our currently outstanding ordinary shares will automatically continue to be outstanding by operation of
law, on a one-for-one basis, as ordinary shares of Frontline (Cyprus) with the same nominal value. Consequently, upon effectiveness of the Redomiciliation, each holder of our ordinary shares will instead hold ordinary shares of Frontline (Cyprus) of
the same nominal value, representing the same proportional equity interest in Frontline as that shareholder held in Frontline (Bermuda) and representing the same class of shares. The number of ordinary shares of Frontline (Cyprus) outstanding
immediately after the Redomiciliation will be the same as the number of ordinary shares of Frontline (Bermuda) outstanding immediately prior to the Redomiciliation.
Frontline (Cyprus) will not issue new share certificates to Frontline (Cyprus) shareholders who currently hold any of our share
certificates, except as set forth below. A shareholder who currently holds any of our share certificates will receive a new share certificate only upon any future transaction in Frontline (Cyprus) ordinary shares that requires the transfer agent to
issue share certificates in exchange for existing share certificates. It is not necessary for shareholders of Frontline (Bermuda) to exchange their existing share certificates for share certificates of Frontline (Cyprus). Until surrendered and
exchanged, each certificate evidencing Frontline (Bermuda) ordinary shares will be deemed for all purposes of the Company to evidence the identical number of ordinary shares of Frontline (Cyprus). Holders of uncertificated ordinary shares of
Frontline (Bermuda) immediately prior to the Redomiciliation will continue as holders of uncertificated ordinary shares of Frontline (Cyprus) upon effectiveness of the Redomiciliation, provided that the holders of uncertificated shares are duly
registered as holders of shares in Frontline’s register of members. After the Redomiciliation to Cyprus, share certificates will not be issued for holders of uncertificated shares.
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Shareholder Rights
After the effectiveness of the Redomiciliation, the rights of shareholders of Frontline (Cyprus) will arise and be governed under Cyprus
law and the Frontline Cyprus Amended and Restated Charter. The Frontline Cyprus Amended and Restated Charter, if approved at the Special General Meeting, will become effective upon issue of the Temporary Redomiciliation Certificate. The Frontline
Cyprus Amended and Restated Charter and Cyprus law may contain provisions that differ in some respects from those in our Current Constitution and Bermuda law and, therefore, some of your rights as a shareholder of Frontline (Cyprus) could differ from
the rights you currently possess as a shareholder of Frontline (Bermuda). The Frontline Cyprus Amended and Restated Charter will be substantially the same as our Current Constitution, subject to changes to conform to the Cyprus Companies Law (noting
that the Frontline Cyprus Amended and Restated Charter will contain certain additional interim governance provisions pursuant to the Combination Agreement). See “Comparison of Bermuda and Cyprus Corporate Law” where we describe material provisions
under the law of Bermuda and the law of the Cyprus relating to your rights as a shareholder.
Material Tax Consequences of the Redomiciliation
We do not believe that we or our shareholders will be subject to taxation in Bermuda or Cyprus as a result of the Redomiciliation. Specifically, in relation to Cyprus tax law provisions, no taxing
circumstances arise at the time of the Redomiciliation of Frontline (Cyprus) and, consequently, no tax liabilities arise as a result of any provision under Cyprus tax law. However, the provisions of Cyprus tax law shall apply on the assessment of
the incomes of Frontline (Cyprus) once it becomes a Cyprus tax resident, which may result in a higher tax rate being applied to taxable profits, depending on the nature of such profits and/or income. Similarly, the provisions of the Cyprus tax law
and double tax treaties shall apply in relation to the distributions of profits to the company to its shareholders.
We expect the Redomiciliation to qualify as a tax-free “reorganization” for purposes of U.S. federal income tax matters and, as such, we expect that neither we nor U.S. Holders will be subject to
U.S. federal income taxation as a result of the Redomiciliation. See “Taxation.”
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PROPOSALS TO BE CONSIDERED BY FRONTLINE’S SHAREHOLDERS
PROPOSAL NO. 1 - THE REDOMICILIATION PROPOSAL
The Redomiciliation
As discussed in this Proxy Statement/Prospectus, Frontline shareholders are being asked to consider and vote on the Redomiciliation Proposal to:
| (a) |
re-domicile Frontline by way of discontinuation out of Bermuda and continue as a public company limited by shares incorporated in the Republic of Cyprus (“Cyprus”) under the
name of Frontline Plc (the “Redomiciliation”);
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| (b) |
approve an amendment to the Company’s current Amended and Restated Bye-Laws, to include a provision allowing for the Company’s redomiciliation out of Bermuda as required under
the under the laws of Cyprus, attached to this Proxy Statement/Prospectus as Annex A (the “Discontinuation Amendment”);
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| (c) |
adopt, upon the Redomiciliation taking effect by issuance of the Temporary Redomiciliation Certificate, the Amended and
Restated Memorandum and Articles of Association governed by the laws of Cyprus, attached to this proxy statement/prospectus (the “Proxy Statement/Prospectus”) as Annex B (the “Amended and Restated Charter”), in place of Frontline’s
Memorandum of Association and Frontline’s current Amended and Restated Bye-Laws including as amended by the proposed Discontinuation Amendment (the “Current Constitution”) which will remove or amend those provisions of the Current
Constitution that terminate or otherwise cease to be applicable as a result of the Redomiciliation; and
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| (d) |
approve Frontline (Cyprus)’s appointment of as the authorized representative in Cyprus to effect the Redomiciliation and sign all necessary statutory
declarations;
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| (e) |
approve Frontline (Cyprus)’s registered address in Cyprus and Frontline (Cyprus)’s directors, secretary and auditors, each effective upon the Redomiciliation taking effect, as
described further in the accompanying Proxy Statement/Prospectus.
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The Discontinuation Amendment, which includes language that will amend the Company’s current Amended and Restated Bye-laws to include a provision allowing for the Redomiciliation as required under the
laws of Cyprus, is attached to this Proxy Statement/Prospectus as Annex A. The primary reason for the Redomiciliation is to enable Frontline and its shareholders to benefit from certain tax efficiencies under Cyprus law. The ability to
redomicile a Bermuda exempted company, by way of discontinuation out of Bermuda to another jurisdiction is expressly provided for in Section 132G of the Companies Act and will be included in the Company’s the Discontinuation Amendment to
Frontline’s current Amended and Restated Bye-laws (subject to obtaining the requisite shareholder approval).
You should read carefully this Proxy Statement/Prospectus in its entirety for more detailed information concerning the Redomiciliation, especially the section entitled “Taxation” beginning on page 84
and “The Redomiciliation” beginning on page 43. In particular, you are directed to the proposed Discontinuation Amendment, a copy of which is attached to this proxy statement/prospectus as Annex A.
Vote Required for Approval
The approval of the Redomiciliation Proposal requires the affirmative vote of more than 50% of the votes cast by the holders of the ordinary shares of Frontline as of the record date present, in
person or by proxy, and voting at the Special General Meeting. The Redomiciliation Proposal is not conditioned upon the Adjournment Proposal.
Recommendation of the Board of Directors
FRONTLINE’S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT FRONTLINE’S SHAREHOLDERS VOTE “FOR” THE REDOMICILIATION PROPOSAL. WHEN YOU CONSIDER THE RECOMMENDATION OF FRONTLINE’S BOARD OF DIRECTORS, YOU SHOULD KEEP IN MIND THAT CERTAIN OF FRONTLINE’S DIRECTORS, EXECUTIVE OFFICERS AND MAJOR SHAREHOLDERS MAY HAVE INTERESTS IN THE MERGER THAT ARE DIFFERENT
FROM, OR IN ADDITION TO, YOUR INTERESTS AS A SHAREHOLDER, WHICH ARE DESCRIBED ELSEWHERE IN THIS PROXY STATEMENT/PROSPECTUS.
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PROPOSAL NO. 2 - THE ADJOURNMENT PROPOSAL
Adjournment Proposal
The Adjournment Proposal, if adopted, will allow Frontline’s Board of Directors to adjourn the Special General Meeting to a later date or
dates to permit further solicitation of proxies. The Adjournment Proposal will only be presented to Frontline’s shareholders in the event that, based on the tabulated votes, there are not sufficient votes at the time of the Special General Meeting
to approve one or more of the proposals presented at the Special General Meeting. In no event will Frontline’s Board of Directors adjourn the Special General Meeting or consummate the Redomiciliation beyond the date by which it may properly do so
under Frontline’s Current Constitution and Bermuda law.
If the Adjournment Proposal is not approved by Frontline’s shareholders, Frontline’s Board of Directors may not be able to adjourn the
Special General Meeting to a later date in the event that, based on the tabulated votes, there are not sufficient votes at the time of the Special General Meeting to approve the Redomiciliation.
Vote Required for Approval
The approval of the Adjournment Proposal requires the affirmative vote of more than 50% of the votes cast by the holders of the ordinary
shares of Frontline as of the record date present, in person or by proxy, and voting at the Special General Meeting. The Adjournment Proposal is not conditioned upon the approval of any other proposal set forth in this proxy
statement/prospectus.
Recommendation of the Board of Directors
FRONTLINE’S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT FRONTLINE’S SHAREHOLDERS VOTE “FOR” THE APPROVAL OF THE
ADJOURNMENT PROPOSAL.
49
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
We are incorporating by reference Management’s Discussion and Analysis of Financial Condition and Results of Operations for the years ended
December 31, 2021 and December 31, 2020 under “Item 5—Operating and Financial Review and Prospects—A. Operating Results,” included in our 2021 Annual Report and Management’s Discussion and Analysis of Financial Condition and Results of Operations for
the six months ended June 30, 2022 included in our Report on Form 6-K filed with the SEC on September 9, 2022.
50
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are incorporating by reference “Item 11 – Quantitative and Qualitative Disclosures about Market Risk” included in our 2021 Annual Report
and “Quantitative and Qualitative Disclosures about Market Risk” in our Report on Form 6-K filed with the SEC on September 9, 2022.
51
BUSINESS
Our Company
We are Frontline Ltd., an international shipping company incorporated in Bermuda as an exempted company under the Bermuda Companies Act of 1981 on June 12, 1992 (Company No. EC-17460). Our
registered and principal executive offices are located at Par-la-Ville Place, 14 Par-la-Ville Road, Hamilton, HM 08, Bermuda, and our telephone number at that address is +(1) 441 295 6935.
We are engaged primarily in the ownership and operation of oil and product tankers. We operate through subsidiaries located in Bermuda, India, the Marshall Islands, Liberia, Norway, the United
Kingdom and Singapore. We are also involved in the charter, purchase and sale of vessels.
The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The
address of the SEC’s internet site is www.sec.gov. The address of the Company's internet site is www.frontline.bm. The information on our website is not incorporated by reference into this registration statement.
As of August 31, 2022, our fleet consisted of 69 vessels, with an aggregate capacity of approximately 12.8 million dwt:
(i) 65 vessels owned by the Company (20 VLCCs, 27 Suezmax tankers, 18 LR2/Aframax tankers); and
(ii) four vessels that are under the Company’s commercial management (two Suezmax tankers and two Aframax tankers).
We took delivery of the VLCC newbuildings, Front Alta and Front Tweed, from Hyundai Heavy Industries, in April and June 2022, respectively.
Our vessels operate worldwide and therefore management does not evaluate performance by geographical region as this information is not meaningful.
We own various vessel owning and operating subsidiaries. Our operations take place substantially outside of the United States. Our subsidiaries, therefore, own and operate vessels
that may be affected by changes in foreign governments and other economic and political conditions. We are engaged in transporting crude oil and its related refined petroleum products and our vessels operate in the spot and time charter markets.
Our VLCCs are specifically designed for the transportation of crude oil and, due to their size, are primarily used to transport crude oil from the Middle East Gulf to the Far East, Northern Europe, the Caribbean and the Louisiana Offshore Oil
Port, or LOOP. Our Suezmax tankers are similarly designed for worldwide trading, but the trade for these vessels is mainly in the Atlantic Basin, Middle East and Southeast Asia. Our LR2/ Aframax tankers are designed to be flexible, able to
transport primarily refined products, but also fuel and crude oil from smaller ports limited by draft restrictions. The vessels will normally trade between the larger refinery centers around the world, being the Gulf of Mexico, Middle East,
Rotterdam and Singapore.
We are committed to providing quality transportation services to all of our customers and to developing and maintaining long-term relationships with the major charterers of
tankers. Increasing global environmental concerns have created a demand in the petroleum products/crude oil seaborne transportation industry for vessels that are able to conform to the stringent environmental standards currently being imposed
throughout the world.
The tanker industry is highly cyclical, experiencing volatility in profitability, vessel values and freight rates. Freight rates are strongly influenced by the supply of tanker
vessels and the demand for oil transportation. Refer to "Item 5. Operating and Financial Review and Prospects-Overview" of our 2021 Annual Report for a discussion of the tanker market in 2020 and 2021.
52
Similar to structures commonly used by other shipping companies, our vessels are all owned by, or chartered to, separate subsidiaries or
associated companies. Frontline Management AS and Frontline Management (Bermuda) Limited, both wholly owned subsidiaries, which we refer to collectively as Frontline Management, support us in the implementation of our decisions. Frontline
Management is responsible for the commercial management of our ship owning subsidiaries, including chartering and insurance. Each of our vessels is registered under the Marshall Islands or Hong Kong flag.
Our Fleet
The following table sets forth certain information regarding the fleet that we operated as of August
31, 2022.
|
Vessel
|
Built
|
Approximate Dwt.
|
Flag
|
Type of Employment(1)
|
|
Tonnage Owned
|
|
|
|
|
|
VLCCs
|
||||
|
Front Kathrine
|
2009
|
298,000
|
MI
|
Spot market
|
|
Front Queen
|
2009
|
298,000
|
MI
|
Spot market
|
|
Front Eminence
|
2009
|
321,000
|
MI
|
Spot market
|
|
Front Endurance
|
2009
|
321,000
|
MI
|
Spot market
|
|
Front Cecilie
|
2010
|
297,000
|
MI
|
Spot market
|
|
Front Signe
|
2010
|
297,000
|
MI
|
Spot market
|
|
Front Duke
|
2016
|
299,000
|
MI
|
Spot market
|
|
Front Duchess
|
2017
|
299,000
|
MI
|
Spot market
|
|
Front Earl
|
2017
|
303,000
|
MI
|
Spot market
|
|
Front Prince
|
2017
|
301,000
|
MI
|
Spot market
|
|
Front Empire
|
2018
|
303,000
|
MI
|
Spot market
|
|
Front Princess
|
2018
|
302,000
|
MI
|
Spot market
|
|
Front Defender
|
2019
|
299,000
|
MI
|
Spot market
|
|
Front Discovery
|
2019
|
299,000
|
MI
|
Spot market
|
|
Front Dynamic
|
2020
|
299,000
|
MI
|
Spot market
|
|
Front Driva
|
2019
|
319,000
|
MI
|
Spot market
|
|
Front Nausta
|
2019
|
319,000
|
MI
|
Spot market
|
|
Front Alta
|
2022
|
300,000
|
MI
|
Spot market
|
|
Front Tweed
|
2022
|
300,000
|
MI
|
Spot market
|
|
Front Tana
|
2022
|
300,000
|
MI
|
Spot market
|
53
|
Vessel
|
Built
|
Approximate Dwt.
|
Flag
|
Type of Employment(1)
|
|
Suezmax Tankers
|
||||
|
Front Ull
|
2014
|
157,000
|
MI
|
Spot market
|
|
Front Idun
|
2015
|
157,000
|
MI
|
Spot market
|
|
Front Thor
|
2010
|
157,000
|
MI
|
Spot market
|
|
Front Loki
|
2010
|
157,000
|
MI
|
Spot market
|
|
Front Odin
|
2010
|
157,000
|
MI
|
Spot market
|
|
Front Njord
|
2010
|
157,000
|
MI
|
Spot market
|
|
Front Balder
|
2009
|
156,000
|
MI
|
Spot market
|
|
Front Brage
|
2011
|
157,000
|
MI
|
Spot market
|
|
Front Crown
|
2016
|
157,000
|
MI
|
Spot market
|
|
Front Challenger
|
2016
|
157,000
|
MI
|
Spot market
|
|
Front Classic
|
2017
|
157,000
|
MI
|
Spot market
|
|
Front Clipper
|
2017
|
157,000
|
MI
|
Spot market
|
|
Front Crystal
|
2017
|
157,000
|
MI
|
Spot market
|
|
Front Coral
|
2017
|
158,000
|
MI
|
Spot market
|
|
Front Cosmos
|
2017
|
158,000
|
MI
|
Spot market
|
|
Front Cascade
|
2017
|
157,000
|
MI
|
Spot market
|
|
Front Sparta
|
2019
|
157,000
|
HK
|
Spot market
|
|
Front Samara
|
2019
|
157,000
|
HK
|
Time charter
|
|
Front Siena
|
2019
|
157,000
|
HK
|
Spot market
|
|
Front Singapore(2)
|
2019
|
157,000
|
HK
|
Time charter
|
|
Front Seoul
|
2019
|
157,000
|
HK
|
Spot market
|
|
Front Santiago(2)
|
2019
|
157,000
|
HK
|
Time charter
|
|
Front Savannah
|
2019
|
157,000
|
HK
|
Time charter
|
|
Front Suez
|
2019
|
157,000
|
HK
|
Spot market
|
|
Front Shanghai(2)
|
2019
|
157,000
|
HK
|
Time charter
|
|
Front Silkeborg
|
2019
|
157,000
|
HK
|
Spot market
|
|
Front Cruiser
|
2020
|
157,000
|
MI
|
Spot market
|
|
LR2/Aframax Tankers
|
|
|
|
|
|
Front Ocelot
|
2016
|
110,000
|
MI
|
Spot market
|
|
Front Cheetah
|
2016
|
110,000
|
MI
|
Spot market
|
|
Front Lynx
|
2016
|
110,000
|
MI
|
Spot market
|
|
Front Cougar
|
2016
|
110,000
|
MI
|
Spot market
|
|
Front Leopard
|
2016
|
110,000
|
MI
|
Spot market
|
|
Front Jaguar
|
2016
|
110,000
|
MI
|
Spot market
|
|
Front Altair
|
2016
|
110,000
|
MI
|
Spot market
|
|
Front Antares
|
2017
|
110,000
|
MI
|
Spot market
|
|
Front Vega
|
2017
|
110,000
|
MI
|
Spot market
|
|
Front Sirius
|
2017
|
110,000
|
MI
|
Spot market
|
|
Front Castor
|
2017
|
110,000
|
MI
|
Spot market
|
|
Front Pollux
|
2017
|
110,000
|
MI
|
Spot market
|
|
Front Capella
|
2017
|
110,000
|
MI
|
Spot market
|
|
Front Polaris
|
2018
|
110,000
|
MI
|
Spot market
|
|
Front Fusion
|
2021
|
110,000
|
MI
|
Spot market
|
|
Front Future
|
2021
|
110,000
|
MI
|
Spot market
|
|
Front Favour
|
2021
|
110,000
|
MI
|
Spot market
|
|
Front Feature(3)
|
2021
|
110,000
|
MI
|
Spot market
|
| 1. |
Time Charter includes those contracts with durations in excess of six months.
|
| 2. |
These vessels were chartered out on time charters in August 2019. In July and August 2022, two of the initial five Suezmax tankers were redelivered upon completion of the time charters and the
remaining three Suezmax tankers are expected to be redelivered in September 2022.
|
| 3. |
In August 2022, the Company entered into a fixed rate time charter to a third party on a three-year time charter.
|
Key to Flags:
MI – Marshall Islands, HK – Hong Kong.
54
Strategy
Our principal focus is the transportation of crude oil and related refined petroleum cargoes for major oil companies and large oil trading
companies. We seek to optimize our income and adjust our exposure through actively pursuing charter opportunities whether through spot charters, time charters, bareboat charters, sale and leasebacks, straight sales and purchases of vessels,
newbuilding contracts and acquisitions.
We presently operate VLCCs, Suezmax and Aframax tankers in the crude oil tanker market and LR2 tankers in the refined
product market. Our preferred strategy is to have some fixed charter income coverage for our fleet, predominantly through time charters, and trade the balance of the fleet on the spot market. We focus on minimizing time spent in ballast by "cross
trading" our vessels, typically with voyages loading in the Middle East Gulf discharging in Northern Europe, followed by a trans-Atlantic voyage to the U.S. Gulf of Mexico and, finally, a voyage from either the Caribbean, US Gulf or West Africa to
the Far East/Indian Ocean. We believe that operating a certain number of vessels in the spot market, enables us to capitalize on a potentially stronger spot market as well as to serve our main customers on a regular non term basis. We believe that
the size of our fleet is important in negotiating terms with our major clients and charterers. We also believe that our large fleet enhances our ability to obtain competitive terms from suppliers, ship repairers and builders and to produce cost
savings in chartering and operations.
Our business strategy is primarily based upon the following principles:
| • |
emphasizing operational safety and quality maintenance for all of our vessels and crews;
|
| • |
ensuring that the work environment on board and ashore always meet the highest standards complying with all safety and health regulations, labor conditions and respecting
human rights;
|
| • |
complying with all current and proposed environmental regulations;
|
| • |
outsourcing technical management and crewing;
|
| • |
continuing to achieve competitive operational costs;
|
| • |
achieving high utilization of our vessels;
|
| • |
achieving competitive financing arrangements;
|
| • |
achieving a satisfactory mix of term charters, contracts of affreightment, or COAs, and spot voyages; and
|
| • |
developing and maintaining relationships with major oil companies and industrial charterers.
|
We continue to have a strategy of outsourcing, which includes the outsourcing of management, crewing and accounting services to a number of
independent and competing suppliers. The technical management of our vessels is provided by independent ship management companies. Pursuant to management agreements, each of the independent ship management companies provides ship maintenance,
crewing, technical support, shipyard supervision and related services to us. A central part of our strategy is to benchmark operational performance and cost level amongst our ship managers. Currently, our vessels are crewed with Russian, Ukrainian,
Croatian, Romanian, Indian and Filipino officers and crews, or combinations of these nationalities.
55
Environmental, Social & Governance
Frontline relies on the SASB framework for our sector to ensure the proper monitoring of material ESG issues. The Company has published its
2021 ESG report, which may be found on its website at https://www.frontline.bm/about-frontline-ltd/environmental-social-governance-esg/. The information on our website is not incorporated by reference into this registration statement.
Identifying and addressing ESG risks and opportunities is at the core of Frontline’s business strategy, which in turn, guides our daily
operations.
Frontline continues to invest in the expansion and modernization of our fleet as demonstrated by the delivery of four LR2 tanker newbuildings
and two latest generation ECO-type VLCCs in 2021, the delivery of two ECO-type VLCCs six months ended June 30, 2022 and the upcoming delivery of three VLCC newbuildings in the remainder 2022 and one VLCC newbuilding in 2023. Our long-term focus on
maintaining a modern, energy efficient fleet has positioned us well to mitigate the risks and capitalize on the opportunities provided by the ever-increasing environmental laws and regulations. As part of our energy efficiency project,
“Decarbonization journey towards IMO 2030-2050”, we have fully digitalized our ship performance data into our digital monitoring platform, Veracity. Closely monitoring, managing, and reporting ESG related key performance indicators, or KPIs,
including energy efficiency and health and safety metrics, is part of our daily operations. Based on our 2021 emissions data, our owned fleet would achieve an overall weighted average carbon intensity rating of ‘A’ (major superior performance
level) under the ship rating system adopted by the IMO, outperforming the IMO’s and the Poseidon Principles’ decarbonization trajectories.
Our number one priority is the health and safety of our people, including the thousands of seafarers employed by the ship management companies
we partner with. Safety first, no compromises. The COVID-19 pandemic has placed great demands on our people, none more so than our ship crew members, and we are extremely grateful for their hard work and dedication during this challenging time. Our
seafarers have endured quarantine and extensive test-regimes to safeguard people and society. To address some of these challenges we have supported our ship managers with the implementation of well-being initiatives and have ensured that all
seafarers have access to mental health support, rolling out a digital platform that gives seafarers access to a doctor, psychologist, and dietician at their discretion.
Frontline has a comprehensive compliance program led by our dedicated Compliance Officer which ensures we conduct our business in an honest
and ethical manner. This includes robust policies and procedures, mitigating the risks of our industry and operations, annual risk assessments by external advisors, training for all employees, management and the Board of Directors, third party
audits, internal systems and controls, remediation, and investigations, as well as quarterly reporting to the Audit Committee. As a result, Frontline can monitor and comprehend emerging challenges arising not only from laws, regulations, and public
authorities, but also from the expectations of our key stakeholders, such as investors, banks and customers.
Seasonality
Historically, oil trade and, therefore, charter rates increased in the winter months and eased in the summer months as demand for oil and oil
products in the Northern Hemisphere rose in colder weather and fell in warmer weather. The tanker industry, in general, has become less dependent on the seasonal transport of heating oil than a decade ago as new uses for oil and oil products have
developed, spreading consumption more evenly over the year. This is most apparent from the higher seasonal demand during the summer months due to energy requirements for air conditioning and motor vehicles.
Customers
No single customer in the years ended December 31, 2021, December 31, 2020 and December 31, 2019, accounted for 10% or more of the Company's
consolidated revenues.
56
Competition
The market for international seaborne crude and oil products transportation services is highly fragmented and
competitive. Seaborne oil transportation services are generally provided by two main types of operators: major oil company captive fleets (both private and state-owned) and independent ship-owner fleets. In addition, several owners and operators
pool their vessels together on an ongoing basis, and such pools are available to customers to the same extent as independently owned-and-operated fleets. Many major oil companies and other oil trading companies, the primary charterers of the
vessels owned or controlled by us, also operate their own vessels and use such vessels not only to transport their own crude oil but also to transport crude oil for third party charterers in direct competition with independent owners and operators
in the tanker charter market. Competition for charters is intense and is based upon price, location, size, age, condition and acceptability of the vessel and its manager. Competition is also affected by the availability of other size vessels to
compete in the trades in which the Company engages. Charters are, to a large extent, brokered through international independent brokerage houses that specialize in finding the optimal ship for any particular cargo based on the aforementioned
criteria. Brokers may be appointed by the cargo shipper or the ship owner.
Environmental and Other Regulations in the Shipping Industry
Government regulation and laws significantly affect the ownership and operation of our fleet. We are subject to
international conventions and treaties, national, state and local laws and regulations in force in the countries in which our vessels may operate or are registered relating to safety and health and environmental protection including the storage,
handling, emission, transportation and discharge of hazardous and non-hazardous materials, and the remediation of contamination and liability for damage to natural resources. Compliance with such laws, regulations and other requirements entails
significant expense, including vessel modifications and implementation of certain operating procedures.
A variety of government and private entities subject our vessels to both scheduled and unscheduled inspections. These
entities include the local port authorities (applicable national authorities such as the United States Coast Guard, or USCG, harbor master or equivalent), classification societies, flag state administrations (countries of registry) and charterers,
particularly terminal operators. Certain of these entities require us to obtain permits, licenses, certificates and other authorizations for the operation of our vessels. Failure to maintain necessary permits or approvals could require us to incur
substantial costs or result in the temporary suspension of the operation of one or more of our vessels.
Increasing environmental concerns have created a demand for vessels that conform to stricter environmental standards. We
are required to maintain operating standards for all of our vessels that emphasize operational safety, quality maintenance, continuous training of our officers and crews and compliance with United States and international regulations. We believe
that the operation of our vessels is in substantial compliance with applicable environmental laws and regulations and that our vessels have all material permits, licenses, certificates or other authorizations necessary for the conduct of our
operations. However, because such laws and regulations frequently change and may impose increasingly stricter requirements, we cannot predict the ultimate cost of complying with these requirements or the impact of these requirements on the resale
value or useful lives of our vessels. In addition, a future serious marine incident that causes significant adverse environmental impact could result in additional legislation or regulation that could negatively affect our profitability.
The International Maritime Organization, or IMO, which is the United Nations' agency for maritime safety and the
prevention of pollution by vessels, has adopted the International Convention for the Prevention of Pollution from Ships, 1973, as modified by the Protocol of 1978 relating thereto, collectively referred to as MARPOL 73/78 and herein as “MARPOL,”
the International Convention for the Safety of Life at Sea of 1974, or SOLAS Convention, and the International Convention on Load Lines of 1966, or LL Convention. MARPOL establishes environmental standards relating to oil leakage or spilling,
garbage management, sewage, air emissions, handling and disposal of noxious liquids and the handling of harmful substances in packaged forms. MARPOL is applicable to drybulk, tanker and LNG carriers, among other vessels, and is broken into six
Annexes, each of which regulates a different source of pollution. Annex I relates to oil leakage or spilling; Annexes II and III relate to harmful substances carried in bulk in liquid or in packaged form, respectively; Annexes IV and V relate to
sewage and garbage management, respectively; and Annex VI, lastly, relates to air emissions. Annex VI was separately adopted by the IMO in September of 1997; new emissions standards, titled IMO-2020, took effect on January 1, 2020.
57
In 2013, the IMO’s Marine Environmental Protection Committee, or the MEPC, adopted a resolution amending MARPOL Annex I Condition Assessment
Scheme, or CAS. These amendments became effective on October 1, 2014, and require compliance with the 2011 International Code on the Enhanced Programme of Inspections during Surveys of Bulk Carriers and Oil Tankers, or “ESP Code,” which provides
for enhanced inspection programs. We may need to make certain financial expenditures to comply with these amendments.
Air Emissions
In September of 1997, the IMO adopted Annex VI to MARPOL to address air pollution from vessels. Effective May 2005, Annex VI sets limits on
sulfur oxide and nitrogen oxide emissions from all commercial vessel exhausts and prohibits “deliberate emissions” of ozone depleting substances (such as halons and chlorofluorocarbons), emissions of volatile compounds from cargo tanks, and the
shipboard incineration of specific substances. Annex VI also includes a global cap on the sulfur content of fuel oil and allows for special areas to be established with more stringent controls on sulfur emissions, as explained below. Emissions of
“volatile organic compounds” from certain vessels, and the shipboard incineration (from incinerators installed after January 1, 2000) of certain substances (such as polychlorinated biphenyls, or PCBs) are also prohibited. We believe that all our
vessels are currently compliant in all material respects with these regulations.
The MEPC adopted amendments to Annex VI regarding emissions of sulfur oxide, nitrogen oxide, particulate matter and ozone depleting
substances, which entered into force on July 1, 2010. The amended Annex VI seeks to further reduce air pollution by, among other things, implementing a progressive reduction of the amount of sulfur contained in any fuel oil used on board ships.
On October 27, 2016, at its 70th session, the MEPC agreed to implement a global 0.5% m/m sulfur oxide emissions limit (reduced from 3.50%)
starting from January 1, 2020. This limitation can be met by using low-sulfur compliant fuel oil, alternative fuels, or certain exhaust gas cleaning systems. Ships are now required to obtain bunker delivery notes and International Air Pollution
Prevention, or IAPP Certificates from their flag states that specify sulfur content. Additionally, at MEPC 73, amendments to Annex VI to prohibit the carriage of bunkers above 0.5% sulfur on ships, with the exception of vessels fitted with exhaust
gas cleaning equipment (“scrubbers”) which can carry fuel of higher sulfur content, were adopted and took effect March 1, 2020. These regulations subject ocean-going vessels to stringent emissions controls, and may cause us to incur substantial
costs.
Sulfur content standards are even stricter within certain “Emission Control Areas,” or ECAs. As of January 1, 2015, ships operating within an
ECA were not permitted to use fuel with sulfur content in excess of 0.1% m/m. Amended Annex VI establishes procedures for designating new ECAs. Currently, the IMO has designated four ECAs, including specified portions of the Baltic Sea area, North
Sea area, North American area and United States Caribbean area. Ocean-going vessels in these areas will be subject to stringent emission controls and may cause us to incur additional costs. Other areas in China are subject to local regulations that
impose stricter emission controls. In December 2021, the member states of the Convention for the Protection of the Mediterranean Sea Against Pollution (“Barcelona Convention”) agreed to support the designation of a new ECA in the Mediterranean. The
group plans to submit a formal proposal to the IMO by the end of 2022 with the goal of having the ECA implemented by 2025. If other ECAs are approved by the IMO, or other new or more stringent requirements relating to emissions from marine diesel
engines or port operations by vessels are adopted by the EPA, or the states where we operate, compliance with these regulations could entail significant capital expenditures or otherwise increase the costs of our operations.
Amended Annex VI also establishes new tiers of stringent nitrogen oxide emissions standards for marine diesel engines, depending on their date
of installation. At the MEPC meeting held from March to April 2014, amendments to Annex VI were adopted which address the date on which Tier III Nitrogen Oxide (NOx) standards in ECAs will go into effect. Under the amendments, Tier III NOx
standards apply to ships that operate in the North American and U.S. Caribbean Sea ECAs designed for the control of NOx produced by vessels with a marine diesel engine installed and constructed on or after January 1, 2016. Tier III requirements
could apply to areas that will be designated for Tier III NOx in the future. At MEPC 70 and MEPC 71, the MEPC approved the North Sea and Baltic Sea as ECAs for nitrogen oxide for ships built on or after January 1, 2021. The EPA promulgated
equivalent (and in some senses stricter) emissions standards in 2010. As a result of these designations or similar future designations, we may be required to incur additional operating or other costs.
58
As determined at the MEPC 70, the new Regulation 22A of MARPOL Annex VI became effective as of March 1, 2018 and requires ships above 5,000
gross tonnage to collect and report annual data on fuel oil consumption to an IMO database, with the first year of data collection having commenced on January 1, 2019. The IMO intends to use such data as the first step in its roadmap (through 2023)
for developing its strategy to reduce greenhouse gas emissions from ships, as discussed further below.
As of January 1, 2013, MARPOL made mandatory certain measures relating to energy efficiency for ships. All ships are now required to develop
and implement Ship Energy Efficiency Management Plans, or SEEMP, and new ships must be designed in compliance with minimum energy efficiency levels per capacity mile as defined by the Energy Efficiency Design Index, or EEDI. Under these measures,
by 2025, all new ships built will be 30% more energy efficient than those built in 2014. MEPC 75 adopted amendments to MARPOL Annex VI which brings forward the effective date of the EEDI’s “phase 3” requirements from January 1, 2025 to April 1,
2022 for several ship types, including gas carriers, general cargo ships, LNG carriers and oil tankers.
Additionally, MEPC 75 introduced draft amendments to Annex VI which impose new regulations to reduce greenhouse gas emissions from ships.
These amendments introduce requirements to assess and measure the energy efficiency of all ships and set the required attainment values, with the goal of reducing the carbon intensity of international shipping. The requirements include (1) a
technical requirement to reduce carbon intensity based on a new Energy Efficiency Existing Ship Index (“EEXI”), and (2) operational carbon intensity reduction requirements, based on a new operational carbon intensity indicator (“CII”). The attained
EEXI is required to be calculated for ships of 400 gross tonnage and above, in accordance with different values set for ship types and categories. With respect to the CII, the draft amendments would require ships of 5,000 gross tonnage to document
and verify their actual annual operational CII achieved against a determined required annual operational CII. Additionally, MEPC 75 proposed draft amendments requiring that, on or before January 1, 2023, all ships above 400 gross tonnage must have
an approved SEEMP on board. For ships above 5,000 gross tonnage, the SEEMP would need to include certain mandatory content. MEPC 75 also approved draft amendments to MARPOL Annex I to prohibit the use and carriage for use as fuel of heavy fuel oil
(“HFO”) by ships in Arctic waters on and after July 1, 2024. The draft amendments introduced at MEPC 75 were adopted at the MEPC 76 session on June 2021 and are expected to enter into force on November 1, 2022, with the requirements for EEXI and
CII certification coming into effect from January 1, 2023. Any vessels that will not meet this new EEXI requirement will need to adopt energy-saving/emission reducing technology, through retrofits, to reach compliant levels. This creates a vast
array of implications for the tanker industry going forward. Recycling of older ships could accelerate as the investments to comply with regulations are not feasible. One of the most efficient ways of reducing emissions is reducing power, this
would in turn limit vessel speed and with that supply.
MEPC 77 adopted a non-binding resolution which urges Member States and ship operators to voluntarily use distillate or other cleaner
alternative fuels or methods of propulsion that are safe for ships and could contribute to the reduction of Black Carbon emissions from ships when operating in or near the Arctic.
We have incurred increased costs to comply with these revised standards. Additional or new conventions, laws and regulations may be adopted
that could require the installation of expensive emission control systems and could adversely affect our business, results of operations, cash flows and financial condition.
Safety Management System Requirements
The SOLAS Convention was amended to address the safe manning of vessels and emergency training drills. The Convention of Limitation of
Liability for Maritime Claims, or LLMC, sets limitations of liability for a loss of life or personal injury claim or a property claim against ship owners. We believe that our vessels are in substantial compliance with SOLAS and LLMC standards.
Under Chapter IX of the SOLAS Convention or the ISM Code, our operations are also subject to environmental standards and requirements. The ISM
Code requires the party with operational control of a vessel to develop an extensive safety management system that includes, among other things, the adoption of a safety and environmental protection policy setting forth instructions and procedures
for operating its vessels safely and describing procedures for responding to emergencies. We rely upon the safety management system that we and our technical managers have developed for compliance with the ISM Code. The failure of a vessel owner or
bareboat charterer to comply with the ISM Code may subject such party to increased liability, may decrease available insurance coverage for the affected vessels and may result in a denial of access to, or detention in, certain ports.
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The ISM Code requires that vessel operators obtain a safety management certificate for each vessel they operate. This certificate evidences
compliance by a vessel’s management with the ISM Code requirements for a safety management system. No vessel can obtain a safety management certificate unless its manager has been awarded a document of compliance, issued by each flag state, under
the ISM Code. Our managers have obtained applicable documents of compliance for their offices and safety management certificates for all of our vessels for which the certificates are required by the IMO. The document of compliance and safety
management certificate are renewed as required.
Regulation II-1/3-10 of the SOLAS Convention governs ship construction and stipulates that ships over 150 meters in length must have adequate
strength, integrity and stability to minimize risk of loss or pollution. Goal-based standards amendments in SOLAS regulation II-1/3-10 entered into force in 2012, with July 1, 2016 set for application to new oil tankers and bulk carriers. The SOLAS
Convention regulation II-1/3-10 on goal-based ship construction standards for bulk carriers and oil tankers, which entered into force on January 1, 2012, requires that all oil tankers and bulk carriers of 150 meters in length and above, for which
the building contract is placed on or after July 1, 2016, satisfy applicable structural requirements conforming to the functional requirements of the International Goal-based Ship Construction Standards for Bulk Carriers and Oil Tankers (GBS
Standards).
Amendments to the SOLAS Convention Chapter VII apply to vessels transporting dangerous goods and require those vessels be in compliance with
the International Maritime Dangerous Goods Code, or IMDG Code. Effective January 1, 2018, the IMDG Code includes (1) updates to the provisions for radioactive material, reflecting the latest provisions from the International Atomic Energy Agency,
(2) new marking, packing and classification requirements for dangerous goods, and (3) new mandatory training requirements. Amendments which took effect on January 1, 2020 also reflect the latest material from the UN Recommendations on the Transport
of Dangerous Goods, including (1) new provisions regarding IMO type 9 tank, (2) new abbreviations for segregation groups, and (3) special provisions for carriage of lithium batteries and of vehicles powered by flammable liquid or gas. The upcoming
amendments, which will come into force on June 1, 2022, include (1) addition of a definition of dosage rate, (2) additions to the list of high consequence dangerous goods, (3) new provisions for medical/clinical waste, (4) addition of various ISO
standards for gas cylinders, (5) a new handling code, and (6) changes to stowage and segregation provisions.
The IMO has also adopted the International Convention on Standards of Training, Certification and Watchkeeping for Seafarers, or SCTW. As of
February 2017, all seafarers are required to meet the STCW standards and be in possession of a valid STCW certificate. Flag states that have ratified SOLAS and STCW generally employ the classification societies, which have incorporated SOLAS and
STCW requirements into their class rules, to undertake surveys to confirm compliance.
The IMO's Maritime Safety Committee and MEPC, respectively, each adopted relevant parts of the International Code for Ships Operating in Polar
Water (the “Polar Code”). The Polar Code, which entered into force on January 1, 2017, covers design, construction, equipment, operational, training, search and rescue as well as environmental protection matters relevant to ships operating in the
waters surrounding the two poles. It also includes mandatory measures regarding safety and pollution prevention as well as recommendatory provisions. The Polar Code applies to new ships constructed after January 1, 2017, and after January 1, 2018,
ships constructed before January 1, 2017 are required to meet the relevant requirements by the earlier of their first intermediate or renewal survey.
Furthermore, recent action by the IMO’s Maritime Safety Committee and United States agencies indicates that cybersecurity regulations for the
maritime industry are likely to be further developed in the near future in an attempt to combat cybersecurity threats. By IMO resolution, administrations are encouraged to ensure that cyber-risk management systems are incorporated by ship-owners
and managers by their first annual Document of Compliance audit after January 1, 2021. In February 2021, the U.S. Coast Guard published guidance on addressing cyber risks in a vessel's safety management system. This might cause companies to create
additional procedures for monitoring cybersecurity, which could require additional expenses and/or capital expenditures. The impact of future regulations is hard to predict at this time.
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Pollution Control and Liability Requirements
The IMO has negotiated international conventions that impose liability for pollution in international waters and the territorial waters of the
signatories to such conventions. For example, the IMO adopted an International Convention for the Control and Management of Ships’ Ballast Water and Sediments (the “BWM Convention”) in 2004. The BWM Convention entered into force on September 8,
2017. The BWM Convention requires ships to manage their ballast water to remove, render harmless, or avoid the uptake or discharge of new or invasive aquatic organisms and pathogens within ballast water and sediments. The BWM Convention’s
implementing regulations call for a phased introduction of mandatory ballast water exchange requirements, to be replaced in time with mandatory concentration limits, and require all ships to carry a ballast water record book and an international
ballast water management certificate.
On December 4, 2013, the IMO Assembly passed a resolution revising the application dates of the BWM Convention so that the dates are triggered
by the entry into force date and not the dates originally in the BWM Convention. This, in effect, makes all vessels delivered before the entry into force date “existing vessels” and allows for the installation of ballast water management systems on
such vessels at the first IOPP renewal survey following entry into force of the convention. The MEPC adopted updated guidelines for approval of ballast water management systems (G8) at MEPC 70. At MEPC 71, the schedule regarding the BWM
Convention’s implementation dates was also discussed and amendments were introduced to extend the date existing vessels are subject to certain ballast water standards. Those changes were adopted at MEPC 72. Ships over 400 gross tons generally must
comply with a “D-1 standard,” requiring the exchange of ballast water only in open seas and away from coastal waters. The “D-2 standard” specifies the maximum amount of viable organisms allowed to be discharged, and compliance dates vary depending
on the IOPP renewal dates. Depending on the date of the IOPP renewal survey, existing vessels must comply with the D-2 standard on or after September 8, 2019. For most ships, compliance with the D-2 standard will involve installing on-board systems
to treat ballast water and eliminate unwanted organisms. Ballast water management systems, which include systems that make use of chemical, biocides, organisms or biological mechanisms, or which alter the chemical or physical characteristics of the
ballast water, must be approved in accordance with IMO Guidelines (Regulation D-3). As of October 13, 2019, MEPC 72’s amendments to the BWM Convention took effect, making the Code for Approval of Ballast Water Management Systems, which governs
assessment of ballast water management systems, mandatory rather than permissive, and formalized an implementation schedule for the D-2 standard. Under these amendments, all ships must meet the D-2 standard by September 8, 2024. Costs of compliance
with these regulations may be substantial. Additionally, in November 2020, MEPC 75 adopted amendments to the BWM Convention which would require a commissioning test of the ballast water management system for the initial survey or when performing an
additional survey for retrofits. This analysis will not apply to ships that already have an installed BWM system certified under the BWM Convention. These amendments are expected to enter into force on June 1, 2022.
Once mid-ocean ballast exchange and ballast water treatment requirements become mandatory under the BWM Convention, the cost of compliance
could increase for ocean carriers and may have a material effect on our operations. However, many countries already regulate the discharge of ballast water carried by vessels from country to country to prevent the introduction of invasive and
harmful species via such discharges. The U.S., for example, requires vessels entering its waters from another country to conduct mid-ocean ballast exchange, or undertake some alternate measure, and to comply with certain reporting requirements.
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The IMO adopted the International Convention on Civil Liability for Oil Pollution Damage of 1969, as amended by different Protocols in 1976, 1984, and 1992, and
amended in 2000, or the CLC. Under the CLC and depending on whether the country in which the damage results is a party to the 1992 Protocol to the CLC, a vessel’s registered owner may be strictly liable for pollution damage caused in the
territorial waters of a contracting state by discharge of persistent oil, subject to certain exceptions. The 1992 Protocol changed certain limits on liability expressed using the International Monetary Fund currency unit, the Special Drawing
Rights. The limits on liability have since been amended so that the compensation limits on liability were raised. The right to limit liability is forfeited under the CLC where the spill is caused by the shipowner’s actual fault and under the 1992
Protocol where the spill is caused by the shipowner’s intentional or reckless act or omission where the shipowner knew pollution damage would probably result. The CLC requires ships over 2,000 tons covered by it to maintain insurance covering the
liability of the owner in a sum equivalent to an owner’s liability for a single incident. We have protection and indemnity insurance for environmental incidents. P&I Clubs in the International Group issue the required Bunkers Convention “Blue
Cards” to enable signatory states to issue certificates. All of our vessels are in possession of a CLC State issued certificate attesting that the required insurance coverage is in force.
The IMO also adopted the International Convention on Civil Liability for Bunker Oil Pollution Damage (the “Bunker Convention”) to impose
strict liability on ship owners (including the registered owner, bareboat charterer, manager or operator) for pollution damage in jurisdictional waters of ratifying states caused by discharges of bunker fuel. The Bunker Convention requires
registered owners of ships over 1,000 gross tons to maintain insurance for pollution damage in an amount equal to the limits of liability under the applicable national or international limitation regime (but not exceeding the amount calculated in
accordance with the LLMC). With respect to non-ratifying states, liability for spills or releases of oil carried as fuel in ship’s bunkers typically is determined by the national or other domestic laws in the jurisdiction where the events or
damages occur.
Ships are required to maintain a certificate attesting that they maintain adequate insurance to cover an incident. In jurisdictions, such as
the United States where the CLC or the Bunker Convention has not been adopted, various legislative schemes or common law govern, and liability is imposed either on the basis of fault or on a strict-liability basis.
Anti‑Fouling Requirements
In 2001, the IMO adopted the International Convention on the Control of Harmful Anti‑fouling Systems on Ships, or the “Anti‑fouling
Convention.” The Anti‑fouling Convention, which entered into force on September 17, 2008, prohibits the use of organotin compound coatings to prevent the attachment of mollusks and other sea life to the hulls of vessels. Vessels of over 400 gross
tons engaged in international voyages will also be required to undergo an initial survey before the vessel is put into service or before an International Anti‑fouling System Certificate is issued for the first time; and subsequent surveys when the
anti‑fouling systems are altered or replaced. We have obtained Anti‑fouling System Certificates for all of our vessels that are subject to the Anti‑fouling Convention.
In November 2020, MEPC 75 approved draft amendments to the Anti-fouling Convention to prohibit anti-fouling systems containing cybutryne,
which would apply to ships from January 1, 2023, or, for ships already bearing such an anti-fouling system, at the next scheduled renewal of the system after that date, but no later than 60 months following the last application to the ship of such
a system. In addition, the IAFS Certificate has been updated to address compliance options for anti-fouling systems to address cybutryne. Ships which are affected by this ban on cybutryne must receive an updated IAFS Certificate no later than two
years after the entry into force of these amendments. Ships which are not affected (i.e. with anti-fouling systems which do not contain cybutryne) must receive an updated IAFS Certificate at the next Anti-fouling application to the vessel. These
amendments were formally adopted at MEPC 76 in June 2021.
We have obtained Anti‑fouling System Certificates for all of our vessels that are subject to the Anti‑fouling Convention.
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Compliance Enforcement
Noncompliance with the ISM Code or other IMO regulations may subject the ship owner or bareboat charterer to increased liability, may lead to
decreases in available insurance coverage for affected vessels and may result in the denial of access to, or detention in, some ports. The USCG and European Union authorities have indicated that vessels not in compliance with the ISM Code by
applicable deadlines will be prohibited from trading in U.S. and European Union ports, respectively. As of the date of this report, each of our vessels is ISM Code certified. However, there can be no assurance that such certificates will be
maintained in the future. The IMO continues to review and introduce new regulations. It is impossible to predict what additional regulations, if any, may be passed by the IMO and what effect, if any, such
regulations might have on our operations.
United States Regulations
The U.S. Oil Pollution Act of 1990 and the Comprehensive Environmental Response, Compensation and Liability Act
The U.S. Oil Pollution Act of 1990, or the OPA, established an extensive regulatory and liability regime for the protection and cleanup of the
environment from oil spills. OPA affects all “owners and operators” whose vessels trade or operate within the U.S., its territories and possessions or whose vessels operate in U.S. waters, which includes the U.S.’s territorial sea and its 200
nautical mile exclusive economic zone around the U.S. The U.S. has also enacted the Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA, which applies to the discharge of hazardous substances other than oil, except in
limited circumstances, whether on land or at sea. OPA and CERCLA both define “owner and operator” in the case of a vessel as any person owning, operating or chartering by demise, the vessel. Both OPA and CERCLA impact our operations.
Under OPA, vessel owners and operators are “responsible parties” and are jointly, severally and strictly liable (unless the spill results
solely from the act or omission of a third party, an act of God or an act of war) for all containment and clean-up costs and other damages arising from discharges or threatened discharges of oil from their vessels, including bunkers (fuel). OPA
defines these other damages broadly to include:
| (i) |
injury to, destruction or loss of, or loss of use of, natural resources and related assessment costs;
|
| (ii) |
injury to, or economic losses resulting from, the destruction of real and personal property;
|
| (iii) |
loss of subsistence use of natural resources that are injured, destroyed or lost;
|
| (iv) |
net loss of taxes, royalties, rents, fees or net profit revenues resulting from injury, destruction or loss of real or personal property, or natural resources;
|
| (v) |
lost profits or impairment of earning capacity due to injury, destruction or loss of real or personal property or natural resources; and
|
| (vi) |
net cost of increased or additional public services necessitated by removal activities following a discharge of oil, such as protection from fire, safety or health hazards,
and loss of subsistence use of natural resources.
|
OPA contains statutory caps on liability and damages; such caps do not apply to direct cleanup costs. Effective November 12, 2019, the USCG
adjusted the limits of OPA liability for a tank vessel, other than a single-hull tank vessel, over 3,000 gross tons liability to the greater of $2,300 per gross ton or $19,943,400 (subject to periodic adjustment for inflation). These limits of
liability do not apply if an incident was proximately caused by the violation of an applicable U.S. federal safety, construction or operating regulation by a responsible party (or its agent, employee or a person acting pursuant to a contractual
relationship), or a responsible party's gross negligence or willful misconduct. The limitation on liability similarly does not apply if the responsible party fails or refuses to (i) report the incident as required by law where the responsible party
knows or has reason to know of the incident; (ii) reasonably cooperate and assist as requested in connection with oil removal activities; or (iii) without sufficient cause, comply with an order issued under the Federal Water Pollution Act (Section
311 (c), (e)) or the Intervention on the High Seas Act.
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CERCLA contains a similar liability regime whereby owners and operators of vessels are liable for cleanup, removal and remedial costs, as well
as damages for injury to, or destruction or loss of, natural resources, including the reasonable costs associated with assessing the same, and health assessments or health effects studies. There is no liability if the discharge of a hazardous
substance results solely from the act or omission of a third party, an act of God or an act of war. Liability under CERCLA is limited to the greater of $300 per gross ton or $5.0 million for vessels carrying a hazardous substance as cargo and the
greater of $300 per gross ton or $500,000 for any other vessel. These limits do not apply (rendering the responsible person liable for the total cost of response and damages) if the release or threat of release of a hazardous substance resulted
from willful misconduct or negligence, or the primary cause of the release was a violation of applicable safety, construction or operating standards or regulations. The limitation on liability also does not apply if the responsible person fails or
refused to provide all reasonable cooperation and assistance as requested in connection with response activities where the vessel is subject to OPA.
OPA and CERCLA each preserve the right to recover damages under existing law, including maritime tort law. OPA and CERCLA both require owners
and operators of vessels to establish and maintain with the USCG evidence of financial responsibility sufficient to meet the maximum amount of liability to which the particular responsible person may be subject. Vessel owners and operators may
satisfy their financial responsibility obligations by providing a proof of insurance, a surety bond, qualification as a self-insurer or a guarantee. We comply and plan to comply going forward with the USCG’s financial responsibility regulations by
providing applicable certificates of financial responsibility.
The 2010 Deepwater Horizon oil spill in the Gulf of Mexico resulted in additional regulatory
initiatives or statutes, including higher liability caps under OPA, new regulations regarding offshore oil and gas drilling, and a pilot inspection program for offshore facilities. However, several of these initiatives and regulations have been or
may be revised. For example, the U.S. Bureau of Safety and Environmental Enforcement’s, or BSEE, revised Production Safety Systems Rule, or PSSR, effective December 27, 2018, modified and relaxed certain environmental and safety protections under
the 2016 PSSR. Additionally, the BSEE amended the Well Control Rule, effective July 15, 2019, which rolled back certain reforms regarding the safety of drilling operations, and the former U.S. President Trump had proposed leasing new sections of
U.S. waters to oil and gas companies for offshore drilling. In January 2021, U.S. President Biden signed an executive order temporarily blocking new leases for oil and gas drilling in federal waters. However, attorney generals from 13 states filed
suit in March 2021 to lift the executive order, and in June 2021, a federal judge in Louisiana granted a preliminary injunction against the Biden administration, stating that the power to pause offshore oil and gas leases “lies solely with
Congress.” With these rapid changes, compliance with any new requirements of OPA and future legislation or regulations applicable to the operation of our vessels could impact the cost of our operations and adversely affect our business.
OPA specifically permits individual states to impose their own liability regimes with regard to oil pollution incidents occurring within their
boundaries, provided they accept, at a minimum, the levels of liability established under OPA and some states have enacted legislation providing for unlimited liability for oil spills. Many U.S. states that border a navigable waterway have enacted
environmental pollution laws that impose strict liability on a person for removal costs and damages resulting from a discharge of oil or a release of a hazardous substance. These laws may be more stringent than U.S. federal law. Moreover, some
states have enacted legislation providing for unlimited liability for discharge of pollutants within their waters, although in some cases, states which have enacted this type of legislation have not yet issued implementing regulations defining
tanker owners’ responsibilities under these laws. The Company intends to comply with all applicable state regulations in the ports where the Company’s vessels call.
We currently maintain pollution liability coverage insurance in the amount of $1.0 billion per incident for each of our vessels. If the
damages from a catastrophic spill were to exceed our insurance coverage, it could have an adverse effect on our business and results of operation.
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Other United States Environmental Initiatives
The U.S. Clean Air Act of 1970 (including its amendments of 1977 and 1990), or CAA requires the EPA to promulgate standards applicable to
emissions of volatile organic compounds and other air contaminants. Our vessels are subject to vapor control and recovery requirements for certain cargoes when loading, unloading, ballasting, cleaning and conducting other operations in regulated
port areas. The CAA also requires states to draft State Implementation Plans, or SIPs, designed to attain national health-based air quality standards in each state. Although state-specific, SIPs may include regulations concerning emissions
resulting from vessel loading and unloading operations by requiring the installation of vapor control equipment. Our vessels operating in such regulated port areas with restricted cargoes are equipped with vapor recovery systems that satisfy these
existing requirements.
The U.S. Clean Water Act, or CWA, prohibits the discharge of oil, hazardous substances and ballast water in U.S. navigable waters unless
authorized by a duly issued permit or exemption, and imposes strict liability in the form of penalties for any unauthorized discharges. The CWA also imposes substantial liability for the costs of removal, remediation and damages and complements the
remedies available under OPA and CERCLA. In 2015, the EPA expanded the definition of “waters of the United States”, or WOTUS, thereby expanding federal authority under the CWA. Following litigation on the revised WOTUS rule, in December 2018, the
EPA and Department of the Army proposed a revised, limited definition of WOTUS. In 2019 and 2020, the agencies repealed the prior WOTUS Rule and promulgated the Navigable Waters Protection Rule (“NWPR”) which significantly reduced the scope and
oversight of EPA and the Department of the Army in traditionally non-navigable waterways. On August 30, 2021, a federal district court in Arizona vacated the NWPR and directed the agencies to replace the rule. On December 7, 2021, the EPA and the
Department of the Army proposed a rule that would reinstate the pre-2015 definition, which was subject to public comment until February 7, 2022. On January 24, 2022, the U.S. Supreme Court granted certiorari for Sackett v. EPA, which will address
the scope of WOTUS and may resolve this issue
The EPA and the USCG have also enacted rules relating to ballast water discharge, compliance with which requires the installation of equipment
on our vessels to treat ballast water before it is discharged or the implementation of other port facility disposal arrangements or procedures at potentially substantial costs, and/or otherwise restrict our vessels from entering U.S. Waters. The
EPA will regulate these ballast water discharges and other discharges incidental to the normal operation of certain vessels within United States waters pursuant to the VIDA, which was signed into law on December 4, 2018 and replaces the 2013 VGP
program (which authorizes discharges incidental to operations of commercial vessels and contains numeric ballast water discharge limits for most vessels to reduce the risk of invasive species in U.S. waters, stringent requirements for exhaust gas
scrubbers, and requirements for the use of environmentally acceptable lubricants) and current Coast Guard ballast water management regulations adopted under NISA, such as mid-ocean ballast exchange programs and installation of approved USCG
technology for all vessels equipped with ballast water tanks bound for U.S. ports or entering U.S. waters. VIDA establishes a new framework for the regulation of vessel incidental discharges under Clean Water Act (CWA), requires the EPA to develop
performance standards for those discharges within two years of enactment, and requires the U.S. Coast Guard to develop implementation, compliance, and enforcement regulations within two years of EPA’s promulgation of standards. Under VIDA, all
provisions of the 2013 VGP and USCG regulations regarding ballast water treatment remain in force and effect until the EPA and U.S. Coast Guard regulations are finalized. Non-military, non-recreational vessels greater than 79 feet in length must
continue to comply with the requirements of the VGP, including submission of a Notice of Intent, or NOI or retention of a PARI form and submission of annual reports. We have submitted NOIs for our vessels where required. Compliance with the EPA,
U.S. Coast Guard and state regulations could require the installation of BWTS on our vessels or the implementation of other port facility disposal procedures at potentially substantial cost, or may otherwise restrict our vessels from entering U.S.
waters.
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European Union Regulations
In October 2009, the European Union amended a directive to impose criminal sanctions for illicit ship-source discharges of polluting
substances, including minor discharges, if committed with intent, recklessly or with serious negligence and the discharges individually or in the aggregate result in deterioration of the quality of water. Aiding and abetting the discharge of a
polluting substance may also lead to criminal penalties. The directive applies to all types of vessels, irrespective of their flag, but certain exceptions apply to warships or where human safety or that of the ship is in danger. Criminal liability
for pollution may result in substantial penalties or fines and increased civil liability claims. Regulation (EU) 2015/757 of the European Parliament and of the Council of 29 April 2015 (amending EU Directive 2009/16/EC) governs the monitoring,
reporting and verification of carbon dioxide emissions from maritime transport, and, subject to some exclusions, requires companies with ships over 5,000 gross tonnage to monitor and report carbon dioxide emissions annually, which may cause us to
incur additional expenses.
The European Union has adopted several regulations and directives requiring, among other things, more frequent inspections of high-risk ships,
as determined by type, age, and flag as well as the number of times the ship has been detained. The European Union also adopted and extended a ban on substandard ships and enacted a minimum ban period and a definitive ban for repeated offenses. The
regulation also provided the European Union with greater authority and control over classification societies, by imposing more requirements on classification societies and providing for fines or penalty payments for organizations that failed to
comply. Furthermore, the EU has implemented regulations requiring vessels to use reduced sulfur content fuel for their main and auxiliary engines. The EU Directive 2005/33/EC (amending Directive 1999/32/EC) introduced requirements parallel to those
in Annex VI relating to the sulfur content of marine fuels. In addition, the EU imposed a 0.1% maximum sulfur requirement for fuel used by ships at berth in the Baltic, the North Sea and the English Channel (the so called “SOx-Emission Control
Area”). As of January 2020, EU member states must also ensure that ships in all EU waters, except the SOx-Emission Control Area, use fuels with a 0.5% maximum sulfur content.
On September 15, 2020, the European Parliament voted to include greenhouse gas emissions from the maritime sector in the European Union’s
carbon market. On July 14, 2021, the European Parliament formally proposed its plan, which would involve gradually including the maritime sector from 2023 and phasing the sector in over a three-year period. This will require shipowners to buy
permits to cover these emissions. Contingent on negotiations and a formal approval vote, these proposed regulations may not enter into force for another year or two.
International Labour Organization
The International Labour Organization, or the ILO, is a specialized agency of the UN that has adopted the Maritime Labor Convention 2006, or
MLC 2006. A Maritime Labor Certificate and a Declaration of Maritime Labor Compliance is required to ensure compliance with the MLC 2006 for all ships that are 500 gross tonnage or over and are either engaged in international voyages or flying the
flag of a Member and operating from a port, or between ports, in another country. We believe that all our vessels are in substantial compliance with and are certified to meet MLC 2006.
Greenhouse Gas Regulation
Currently, the emissions of greenhouse gases from international shipping are not subject to the Kyoto Protocol to the United Nations Framework
Convention on Climate Change, which entered into force in 2005 and pursuant to which adopting countries have been required to implement national programs to reduce greenhouse gas emissions with targets extended through 2020. International
negotiations are continuing with respect to a successor to the Kyoto Protocol, and restrictions on shipping emissions may be included in any new treaty. In December 2009, more than 27 nations, including the U.S. and China, signed the Copenhagen
Accord, which includes a non-binding commitment to reduce greenhouse gas emissions. The 2015 United Nations Climate Change Conference in Paris resulted in the Paris Agreement, which entered into force on November 4, 2016 and does not directly limit
greenhouse gas emissions from ships. The U.S. initially entered into the agreement, but on June 1, 2017, former U.S. President Trump announced that the United States intends to withdraw from the Paris Agreement, and the withdrawal became effective
on November 4, 2020. On January 20, 2021, U.S. President Biden signed an executive order to rejoin the Paris Agreement, which the U.S. officially rejoined on February 19, 2021.
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At MEPC 70 and MEPC 71, a draft outline of the structure of the initial strategy for developing a comprehensive IMO strategy on reduction of
greenhouse gas emissions from ships was approved. In accordance with this roadmap, in April 2018, nations at the MEPC 72 adopted an initial strategy to reduce greenhouse gas emissions from ships. The initial strategy identifies “levels of ambition”
to reducing greenhouse gas emissions, including (1) decreasing the carbon intensity from ships through implementation of further phases of the EEDI for new ships; (2) reducing carbon dioxide emissions per transport work, as an average across
international shipping, by at least 40% by 2030, pursuing efforts towards 70% by 2050, compared to 2008 emission levels; and (3) reducing the total annual greenhouse emissions by at least 50% by 2050 compared to 2008 while pursuing efforts towards
phasing them out entirely. The initial strategy notes that technological innovation, alternative fuels and/or energy sources for international shipping will be integral to achieve the overall ambition. At MEPC 77, the Member States agreed to
initiate the revision of the Initial IMO Strategy on Reduction of GHG emissions from ships, recognizing the need to strengthen the ambition during the revision process. A final draft Revised IMO GHG Strategy would be considered by MEPC 80
(scheduled to meet in spring 2023), with a view to adoption. Compliance with these regulations and other changes in laws, regulations and obligations relating to climate change affects the propulsion options in subsequent vessel designs and could
increase our costs related to acquiring new vessels, operating and maintaining our existing vessels and require us to install new emission controls, acquire allowances or pay taxes related to our greenhouse gas emissions or administer and manage a
greenhouse gas emissions program.
The EU made a unilateral commitment to reduce overall greenhouse gas emissions from its member states from 20% of 1990 levels by 2020. The EU
also committed to reduce its emissions by 20% under the Kyoto Protocol’s second period from 2013 to 2020. Starting in January 2018, large ships over 5,000 gross tonnage calling at EU ports are required to collect and publish data on carbon dioxide
emissions and other information. As previously discussed, regulations relating to the inclusion of greenhouse gas emissions from the maritime sector in the European Union’s carbon market are also forthcoming.
In the United States, the EPA issued a finding that greenhouse gases endanger the public health and safety, adopted regulations to limit
greenhouse gas emissions from certain mobile sources, and proposed regulations to limit greenhouse gas emissions from large stationary sources. However, in March 2017, former U.S. President Trump signed an executive order to review and possibly
eliminate the EPA’s plan to cut greenhouse gas emissions, and in August 2019, the Administration announced plans to weaken regulations for methane emissions. On August 13, 2020, the EPA released rules rolling back standards to control methane and
volatile organic compound emissions from new oil and gas facilities. However, U.S. President Biden recently directed the EPA to publish a proposed rule suspending, revising, or rescinding certain of these rules. On November 2, 2021, the EPA issued
a proposed rule under the CAA designed to reduce methane emissions from oil and gas sources. The proposed rule would reduce 41 million tons of methane emissions between 2023 and 2035 and cut methane emissions in the oil and gas sector by
approximately 74 percent compared to emissions from this sector in 2005. EPA also anticipates issuing a supplemental proposed rule in 2022 to include additional methane reduction measures following public input and anticipates issuing a final rule
by the end of 2022. If these new regulations are finalized, they could affect our operations.
Any passage of climate control legislation or other regulatory initiatives by the IMO, the EU, the U.S. or other countries where we operate,
or any treaty adopted at the international level to succeed the Kyoto Protocol or Paris Agreement, that restricts emissions of greenhouse gases could require us to make significant financial expenditures which we cannot predict with certainty at
this time. Even in the absence of climate control legislation, our business may be indirectly affected to the extent that climate change may result in sea level changes or certain weather events.
For more information on the Company's approach to ESG issues, see our 2021 ESG Report at our website www.frontline.bm under “Environmental,
Social and Governance.” None of the information or contents of our 2021 ESG Report are incorporated into this registration statement.
67
Vessel Security Regulations
Since the terrorist attacks of September 11, 2001 in the United States, there have been a variety of initiatives intended
to enhance vessel security such as the U.S. Maritime Transportation Security Act of 2002, or MTSA. To implement certain portions of the MTSA, the USCG issued regulations requiring the implementation of certain security requirements aboard vessels
operating in waters subject to the jurisdiction of the United States and at certain ports and facilities, some of which are regulated by the EPA.
Similarly, Chapter XI-2 of the SOLAS Convention imposes detailed security obligations on vessels and port authorities and
mandates compliance with the ISPS Code. The ISPS Code is designed to enhance the security of ports and ships against terrorism. To trade internationally, a vessel must attain an International Ship Security Certificate, or ISSC, from a recognized
security organization approved by the vessel’s flag state. Ships operating without a valid certificate may be detained, expelled from, or refused entry at port until they obtain an ISSC. The various requirements, some of which are found in the
SOLAS Convention, include, for example, on-board installation of automatic identification systems to provide a means for the automatic transmission of safety-related information from among similarly equipped ships and shore stations, including
information on a ship’s identity, position, course, speed and navigational status; on-board installation of ship security alert systems, which do not sound on the vessel but only alert the authorities on shore; the development of vessel security
plans; ship identification number to be permanently marked on a vessel’s hull; a continuous synopsis record kept onboard showing a vessel's history including the name of the ship, the state whose flag the ship is entitled to fly, the date on which
the ship was registered with that state, the ship's identification number, the port at which the ship is registered and the name of the registered owner(s) and their registered address; and compliance with flag state security certification
requirements.
The USCG regulations, intended to align with international maritime security standards, exempt non-U.S. vessels from MTSA
vessel security measures, provided such vessels have on board a valid ISSC that attests to the vessel’s compliance with the SOLAS Convention security requirements and the ISPS Code. Future security measures could have a significant financial impact
on us. We intend to comply with the various security measures addressed by MTSA, the SOLAS Convention and the ISPS Code.
The cost of vessel security measures has also been affected by the escalation in the frequency of acts of piracy against
ships, notably off the coast of Somalia, including the Gulf of Aden and Arabian Sea area. Substantial loss of revenue and other costs may be incurred as a result of detention of a vessel or additional security measures, and the risk of uninsured
losses could significantly affect our business. Costs are incurred in taking additional security measures in accordance with Best Management Practices to Deter Piracy, notably those contained in the BMP5 industry standard.
Inspection by Classification Societies
The hull and machinery of every commercial vessel must be classed by a classification society authorized by its country of registry. The
classification society certifies that a vessel is safe and seaworthy in accordance with the applicable rules and regulations of the country of registry of the vessel and SOLAS. Most insurance underwriters make it a condition for insurance coverage
and lending that a vessel be certified “in class” by a classification society which is a member of the International Association of Classification Societies, the IACS. The IACS has adopted harmonized Common Structural Rules, or the Rules, which
apply to oil tankers and bulk carriers contracted for construction on or after July 1, 2015. The Rules attempt to create a level of consistency between IACS Societies. All of our vessels are certified as being “in class” by the applicable
Classification Societies (e.g., American Bureau of Shipping., Lloyd's Register of Shipping or DNV GL).
A vessel must undergo annual surveys, intermediate surveys, drydockings and special surveys. In lieu of a special survey, a vessel’s machinery
may be on a continuous survey cycle, under which the machinery would be surveyed periodically over a five-year period. Every vessel is also required to be drydocked every 30 to 36 months for inspection of the underwater parts of the vessel. If any
vessel does not maintain its class and/or fails any annual survey, intermediate survey, drydocking or special survey, the vessel will be unable to carry cargo between ports and will be unemployable and uninsurable which could cause us to be in
violation of certain covenants in our loan agreements. Any such inability to carry cargo or be employed, or any such violation of covenants, could have a material adverse impact on our financial condition and results of operations.
68
Risk of Loss and Liability Insurance
The operation of any ocean-going vessel carries an inherent risk of catastrophic marine disasters and property losses caused by adverse
weather conditions, mechanical failures, human error, war, terrorism and other circumstances or events. In addition, the transportation of crude oil is subject to the risk of spills, and business interruptions due to political circumstances in
foreign countries, hostilities, labor strikes and boycotts. OPA has made liability insurance more expensive for ship owners and operators imposing potentially unlimited liability upon owners, operators and bareboat charterers for oil pollution
incidents in the territorial waters of the United States. We believe that our current insurance coverage is adequate to protect us against the principal accident-related risks that we face in the conduct of our business.
Our protection and indemnity insurance, or P&I insurance, covers third party liabilities and other related expenses from, among other
things, injury or death of crew, passengers and other third parties, claims arising from collisions, damage to cargo and other third party property and pollution arising from oil or other substances. Our current P&I insurance coverage for
pollution is the maximum commercially available amount of $1.0 billion per vessel per incident and is provided by mutual protection and indemnity associations. Each of the vessels currently in our fleet is entered in a protection and indemnity
association which is a member of the International Group of Protection & Indemnity Clubs. The 13 protection and indemnity associations that comprise the International Group insure approximately 90% of the world's commercial tonnage and have
entered into a pooling agreement to re-insure each association's liabilities. The International Group’s website states that the Pool provides a mechanism for sharing all claims in excess of US$ 10 million up to, currently, approximately US$ 3.1
billion. As a member of protection and indemnity associations, which are, in turn, members of the International Group, we are subject to calls payable to the associations based on its claim records as well as the claim records of all other members
of the individual associations and members of the pool of protection and indemnity associations comprising the International Group.
Our hull and machinery insurance covers actual or constructive total loss from covered risks of collision, fire, heavy weather, grounding and
engine failure or damages from same. Our war risks insurance covers risks of confiscation, seizure, capture, vandalism, terrorism, sabotage and other war-related risks. Our loss-of-hire insurance covers loss of revenue for not less than $20,000 per
day for Suezmax tankers and VLCCs for not less than 180 days resulting from an accident covered by the terms of our hull and machinery insurance for each of our vessels, with a 60 day deductible for all Suezmax tankers and VLCCs. Our LR2/Aframax
product tankers are insured for not less than $20,000 for 90 days with a deductible of 14 days.
69
MANAGEMENT
A. DIRECTORS AND SENIOR MANAGEMENT
The following table sets forth information regarding our executive officers and directors and certain key officers of our wholly owned
subsidiary, Frontline Management AS, who are responsible for overseeing our management.
|
Name
|
Age
|
Position
|
||
|
John Fredriksen
|
78
|
Director
|
||
|
James O’Shaughnessy
|
58
|
Director and Audit Committee Chairman
|
||
|
Ola Lorentzon
|
73
|
Chairman and Director
|
||
|
Jens Martin Jensen
|
58
|
Director
|
||
|
Ole B. Hjertaker
|
55
|
Director
|
||
|
Steen Jakobsen
|
57
|
Director
|
||
|
Lars H. Barstad
|
51
|
Chief Executive Officer of Frontline Management AS
|
||
|
Inger M. Klemp
|
58
|
Chief Financial Officer of Frontline Management AS
|
||
Certain biographical information about each of our directors and executive officers is set forth below.
John Fredriksen has served as a Director of the Company since November 3, 1997. Mr. Fredriksen was a
director of Frontline 2012 at the date of the merger between Frontline and Frontline 2012. Mr. Fredriksen is also a Director of a related party Golden Ocean, a Bermuda company listed on Nasdaq and the OSE whose principal shareholder is Hemen.
James O’Shaughnessy has been a Director and member of the Audit Committee of the Company since
September 2018. James O’Shaughnessy served as an Executive Vice President, Chief Accounting Officer and Corporate Controller of Axis Capital Holdings Limited since March 26, 2012. Prior to that Mr. O’Shaughnessy has served as Chief Financial Officer
of Flagstone Reinsurance Holdings and as Chief Accounting Officer and Senior Vice President of Scottish Re Group Ltd., and Chief Financial Officer of XL Re Ltd. at XL Group plc. Mr. O’Shaughnessy received a Bachelor of Commerce degree from University
College, Cork, Ireland and is a Chartered Director, Fellow of the Institute of Chartered Accountants of Ireland and an Associate Member of the Chartered Insurance Institute of the UK.
Ola Lorentzon has been Director of the Company since May 2015. Mr. Lorentzon was the Managing Director
of Frontline Management AS, a subsidiary of the Company, from April 2000 until September 2003. Mr. Lorentzon has served as a director of FLEX LNG Ltd. since June 2017 and is also a director and Chairman of Golden Ocean and a director of Erik Thun AB.
Mr. Lorentzon was appointed Chairman of the Company in May 2021.
Jens Martin Jensen has been a Director of the Company since March 2022. Mr. Jensen joined Seatankers
Management in March 2022, and prior to that he was the CEO of Athenian Holdings. He previously served as Head of Shipping at New Fortress Energy (USA) and prior to that he was a Partner at Pillarstone Europe. From May 2008 to September 2014, he was
the CEO of Frontline Management AS. Mr. Jensen has served as a Director of various companies, including 2020 Bulkers Ltd, Frontline Ltd and Flex LNG Limited. Prior to these roles, he was a Partner/Director at Island Shipbrokers between the periods of
1996 - 2004 and held various positions at A.P. Moller/Maersk Group during 1985-1996 in Copenhagen, Mexico City, Tokyo and Singapore.
70
Ole B. Hjertaker has been a director of SFL Corporation Ltd. (“SFL”) since October 2019. Mr. Hjertaker
has served as Chief Executive Officer of SFL since 2009 and served as Chief Financial Officer from 2006 to 2009. Prior to joining SFL, Mr. Hjertaker was employed in the Corporate Finance division of DNB Markets, a leading shipping and offshore bank.
Mr. Hjertaker has extensive corporate and investment banking experience, mainly within the Maritime and Transportation industries, and holds a Master of Science degree from the Norwegian School of Economics and Business Administration.
Steen Jakobsen has served as a director of Flex LNG Ltd. since March 2021. Mr. Jakobsen joined Saxo
Bank in 2000 and serves as Chief Investment Officer. Mr. Jakobsen was the founder of then Saxo Bank’s renowned Outrageous Predictions. Prior to joining Saxo Bank, he worked with Swiss Bank Corp, Citibank, Chase Manhattan, UBS and served as Global
Head of Trading, FX and Options at Christiania (now Nordea). Mr. Jakobsen graduated from the University of Copenhagen in 1989 with a MSc in Economics.
Lars H. Barstad has served as Chief Executive Officer of Frontline Management AS since October 2020,
and as Commercial Director since 2015. Mr. Barstad has close to 17 years’ experience in the wider shipping and oil trading industry, firstly as Director of Imarex Pte Ltd (now Marex) in Singapore. He joined Glencore Ltd in 2007, working in London as
head of FFA trading. In 2012 he moved to Noble Group Ltd, heading up their freight derivatives desk in London with a cross commodities mandate. Mr. Barstad holds a BSc in Financial Economics from BI Norwegian Business School.
Inger M. Klemp has served as Chief Financial Officer of Frontline Management AS since June 1, 2006 and
served as principal financial officer of Frontline 2012 at the date of the merger between Frontline and Frontline 2012. Mrs. Klemp has served as a director of Independent Tankers Corporation Limited since February 2008 and has served as Chief
Financial Officer of Golden Ocean from September 2007 to March 2015. Mrs. Klemp served as Vice President Finance from August 2001 until she was promoted in May 2006. Mrs. Klemp graduated as MSc in Business and Economics from the Norwegian School of
Management (BI) in 1986. Prior to joining the Company, Mrs. Klemp was Assistant Director Finance in Color Group ASA and Group Financial Manager in Color Line ASA, an OSE listed company and before that was Assistant Vice President in Nordea Bank Norge
ASA handling structuring and syndication of loan facilities in the international banking market and a lending officer of Danske Bank A/S.
B. COMPENSATION
During the year ended December 31, 2021, we paid aggregate cash compensation of approximately $1.1 million and an aggregate amount of
approximately $0.1 million for pension and retirement benefits to our directors and executive officers (six persons) of that fiscal year.
C. BOARD PRACTICES
In accordance with our current Amended and Restated Bye-Laws the number of directors shall be such number not less than two as our shareholders
by Ordinary Resolution (defined below) may from time to time determine and each director shall hold office until the next annual general meeting following his or her election or until his or her successor is elected. We currently have four directors.
We currently have an audit committee, which is responsible for overseeing the quality and integrity of our financial statements and our
accounting, auditing and financial reporting practices, our compliance with legal and regulatory requirements, the independent auditor’s qualifications, independence and performance and our internal audit function. In 2018, James O’Shaughnessy was
appointed to serve on the Audit Committee. James O’Shaughnessy is the chairperson of the Audit Committee and the Audit Committee Financial Expert.
In lieu of a compensation committee comprised of independent directors, our Board of Directors is responsible for establishing the executive
officers’ compensation and benefits. In lieu of a nomination committee comprised of independent directors, our Board of Directors is responsible for identifying and recommending potential candidates to become board members and recommending directors
for appointment to board committees.
71
Our officers are elected by the Board of Directors as soon as possible following each Annual General Meeting and shall hold office for such
period and on such terms as the Board of Directors may determine. For more information on our Board of Directors, please see “Recent Developments—The Combination Agreement – Board of Directors and Executive Management.”
There are no service contracts between us and any of our directors providing for benefits upon termination of their employment or service.
As a foreign private issuer, we are exempt from certain requirements of the NYSE that are applicable to U.S. listed companies. For a listing and
further discussion of how our corporate governance practices differ from those required of U.S. companies listed on the NYSE, please see “Item 16G. Corporate Governance” of our 2021 Annual Report or visit the corporate governance section of our
website at www.frontline.bm. The information on our website is not incorporated by reference into this Proxy Statement/Prospectus.
D. EMPLOYEES
As of June 30, 2022, we employed approximately 78 people in our offices in Bermuda, London, Glasgow, Oslo, Singapore and China, compared to 79
employees in 2021 and 84 employees in 2020. We contract with independent ship managers to provide technical management services in respect of our vessels.
E. SHARE OWNERSHIP
As of August 26, 2022, the beneficial interests of our directors and officers in our ordinary shares were as follows:
|
Director or Officer
|
Ordinary
shares of $1.00 each |
Options to
acquire ordinary shares which have vested |
Percentage of
ordinary shares outstanding |
|||||||||
|
John Fredriksen*
|
198,000
|
*
|
—
|
Less than 1%
|
||||||||
|
James O’Shaughnessy
|
—
|
—
|
—
|
|||||||||
|
Ola Lorentzon
|
24,000
|
—
|
Less than 1%
|
|||||||||
|
Ole B. Hjertaker
|
—
|
—
|
||||||||||
|
Steen Jakobsen
|
—
|
—
|
—
|
|||||||||
|
Lars H. Barstad
|
—
|
—
|
—
|
|||||||||
|
Inger M. Klemp
|
300,000
|
—
|
Less than 1%
|
|||||||||
* Please see “Item 7. Major Shareholders and Related Party Transactions—A. Major Shareholders” in our 2021 Annual Report.
Share Option Scheme
In September 2009, the Board of Directors approved a share option plan, or the Frontline Scheme. The Frontline Scheme permitted the Board of
Directors, at its discretion, to grant options to acquire shares in the Company to employees and directors of the Company or its subsidiaries. The subscription price for all options granted under the scheme is reduced by the amount of all dividends
declared by the Company in the period from the date of grant until the date the option is exercised, provided the subscription price is never reduced below the par value of the share. The vesting periods of options granted under the plan will be
specific to each grant. There is no maximum number of shares authorized for awards of equity share options and authorized, un-issued or treasury shares of the Company may be used to satisfy exercised options.
72
In July 2016, the Company granted 1,170,000 share options with an exercise price of $8.00 per share, reduced for dividends paid of $2.30 per
share up until December 31, 2020, to directors and officers in accordance with the terms of the Frontline Scheme. One third of the options vest over one year, one third vest over two years and one third vest over three years. The options have a
five-year term. In November 2018, the Company granted an additional 180,000 options, all of which were to employees and none were to directors and officers.
In January 2020, the Company issued 798,000 ordinary shares under its share option scheme to Robert Hvide Macleod, former Chief Executive
Officer of Frontline Management AS, at a strike price of $7.30 per share.
In July 2021, the Company issued 339,000 ordinary shares under its share option scheme at a strike price of $5.70 per share. The shares were
issued to John Fredriksen (198,000 ordinary shares), Inger M. Klemp (120,000 ordinary shares), and Ola Lorentzon (21,000 ordinary shares).
In December 2021, the Board of Directors approved the grant of 1,280,000 synthetic options to employees and board members according to the rules
of the Company’s synthetic option scheme approved on December 7, 2021. The synthetic options have a five-year term expiring in December 2026. The vesting period is 12 months for the first 27.5% of options, 24 months for the next 27.5% of options and
36 months for the final 45% of options. The synthetic options will be settled in cash based on the difference between the market price of the Company’s shares and the exercise price on the date of exercise, and as such, have been classified as a
liability.
73
RELATED PARTY TRANSACTIONS
We are incorporating by reference the information set forth under “Item 7. Major Shareholders and Related Party Transactions—B. Related
Party Transactions” in our 2021 Annual Report and “Note 14. Related Party Transactions” in our Report on Form 6-K filed with the SEC on September 9, 2022. Please also see “Recent Developments” in this Proxy Statement/Prospectus.
74
PRINCIPAL SHAREHOLDERS
The following table presents certain information as of August 31, 2022, regarding the ownership of our ordinary shares with respect to each
shareholder whom we know to beneficially own more than 5% of our outstanding ordinary shares.
|
Owner
|
Number of shares
|
%
|
*
|
|||||
|
Hemen Holding Ltd.**
|
79,321,042
|
35.6
|
%
|
|||||
*Based on issued share capital of 222,622,889.
** C.K. Limited is the trustee of two trusts (the “Trusts”) settled by Mr. John Fredriksen. The Trusts indirectly hold all of the shares of Hemen and Greenwich
Holdings Limited, the sole shareholder of Hemen. Accordingly, C.K. Limited, as trustee, may be deemed to beneficially own the 79,321,042 Ordinary Shares of the Company that are owned by Hemen and beneficially owned by Greenwich Holdings Limited. The
beneficiaries of the Trusts are members of Mr. Fredriksen’s family. Mr. Fredriksen is neither a beneficiary nor a trustee of either Trust. Therefore, Mr. Fredriksen has no economic interest in such 79,321,042 Ordinary Shares and Mr. Fredriksen
disclaims any control over such 79,321,042 Ordinary Shares, save for any indirect influence he may have with C.K. Limited, as the trustee of the Trusts, in his capacity as the settlor of the Trusts.
75
DESCRIPTION OF SHARE CAPITAL
The following is a summary of the description of our share capital. The following summary does not contain all of the information that you
may find useful. For more complete information, you should read the description of our share capital and the material terms of our Current Constitution, as amended, our Amended and Restated Bye-Laws filed as an exhibit to the registration statement,
which this Proxy Statement/Prospectus is a part of, as updated by annual and other reports and documents we file with the SEC after the date of this Proxy Statement/Prospectus and that are incorporated by reference herein, together with the Current
Constitution, as amended, our Amended and Restated Bye-Laws, as amended, copies of which have been filed as exhibits thereto. Please see the section of this Proxy Statement/Prospectus entitled “Where You Can Find Additional Information.”
Authorized Capitalization
Under our Memorandum of Association, our authorized share capital consists of 500,000,000 ordinary
shares, par value $1.00 per share, of which 203,530,979 shares were issued and outstanding as of June 30, 2022. Pursuant to the share lending arrangement with Hemen described above, we have issued a total of 19,091,910 ordinary shares to Hemen in
August 2022, following which we have a total of 222,622,889 shares issued and outstanding.
Reconciliation of the Number of Ordinary Shares Outstanding through June 30, 2022
|
Shares outstanding at December 31, 2018
|
169,821,192
|
|||
|
Number of ordinary shares issued in connection with the 2018 ATM Program
|
11,037,273
|
|||
|
Number of ordinary shares issued in connection with the Trafigura Acquisition
|
16,035,856
|
|||
|
Shares outstanding at December 31, 2019
|
196,894,321
|
|||
|
Number of ordinary shares issued in connection with our share option scheme
|
798,000
|
|||
|
Shares outstanding at December 31, 2020
|
197,692,321
|
|||
|
Number of ordinary shares issued in connection with the 2020 ATM Program
|
5,499,658
|
|||
|
Number of ordinary shares issued in connection with our share option scheme
|
339,000
|
|||
|
Shares outstanding at December 31, 2021
|
203,530,979
|
|||
|
Shares outstanding at June 30, 2022
|
203,530,979
|
|||
|
Number of ordinary shares issued in connection with share exchange transaction
|
19,091,910
|
|||
|
Shares outstanding at August 31, 2022
|
222,622,889
|
2018 ATM Program
In July 2018, we entered into an equity distribution agreement with Morgan Stanley & Co. LLC (“Morgan Stanley”) for the offer and sale
of up to $100.0 million of ordinary shares through an at-the-market offering program (the “2018 ATM Program”). In October 2019, the 2018 ATM Program was completed. In the year ended December 31, 2019, we issued 11,037,273 shares pursuant to the 2018
ATM Program.
Trafigura Acquisition
In August 2019, we entered into a Sale and Purchase Agreement with Trafigura Maritime Logistics to acquire 10 Trafigura Suezmax tankers
(the “Trafigura Acquisition”). We issued 16,035,856 shares as a part of the consideration for the Acquisition.
2020 ATM Program
In June 2020, we entered into an equity distribution agreement with Morgan Stanley for the offer and sale of up to $100.0 million of
ordinary shares through an at-the-market offering program (the “2020 ATM Program”). In the year ended, December 31, 2020, we issued zero shares pursuant to the 2020 ATM Program. In the year ended December 31, 2021, we issued 5,499,658 shares pursuant
to the 2020 ATM Program.
76
2016 Share Option Scheme
In the year ended December 31, 2020, we issued 798,000 ordinary shares under our 2016 share option scheme (the “2016 Share Option Scheme”) to
Robert Hvide Macleod, former Chief Executive Officer of Frontline Management AS, at a strike share price of $7.30 per share.
In the year ended December 31, 2021, we issued 339,000 ordinary shares under our 2016 Share Option Scheme at a strike price of $5.70 per share.
The shares were issued to John Fredriksen (198,000 ordinary shares), Inger M. Klemp (120,000 ordinary shares) and Ola Lorentzon (21,000 ordinary shares).
2022 share exchange transaction
As of June 30, 2022, the Company had acquired 13,664,613 shares in Euronav in privately negotiated transactions with certain shareholders of
Euronav. The Euronav shares were acquired in exchange for 19,091,910 Frontline shares with an aggregate fair value of $175.5 million. The fair value of the Euronav shares was $163.0 million as of June 30, 2022.
In connection with the above-referenced privately negotiated share exchange transactions, Frontline entered into a share lending arrangement
with Hemen to facilitate settlement of such transactions. Pursuant to such arrangement Hemen delivered an aggregate of 19,091,910 Frontline shares to the exchanging Euronav holders in June 2022 and Frontline agreed to issue to Hemen the same number
of shares of Frontline Ltd. in full satisfaction of the share lending arrangement. This share issuance to Hemen was completed in August 2022.
Ordinary Shares
Each outstanding ordinary share entitles the holder to one vote on all matters submitted to a vote of shareholders. Subject to preferences
that may be applicable to any outstanding preferred shares, holders of ordinary shares are entitled to receive ratably cash dividends, if any, declared by our Board of Directors out of funds legally available for dividends. Upon our dissolution or
liquidation or the sale of all or substantially all of our assets, after payment in full of all amounts required to be paid to creditors and to the holders of preferred shares having liquidation preferences, if any, the holders of our ordinary shares
will be entitled to receive pro rata our remaining assets available for distribution. Holders of ordinary shares do not have conversion, redemption or preemptive rights to subscribe to any of our securities. The rights, preferences and privileges of
holders of ordinary shares are subject to the rights of the holders of any preferred shares, which we may issue in the future.
Preferred Shares
The material terms of any series of preferred shares that we may offer through a prospectus supplement will be described in that prospectus
supplement. Bye-Law 4 of our Amended and Restated Bye-laws provides that any share in the Company may be issued with or have attached thereto such preferred, deferred, qualified or other special rights or such restrictions, whether in regard to
dividend, voting, return of capital or otherwise, as the Company may by Ordinary Resolution (defined below) determine. Bye-Law 7 of our Amended and Restated Bye-Laws provides that the Board of Directors may exercise all the powers of the Company to
divide its shares into several classes and attach thereto respectively any preferential, deferred, qualified or special rights, privileges or conditions. Bye-Law 9 provides that subject to the Companies Act 1981, any preference shares may, with the
sanction of an Ordinary Resolution, be issued on terms (a) that they are to be redeemed on the happening of a specified event or on a given date; and/or (b) that they are liable to be redeemed at the option of the Company; and/or (c) if authorized by
the memorandum of association , that they are liable to be redeemed at the option of the holder. An Ordinary Resolution is defined in Bye-Law 1 of our Amended and Restated Bye-laws as a resolution passed by a
simple majority of votes cast at a general meeting of the Company. Our Board of Directors may be authorized to provide for the issuance of preferred shares in one or more series with designations as may be stated in the resolution or resolutions
providing for the issue of such preferred shares provided that the terms and manner of redemption of any preferred shares that are redeemable shall be either as the Company may in general meeting determine or, in the event that the Company in general
meeting may have so authorized, as our Board of Directors or any committee thereof may by resolution determine before the issuance of such shares pursuant to Bye-Law 9. Our Board of Directors will authorize the issuance of preferred shares only for a
proper purpose and in our best interests. At the time that any series of our preferred shares is authorized, our Board of Directors will fix the dividend rights, any conversion rights, any voting rights, redemption provisions, liquidation preferences
and any other rights, preferences, privileges and restrictions of that series, as well as the number of shares constituting that series and their designation. Our Board of Directors could, with the sanction of an Ordinary Resolution of our
shareholders, cause us to issue preferred shares, which have voting, conversion and other rights that could adversely affect the holders of our ordinary shares or make it more difficult to effect a change in control. Our preferred shares, depending
on the specific terms pursuant to which they are issued, could have the effect of diluting the share ownership of shareholders, including persons seeking to obtain control of us, thereby hindering a possible takeover attempt. In addition, our
preferred shares could be issued with voting, conversion and other rights and preferences, which would adversely affect the voting power and other rights of holders of our ordinary shares.
Listing
Our ordinary shares are listed on the NYSE and OSE under the symbol “FRO.”
Transfer Agent
The registrar and transfer agent for our ordinary shares is Computershare Trust Company, N.A.
77
Comparison of Bermuda to Cyprus Corporate Law
Upon the Redomiciliation becoming effective by issuance of the Temporary Continuation Certificate, the Frontline Cyprus Amended and
Restated Charter, will replace our Current Constitution and Amended and Restated Bye-Laws, including as amended by the Discontinuation Amendment as our constitutional documents after the Redomiciliation. The
Frontline Cyprus Amended and Restated Charter of Frontline (Cyprus), if approved at the Special General Meeting, shall become effective immediately upon issuance of the Temporary Redomiciliation Certificate. The forms of Discontinuation Amendment to
the Amended and Restated Bye-laws and the Frontline Cyprus Amended and Restated Charter are filed as Annex A and Annex B, respectively, to the registration statement of which this Proxy Statement/Prospectus is a part.
Although we anticipate that the Frontline Cyprus Amended and Restated Charter under Cyprus law will comprise substantially the same rights
and protections for our shareholders and creditors as those they currently have under Bermuda law and our Current Constitution, there will be some differences between our new constitutional documents and Cyprus law, on one hand, and our Current
Constitution and Bermuda law, on the other hand, that may affect the rights of shareholders. Set forth below is a comparison of select provisions of the corporate laws of Bermuda and of Cyprus showing the default positions in each jurisdiction that
will govern the company and our shareholders to the extent not otherwise provided for in our constitutional documents.
Comparison of Bermuda and Cyprus Corporate Law
The following table provides a comparison between some statutory provisions of the Cyprus Companies Law and the Bermuda Companies Act of 1981,
as amended, relating to shareholders’ rights.
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Bermuda
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Cyprus
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Amendment of Constitutional Documents
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A company may, by resolution passed at a general meeting of shareholders of which due notice has been given, alter the provisions of its memorandum of association.
(Companies Act § 12(1)).
The directors of a company may after its registration amend the bye-laws but any such amendment shall be submitted to a general meeting of the company, and shall become
operative only to such extent as they are approved at such meeting. (Companies Act § 13(5)).
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Pursuant to sections 7 and 12 of the Cyprus Companies Law, respectively, the Memorandum and Articles of Association of a Cyprus company may be amended by special
resolution of the company (i.e., at least 75% of voting shares at a quorate meeting).
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Authorized Capital Stock
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Under the Companies Act, the authorized share capital of a company limited by shares is the amount of share capital divided into shares of a fixed amount stated in the
company’s memorandum of association. (Companies Act § 7).
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If authorized by the General Meeting, the directors of the company have the right to resolve upon the issue of shares up to the authorized share capital amount and any
share capital increase is decided by the General Meeting with the decision taken by a majority of 2/3rd of the votes corresponding either to the represented securities or to the represented issued share capital. Where at least
half of the issued share capital is represented, a simple majority shall be sufficient.
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Director and Officer Limitation on Liability and Indemnification
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The Companies Act permits a company to release its directors and officers from liability to the company and to indemnify its directors and officers and auditors from
liability to the company or any of its subsidiaries, except in the case of liability for fraud or dishonesty. The release and indemnity provisions may be contained in a contract between the company and its directors, officers or creditors,
or it may be set out in the bye-laws of the company. (Companies Act § 98).
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The Cyprus Companies Law does not have limitation on the liability of directors (Cyprus Companies Law Section 197). However, as per the Cyprus Companies Law, the
articles of association of a company may contain indemnity provisions by virtue of which the directors shall be indemnified and secured harmless out of the assets and profits of the company from and against all actions, costs, charges,
losses, damages and expenses which they or any of them may incur or sustain by reason of any contract entered into or any act done, concurred in, or omitted in about the execution of their duty except such (if any) as they shall incur or
sustain by or through their own willful act, neglect or default. Such provisions must be included in the articles prior to the act or omission for which the directors or officer shall be indemnified in order them to have effect for the
protection of the directors.
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Director’s Fiduciary Duties
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The Companies Act specifically requires that every officer of a company, which includes a director and secretary, in exercising his powers and discharging his duties
must do so honestly and in good faith with a view to the best interests of the company and exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. (Companies Act § 97(1)).
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A director must act in good faith and for the benefit and interest of the company, take reasonable care in the management and conduct of the company’s affairs and act in
this context with the skill and care of a reasonably diligent person with similar skills and knowledge. A director cannot exceed the authority vested in him by the company (through its articles of association) or cause the company to do
something which is outside its powers (as regulated by its memorandum of objects).
Such duties and obligations are derived from Cyprus common law.
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Dividends
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Under the Companies Act, a company may declare and pay a dividend, or make a distribution out of contributed surplus, provided there are reasonable
grounds for believing that after any such payment (a) the company will be able to pay its liabilities as they become due and (b) the realizable value of its assets will be greater than its liabilities. (Companies Act § 54).
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Under section 169A of the Cyprus Companies Law, except for cases of reduction of subscribed capital, a public company cannot make
dividend distributions to its shareholders in case that at the date of expiration of the last financial year the net assets as presented in its annual accounts or as could arise as a result of such distribution are below the aggregate of
the subscribed capital and the reserves, the distribution of which the law or the articles of association do not allow.
The amount of dividend distribution cannot exceed the amount of the results of the last financial year, increased by the profits
brought forward at the end of the last financial year and sums drawn from reserves available for this purpose, reduced by the amount of losses brought forward from previous financial years and sums placed to reserves in accordance with the
law or the articles of association.
Under section 169C of the Cyprus Companies Law, interim dividends can be distributed provided interim accounts shall be prepared in which the funds available for
distribution are shown to be sufficient and the amount to be distributed cannot exceed the amount of profits made since the end of the last financial year the accounts of which have been finalized, increased by the profits which have been
transferred from the last financial year and sums drawn from reserves available for this purpose and reduced by the losses of the previous financial years, and sums to be placed in reserve pursuant to the requirements of the law or the
articles of association.
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Directors
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The maximum number of directors may be set by the shareholders at a general meeting or in accordance with the bye-laws. The maximum number of directors
is usually fixed by the shareholders at the annual general meeting and may be fixed at a special general meeting. Only the shareholders may increase or decrease the number of directors’ seats last approved by the shareholders. If the
maximum number of directors fixed by the shareholders has not been elected by the shareholders, the shareholders may authorize the board of directors to fill any vacancies. (Companies Act §91).
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According to section 170 of the Cyprus Companies Law, the minimum number of directors in public companies is two. The articles of
association may provide for a higher minimum number of directors or may provide that the number of directors is subject to increase or decrease (not below the statutory minimum) by resolution of the shareholders at annual or an
extraordinary meeting. The shareholders have the power in accordance with section 178 of the Cyprus Companies Law to remove a director or directors by ordinary resolution. The articles of association may provide that a new director or
directors can be appointed in replacement of any directors removed as aforementioned, by ordinary resolution. The articles of association may also provide that directors or the shareholders (by ordinary resolution) have the power to appoint
a director in the event of a vacancy.
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Dissenter’s Rights of Appraisal
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In the event of an amalgamation or merger of a Bermuda company with another company or corporation, a shareholder of the Bermuda company who did not vote
in favor of the amalgamation or merger and is not satisfied that fair value has been offered for such shareholder’s shares may, within one month of notice of the shareholders meeting, apply to the Supreme Court of Bermuda to appraise the
fair value of those shares. (Companies Act § 106(6)).
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In accordance with section 201 of the Cyprus Companies Law, in the event of a scheme or contract involving the transfer of shares
of a Cypriot company to another company which, within four months after the making of the offer, has been approved by the holders of not less than 9/10th in value of the shares whose transfer is involved (other than shares
already held at the date of the offer by, or on behalf of, the offering company or its subsidiary), any dissenting shareholder may apply to the Court for an order to maintain his shares in the transferor company in the event that the
acquiring company gives to the dissenting shareholders a statutory notice for acquisition of their shares within two months after the expiration of the aforementioned four month period.
A Cypriot company with securities listed on a regulated market is also subject to the Cypriot law making provision for public takeover bids
for the acquisition of securities of companies and related matters (the “Takeover Law”). The Takeover Law also contains provisions enabling a squeeze out of minority shareholders where the offeror holds voting securities in the company
representing no less than 90% or where the offeror holds or has irrevocably agreed to acquire, following acceptance of a takeover bid, voting securities in the company representing no less than 90%. In the event of a compulsory
acquisition (squeeze out) by a majority shareholder as aforementioned, the squeezed out shareholders may commence a legal action against the offeror within six months from the announcement of the of the payment of the consideration for the
squeeze out, to dispute the cash consideration offered for the compulsory acquisition of their shares. This does not hinder the transfer of shares pursuant to the squeeze out (section 36 of the Takeover Law).
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Shareholder Derivative Actions
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Generally, class actions and derivative actions are not available to shareholders under Bermuda law. (See generally,
Bermuda Companies Act).
Bermuda courts, however, would ordinarily be expected to permit a shareholder to commence an action in the name of a company to remedy a wrong to the
company where the act complained of is alleged to be beyond the corporate power of the company or illegal, or would result in the violation of the bye-laws.
Bermuda courts would further give consideration to acts that are alleged to constitute a fraud against the minority of shareholders, or, for instance,
where an act requires the approval of a greater percentage of the company’s shareholders than that which actually approved it.
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Under Cypriot common law, a derivative action is possible by virtue of which a legal action can be initiated by the minority
shareholders or those shareholders who are not de facto in control of the company, placing the company as the proper claimant in litigation for wrongs committed against it;
According to section 211(f) of the Cyprus Companies Law, a company may be wound up by the court if the court is of the opinion that it is
just and equitable to do so. The “just and equitable” ground has been interpreted by the courts as to cover, inter alia, cases of oppressive conduct of the majority shareholder(s) over the minority. Alternatively, section 202 of the
Cyprus Companies Law provides an alternative statutory remedy to winding-up in the case of oppression where (a) the affairs of the company are being conducted in a manner oppressive to some part of the shareholders; (b) the court
would be justified in making a winding-up order on the ground that it is just and equitable; but (c) such order would unfairly prejudice that part of the members. In such a case, any member of the company complaining that the affairs of the
company are being conducted in a manner oppressive to some part of the members may cause an application to the Court by petition for the purpose of bringing an end to the matters complained of.
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Shareholder Meetings and Voting Rights
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Shareholder meetings may be called by the board of directors and must be called upon the request of shareholders holding not less than 10% of the paid-up
capital of the company carrying the right to vote at a general meeting. (Companies Act §74(1)).
Special General Meetings may be convened by the board of directors whenever they see fit, and the meetings shall be called special general meetings.
(Companies Act §71(1)).
May be held in or outside of Bermuda.
Notice:
•Notice of all general meetings shall specify the place, the day and hour of the meeting. (Companies Act §71(3)).
•Notice of special general meetings shall specify the place, the day, hour and general nature of the business to be considered at the meeting. (Companies
Act §71(3)).
•Notwithstanding any provision in the bye-laws of a company, at least five days’ notice shall be given of a company meeting, other than an adjourned
meeting. (Companies Act §75(1)).
The accidental omission to give notice to, or the non- of a notice of a meeting by any person entitled to receive notice does not invalidate the
proceedings. (Companies Act §71(4)).
Generally, any action which may be done by resolution of a company in a general meeting may be done by resolution in writing. (Companies Act §77A).
Shareholders may act by written resolution to elect directors, but may not act by written resolution to remove directors. (Companies Act §77A(6)(b)).
Except as otherwise provided in the bye-laws of a company or the Companies Act, any action or resolution requiring the approval of the shareholders may
be passed by a simple majority of votes cast (Companies Act §77(2)).
A shareholder may authorize another person or persons to act for him by proxy. (Companies Act §77(1)).
The bye-laws may specify the number to constitute a quorum for a general meeting of the Company. In the case of a company having only one member, one
member present in person or by proxy constitutes the necessary quorum. (Companies Act § 71(5)).
The bye-laws may provide for cumulative voting in the election of directors. (Companies Act §77).
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According to section 125 of the Cyprus Companies Law, every company shall in every year hold a general meeting as its annual
general meeting in addition to any other meeting in that year and shall specify the meeting as such in the notices calling it. No more than 15 months should elapse between the date of one annual general meeting
of a company and the next one.
A general meeting of the shareholders which is not an annual general meeting is an extraordinary general meeting. Pursuant to section 126
(2) of the Cyprus Companies Law, the directors of a company listed in a regulated market shall, on the requisition of members of the company holding (on the date of requisition) no less than 1/20th of the paid up capital of the company which carries the right to vote, convene an extraordinary general meeting.
A company listed in a regulated market shall ensure equal treatment for all shareholders who are in the same position with regard to the exercise of voting rights and
participation in a general meeting (section 126A of the Cyprus Companies Law).
Notice:
•There shall be 21 days’ written notice of all annual general meetings.
•There shall be 21 days’ written notice for extraordinary general meetings for passing of special resolutions.
•In respect of a company listed on a regulated market, there shall be 21 days’ written notice of any general meeting other than an annual
general meeting or a meeting for the passing of a special resolution, unless the company (a) offers technical facilitation to its members in order to vote through electronic means accessible to all voting members; and (b) in the
immediately preceding annual general meeting or at a general meeting convened after that meeting, a special resolution is passed shortening the notice period for convening general meetings to 14 days, in which case, 14 days’ written notice will be required (section 127 of the Cyprus Companies Law).
Except as otherwise provided by the Cyprus Companies Law or in a company’s articles of association, any action or resolution requiring the approval of the shareholders
may be passed by a simple majority of votes cast.
A shareholder or shareholders of a company listed in a regulated market holding at least 5% of the voting shares have the right to
put items on the agenda of a general meeting of shareholders provided that each such item is accompanied by reasons which justify its inclusion, or a draft resolution to be adopted and/or table draft resolutions as an item on the agenda of
any extraordinary general meeting for approval (section 127B of the Cyprus Companies Law).
For public companies and in so far as the articles of association of the company do not provide otherwise, three shareholders present at a meeting constitute a quorum
(section 128(1)(c) of the Cyprus Companies Law).
A company listed in a regulated market may offer participation in a general meeting by electronic means including mechanisms for casting votes and real time transmission
of the meeting (section 128B of the Cyprus Companies Law).
Any shareholder of a company shall have the right to appoint any other person as his proxy to attend and vote in his stead (section
130 of the Cyprus Companies Law).
The Cyprus Companies Law does not provide for passing resolutions in writing however this may be permitted by its articles of association.
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Quorum and Action by the Board of Directors
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The quorum at meetings of the directors is a matter that may be regulated in a company’s bye-laws. (Companies Act § 13(3)(xiv)).
Wherever in the Companies Act an obligation or duty is placed on a company or a company is authorised to do any act, then unless it is otherwise provided such
obligation, duty or act may be carried out by the directors of the company. (Companies Act § 2(2)).
The Companies Act vests very wide powers on the directors of a company to manage the business of the company. (Companies Act § 91(1)).
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TAXATION
The following discussion summarizes the material United States federal income tax and Bermuda and/or Cyprus tax consequences to United
States Holders, as defined below, of ownership of ordinary shares and the Redomiciliation. This summary does not purport to deal with all aspects of United States federal income taxation and Bermuda and/or Cyprus taxation that may be relevant to an
investor's decision to purchase ordinary shares, nor any tax consequences arising under the laws of any state, locality or other foreign jurisdiction.
United States Federal Income Tax Considerations
In the opinion of Seward & Kissel LLP, our United States counsel, the following are the material United States federal income tax
consequences to us of our activities and to United States Holders of our ordinary shares. The following discussion of United States federal income tax matters is based on the Code, judicial decisions, administrative pronouncements, and existing and
proposed regulations issued by the U.S. Department of the Treasury, all of which are subject to change, possibly with retroactive effect. Except as otherwise noted, this discussion is based on the assumption that we will not maintain an office or
other fixed place of business within the United States.
The Redomicilation
The Redomiciliation will constitute a tax-free reorganization within the meaning of Section 368(a)(1)(F) of the Code, in which the holders
of Frontline ordinary shares will be deemed to exchange their shares for equivalent shares of a Cyprus corporation. U.S. holders will not recognize taxable gain or loss as a result of the Redomiciliation for U.S. federal income tax purposes.
Taxation of the Company's Shipping Income: In General
The Company anticipates that it will derive substantially all of its gross income from the use and operation of vessels in international
commerce and that this income will principally consist of freights from the transportation of cargoes, charter hire from time or voyage charters and the performance of services directly related thereto, which the Company refers to as "shipping
income."
Shipping income that is attributable to transportation that begins or ends, but that does not both begin and end, in the United States will
be considered to be 50% derived from sources within the United States. Shipping income attributable to transportation that both begins and ends in the United States will be considered to be 100% derived from sources within the United States. The
Company is not permitted by law to engage in transportation that gives rise to 100% United States source income.
Shipping income attributable to transportation exclusively between non-United States ports will be considered to be 100% derived from
sources outside the United States. Shipping income derived from sources outside the United States will not be subject to United States federal income tax.
Based upon the Company's current and anticipated shipping operations, the Company's vessels will operate in various parts of the world,
including to or from United States ports. Unless exempt from United States federal income taxation under Section 883 of the Code, or Section 883, the Company will be subject to United States federal income taxation, in the manner discussed below, to
the extent its shipping income is considered derived from sources within the United States.
Application of Section 883
Under the relevant provisions of Section 883, the Company will be exempt from United States federal income taxation on its United States
source shipping income if:
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it is organized in a "qualified foreign country" which is one that grants an equivalent exemption from taxation to corporations organized in the United States in respect of the shipping income
for which exemption is being claimed under Section 883, and which the Company refers to as the "country of organization requirement"; and
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it can satisfy any one of the following two ownership requirements for more than half the days during the taxable year:
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the Company's stock is "primarily and regularly" traded on an established securities market located in the United States or a qualified foreign country, which the Company refers to as the
"Publicly-Traded Test"; or
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more than 50% of the Company's stock, in terms of value, is beneficially owned by any combination of one or more qualified shareholders which, as defined, includes individuals who are
residents of a qualified foreign country or foreign corporations that satisfy the country of organization requirement and the Publicly-Traded Test.
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The United States Treasury Department has recognized each of Bermuda and Cyprus, the countries of incorporation of the Company before and
after the Redomicilation and certain of its subsidiaries, as a qualified foreign country. In addition, the United States Treasury Department has recognized Liberia, the Republic of the Marshall Islands, Singapore and Bermuda, the countries of
incorporation of certain of the Company's vessel-owning or chartering subsidiaries, as qualified foreign countries. Accordingly, the Company and its vessel owning subsidiaries satisfy the country of organization requirement.
Therefore, the Company's eligibility for exemption under Section 883 is wholly dependent upon being able to satisfy one of the stock
ownership requirements.
Prior to the Merger, the Company qualified for exemption under Section 883 while Frontline 2012 Ltd. did not so qualify. In addition, the
Company currently does not anticipate circumstances under which the Company would be able to satisfy the 50% ownership test described above. The Company’s ability to satisfy the Publicly-Traded Test is described below.
Under the Treasury Regulations, stock of a foreign corporation is considered "primarily traded" on an established securities market in a
country if the number of shares of each class of stock that is traded during the taxable year on all established securities markets in that country exceeds the number of shares in each such class that is traded during that year on established
securities markets in any other single country. The Company's ordinary shares were "primarily traded" on the NYSE during the 2020 taxable year.
Under the Treasury Regulations, the Company's ordinary shares will be considered to be "regularly traded" on the NYSE if: (1) more than 50%
of its ordinary shares, by voting power and total value, is listed on the NYSE, referred to as the "Listing Threshold", (2) its ordinary shares are traded on the NYSE, other than in minimal quantities, on at least 60 days during the taxable year (or
one-sixth of the days during a short taxable year), which is referred to as the "Trading Frequency Test"; and (3) the aggregate number of its ordinary shares traded on the NYSE during the taxable year are at least 10% of the average number of its
ordinary shares outstanding during such taxable year (as appropriately adjusted in the case of a short taxable year), which is referred to as the "Trading Volume Test". The Trading Frequency Test and Trading Volume Test are deemed to be satisfied
under the Treasury Regulations if the Company's ordinary shares are regularly quoted by dealers making a market in the ordinary shares.
The Company believes that its ordinary shares have satisfied the Listing Threshold, as well as the Trading Frequency Test and Trading
Volume Tests, during the 2020 taxable year.
Notwithstanding the foregoing, the Treasury Regulations provide, in pertinent part, that stock of a foreign corporation will not be
considered to be "regularly traded" on an established securities market for any taxable year during which 50% or more of such stock is owned, actually or constructively under specified stock attribution rules, on more than half the days during the
taxable year by persons, or "5% Shareholders", who each own 5% or more of the vote and value of such stock, which is referred to as the "50% Override Rule." For purposes of determining the persons who are 5% Shareholders, a foreign corporation may
rely on Schedules 13D and 13G filings with the U.S. Securities and Exchange Commission.
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During the 2020 taxable year, 5% Shareholders owned less than 50% of the Company's ordinary shares for more than half the number of days in
the year. Therefore, the Company was not subject to the 50% Override Rule, and therefore the Company believes that it satisfied the Publicly-Traded Test for the 2020 taxable year.
However, the Company may not satisfy the Publicly-Traded Test in future taxable years. In this regard, Hemen, who we believe to be a
non-qualified shareholder, currently owns less than 50% of the ordinary shares. If Hemen and other 5% Shareholders hold more than 50% of our ordinary shares, the Company would be subject to the 50% Override Rule for such taxable year unless it could
establish that, among the ordinary shares owned by the 5% Shareholders, sufficient shares are owned by qualified shareholders, for purposes of Section 883 of the Code, to preclude non-qualified shareholders from owning 50% or more of the Company's
ordinary shares for more than half the number of days during the taxable year. The requirements of establishing this exception to the 50% Override Rule are onerous and the Company may not be able to satisfy them.
Taxation in Absence of Section 883 Exemption
If the benefits of Section 883 are unavailable for any taxable year, the Company's United States source shipping income will be subject to
a 4% tax imposed by Section 887 of the Code on a gross basis, without the benefit of deductions, which the Company refers to as the "4% gross basis tax regime". Since under the sourcing rules described above, no more than 50% of the Company's
shipping income would be treated as being derived from United States sources, the maximum effective rate of United States federal income tax on the Company's shipping income would never exceed 2% under the 4% gross basis tax regime.
Gain on Sale of Vessels
Regardless of whether the Company qualifies for exemption under Section 883, the Company will not be subject to United States federal
income taxation with respect to gain realized on a sale of a vessel, provided the sale is considered to occur outside of the United States under United States federal income tax principles. In general, a sale of a vessel will be considered to occur
outside of the United States for this purpose if title to the vessel, and risk of loss with respect to the vessel, pass to the buyer outside of the United States. It is expected that any sale of a vessel by the Company will be considered to occur
outside of the United States.
Taxation of United States Holders
The following is a discussion of the material United States federal income tax considerations relevant to an investment decision by a
United States Holder, as defined below, with respect to the ordinary shares. This summary is not intended to be applicable to all categories of investors, such as dealers in securities, traders in securities that elect the mark-to-market method of
accounting, banks, thrifts or other financial institutions, insurance companies, regulated investment companies, tax-exempt organizations, United States expatriates, persons that hold ordinary shares as part of a straddle, conversion transaction or
hedge, persons who own 10% or more, actually or constructively, of our outstanding stock (by vote or value), persons deemed to sell ordinary shares under the constructive sale provisions of the Code, United States Holders whose "functional currency"
is other than the United States dollar, holders required to recognize income for United States federal income tax purposes no later than when such item of income is included on an “applicable financial statement,” persons subject to the “base erosion
and anti-avoidance” tax, or holders subject to the alternative minimum tax, each of which may be subject to special rules. In addition, this discussion is limited to persons who hold ordinary shares as "capital assets" (generally, property held for
investment) within the meaning of Code Section 1221. This summary does not contain a detailed description of all the United States federal income tax consequences to United States Holders in light of their particular circumstances and does not
address the Medicare tax on net investment income, or the effects of any state, local or non-United States tax laws. You are encouraged to consult your own tax advisors concerning the overall tax consequences arising in your own particular situation
under United States federal, state, local or foreign law of the ownership of ordinary shares.
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As used herein, the term "United States Holder" means a beneficial owner of ordinary shares that is (i) a United States citizen or
resident, (ii) a United States corporation or other United States entity taxable as a corporation, (iii) an estate, the income of which is subject to United States federal income taxation regardless of its source, or (iv) a trust if a court within
the United States is able to exercise primary jurisdiction over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust.
If a partnership holds ordinary shares, the tax treatment of a partner will generally depend upon the status of the partner and upon the
activities of the partnership. If you are a partner in a partnership holding ordinary shares, you are encouraged to consult your own tax advisor regarding the United States federal income tax consequences of owning an interest in a partnership that
holds ordinary shares.
Distributions
Subject to the discussion of passive foreign investment companies below, any distributions made by the Company with respect to ordinary
shares to a United States Holder will generally constitute foreign source dividends, which may be taxable as ordinary income or "qualified dividend income" as described in more detail below, to the extent of the Company's current or accumulated
earnings and profits, as determined under United States federal income tax principles. Distributions in excess of the Company's earnings and profits will be treated first as a non-taxable return of capital to the extent of the United States Holder's
tax basis in its ordinary shares on a dollar-for-dollar basis and thereafter as capital gain. Because the Company is not a United States corporation, United States Holders that are corporations will not be entitled to claim a dividends-received
deduction with respect to any distributions they receive from the Company.
Dividends paid on ordinary shares to a United States Holder which is an individual, trust or estate (a "United States Non-Corporate
Holder") will generally be treated as "qualified dividend income" that is taxable to such shareholder at preferential United States federal income tax rates provided that (1) the ordinary shares are readily tradable on an established securities
market in the United States (such as the NYSE on which the ordinary shares are listed); (2) the Company is not a passive foreign investment company for the taxable year during which the dividend is paid or the immediately preceding taxable year
(which the Company does not believe it is, has been or will be); and (3) the United States Non-Corporate Holder has owned the ordinary shares for more than 60 days in the 121-day period beginning 60 days before the date on which the ordinary shares
become ex-dividend.
Any dividends paid by the Company which are not eligible for these preferential rates will be taxed as ordinary income to a United States
Holder.
Special rules may apply to any “extraordinary dividend,” generally, a dividend paid by the Company in an amount which is equal to or in
excess of 10% of a shareholder’s adjusted tax basis or dividends received within a one-year period that, in the aggregate, equal or exceed 20% of a shareholder's adjusted tax basis (or fair market value upon the shareholder's election) in an ordinary
share. If the Company pays an “extraordinary dividend” on its ordinary shares that is treated as “qualified dividend income,” then any loss derived by a United States Non-Corporate Holder from the sale or exchange of such ordinary shares will be
treated as long-term capital loss to the extent of such dividend.
Sale, Exchange or other Disposition of Our Ordinary Shares
Assuming the Company does not constitute a passive foreign investment company for any taxable year, a United States Holder generally will
recognize taxable gain or loss from U.S. sources upon a sale, exchange or other disposition of the Company's ordinary shares in an amount equal to the difference between the amount realized by the United States Holder from such sale, exchange or
other disposition and the United States Holder's tax basis in the ordinary shares. Such gain or loss will be capital gain or loss and will be treated as long-term capital gain or loss if the United States Holder's holding period in the ordinary
shares is greater than one year at the time of the sale, exchange or other disposition. Long-term capital gains of a United States Non-Corporate Holder are taxable at preferential United States federal income tax rates. A United States Holder's
ability to deduct capital losses is subject to certain limitations.
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Passive Foreign Investment Company Status and Significant Tax Consequences
Special United States federal income tax rules apply to a United States Holder that holds stock in a foreign corporation classified as a
passive foreign investment company, or a PFIC, for United States federal income tax purposes. In general, the Company will be treated as a PFIC with respect to a United States Holder if, for any taxable year in which such holder held the Company's
ordinary shares, either:
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at least 75% of the Company's gross income for such taxable year consists of passive income (e.g., dividends, interest, capital gains and rents and royalties other than rents and royalties
which are received from unrelated parties in connection with the active conduct of a trade or business), or
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at least 50% of the average value of the assets held by the Company during such taxable year produce, or are held for the production of, passive income.
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For purposes of determining whether the Company is a PFIC, the Company will be treated as earning and owning its proportionate share of the
income and assets, respectively, of any of its subsidiary corporations in which it owns at least 25% of the value of the subsidiary's stock. Income earned, or deemed earned, by the Company in connection with the performance of services would not
constitute passive income. By contrast, rental income would generally constitute "passive income" unless the Company is treated under specific rules as deriving its rental income in the active conduct of a trade or business.
Based on the Company's current operations and future projections, the Company does not believe that it is, or that it has been, nor does it
expect to become, a PFIC with respect to any taxable year. Although there is no legal authority directly on point, the Company's belief is based principally on the position that, for purposes of determining whether the Company is a PFIC, the gross
income the Company derives or is deemed to derive from the time chartering and voyage chartering activities should constitute services income, rather than rental income. Correspondingly, the Company believes that such income does not constitute
passive income, and the assets that the Company or its wholly owned subsidiaries own and operate in connection with the production of such income, in particular, the vessels, do not constitute assets that produce, or are held for the production of,
passive income for purposes of determining whether the Company is a PFIC.
Although there is no direct legal authority under the PFIC rules, the Company believes there is substantial legal authority supporting its
position consisting of case law and IRS pronouncements concerning the characterization of income derived from time charters and voyage charters as services income for other tax purposes. However, there is also authority which characterizes time
charter income as rental income rather than services income for other tax purposes. Accordingly, in the absence of any legal authority specifically relating to the Code provisions governing PFICs, the IRS or a court could disagree with our position.
In addition, although the Company intends to conduct its affairs in such a manner as to avoid being classified as a PFIC with respect to any taxable year, there can be no assurance that the nature of its operations will not change in the future.
As discussed more fully below, if the Company were to be treated as a PFIC for any taxable year, a United States Holder would be subject to
different taxation rules depending on whether the United States Holder makes an election to treat the Company as a "Qualified Electing Fund," which the Company refers to as a "QEF election." As an alternative to making a QEF election, a United States
Holder should be able to elect to mark-to-market the Company's ordinary shares, which the Company refers to as a "Mark-to-Market election" as discussed below.
Taxation of United States Holders Making a Timely QEF Election
If a United States Holder makes a timely QEF election, which United States Holder is referred to by the Company as an "Electing United
States Holder," the Electing United States Holder must report each year for United States federal income tax purposes its pro rata share of the Company's ordinary earnings and its net capital gain, if any, for the Company's taxable year that ends
with or within the taxable year of the Electing United States Holder, regardless of whether or not distributions were received from the Company by the Electing United States Holder. The Electing United States Holder's adjusted tax basis in the
ordinary shares will be increased to reflect taxed but undistributed earnings and profits. Distributions of earnings and profits that had been previously taxed will result in a corresponding reduction in the adjusted tax basis in the ordinary shares
and will not be taxed again once distributed. An Electing United States Holder would generally recognize capital gain or loss on the sale, exchange or other disposition of the ordinary shares. A United States Holder will be eligible to make a QEF
election with respect to its ordinary shares only if the Company provides the United States Holder with annual tax information relating to the Company. There can be no assurance that the Company will provide such tax information on an annual basis.
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Taxation of United States Holders Making a "Mark-to-Market" Election
Alternatively, if the Company were to be treated as a PFIC for any taxable year and, as anticipated, the ordinary shares are treated as
"marketable stock," a United States Holder would be allowed to make a Mark-to-Market election with respect to the Company's ordinary shares. If that election is made, the United States Holder generally would include as ordinary income in each taxable
year that the Company is a PFIC the excess, if any, of the fair market value of the ordinary shares at the end of the taxable year over such holder's adjusted tax basis in the ordinary shares. The United States Holder would also be permitted an
ordinary loss for each such taxable year in respect of the excess, if any, of the United States Holder's adjusted tax basis in the ordinary shares over their fair market value at the end of the taxable year, but only to the extent of the net amount
previously included in income as a result of the Mark-to-Market election. A United States Holder's tax basis in its ordinary shares would be adjusted to reflect any such income or loss amount. In any taxable year that the Company is a PFIC, gain
realized on the sale, exchange or other disposition of the ordinary shares would be treated as ordinary income, and any loss realized on the sale, exchange or other disposition of the ordinary shares would be treated as ordinary loss to the extent
that such loss does not exceed the net mark-to-market gains previously included by the United States Holder.
Taxation of United States Holders Not Making a Timely QEF or Mark-to-Market Election
Finally, if the Company were to be treated as a PFIC for any taxable year, a United States Holder who does not make either a QEF election
or a Mark-to-Market election for that year, who is referred to as a "Non-Electing United States Holder," would be subject to special rules with respect to (1) any excess distribution (i.e., the portion of any distributions received by the
Non-Electing United States Holder on the ordinary shares in a taxable year in excess of 125% of the average annual distributions received by the Non-Electing United States Holder in the three preceding taxable years, or, if shorter, the Non-Electing
United States Holder's holding period for the ordinary shares), and (2) any gain realized on the sale, exchange or other disposition of the ordinary shares. Under these special rules:
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the excess distribution or gain would be allocated ratably over the Non-Electing United States Holder's aggregate holding period for the ordinary shares;
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the amount allocated to the current taxable year and any taxable years before the Company became a PFIC would be taxed as ordinary income; and
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the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class of taxpayer for that year, and an interest charge
for the deemed tax deferral benefit would be imposed with respect to the resulting tax attributable to each such other taxable year.
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These penalties would not apply to a pension or profit sharing trust or other tax-exempt organization that did not borrow funds or
otherwise utilize leverage in connection with its acquisition of the ordinary shares. If a Non-Electing United States Holder who is an individual dies while owning the ordinary shares, the successor of such deceased Non-Electing United States Holder
generally would not receive a step-up in tax basis with respect to such stock.
PFIC Annual Filing Requirements
If the Company were to be treated as a PFIC for any taxable year, a United States Holder will generally be required to file an information
return on an IRS Form 8621 with respect to its ownership of the Company’s ordinary shares.
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Backup Withholding and Information Reporting
In general, dividend payments, or other taxable distributions, made within the United States to a United States Holder and proceeds from
the sale or other disposition of the ordinary shares that are paid to a United States Holder within the United States (and in certain cases, outside the United States) will be subject to information reporting requirements. Such payments will
generally also be subject to "backup withholding" if paid to a non-corporate United States Holder who:
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fails to provide an accurate taxpayer identification number;
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is notified by the IRS that he has failed to report all interest or dividends required to be shown on his United States federal income tax returns; or
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in certain circumstances, fails to comply with applicable certification requirements.
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Backup withholding is not an additional tax. Rather, a taxpayer generally may obtain a refund of any amounts withheld under backup
withholding rules that exceed the taxpayer's income tax liability by filing a refund claim with the IRS.
Other U.S. Information Reporting Obligations
Individuals who are United States Holders (and to the extent specified in applicable Treasury Regulations, certain United States entities)
who hold "specified foreign financial assets" (as defined in Section 6038D of the Code) are required to file IRS Form 8938 with information relating to the asset for each taxable year in which the aggregate value of all such assets exceeds $75,000 at
any time during the taxable year or $50,000 on the last day of the taxable year (or such higher dollar amount as prescribed by applicable Treasury Regulations). Specified foreign financial assets would include, among other assets, the ordinary
shares, unless the ordinary shares are held through an account maintained with a United States financial institution. Substantial penalties apply to any failure to timely file IRS Form 8938, unless the failure is shown to be due to reasonable cause
and not due to willful neglect. Additionally, in the event an individual United States Holder (and to the extent specified in applicable Treasury Regulations a United States entity) that is required to file IRS Form 8938 does not file such form, the
statute of limitations on the assessment and collection of United States federal income taxes of such holder for the related tax year may not close until three years after the date that the required information is filed. United States Holders
(including United States entities) are encouraged to consult their own tax advisors regarding their reporting obligations under this legislation.
Bermuda Taxation
As of the date of this registration statement, we are not subject to taxation under the laws of Bermuda and distributions to us by our
subsidiaries also are not subject to any Bermuda tax. As of the date of this document, there is no Bermuda income, corporation or profits tax, withholding tax, capital gains tax, capital transfer tax, estate duty or inheritance tax payable by
non-residents of Bermuda in respect of capital gains realized on a disposition of our ordinary shares or in respect of distributions by us with respect to our ordinary shares. This does not, however, apply to the taxation of persons ordinarily
resident in Bermuda. Bermuda holders should consult their own tax advisors regarding possible Bermuda taxes with respect to dispositions of, and distributions on, our ordinary shares. The Minister of Finance in Bermuda has granted the Company a tax
exempt status until March 31, 2035, under which no income taxes or other taxes (other than duty on goods imported into Bermuda and payroll tax in respect of any Bermuda resident employees) are payable by the Company in Bermuda. If the Minister of
Finance in Bermuda does not grant a new exemption or extend the current tax exemption, and if the Bermudian Parliament passes legislation imposing taxes on exempted companies, the Company may become subject to taxation in Bermuda after March 31,
2035.
Currently, there are no withholding taxes payable in Bermuda on dividends distributed by the Company to its shareholders.
Cyprus Taxation
Cyprus Income Tax Considerations
The following are the material Cyprus income tax consequences to Frontline (Cyprus) and its shareholders under the provisions of the Cyprus tax law, provided Frontline (Cyprus) is considered to be a
Cyprus tax resident entity. The following discussion of Cyprus income tax matters is based on the provisions of Cyprus tax law and practice, including administrative pronouncements, and existing and proposed regulations issued by the Cyprus
government all of which are subject to change, possibly with retroactive effect. Except as otherwise noted, this discussion is based on the assumption that Frontline (Cyprus) shall maintain an office or other fixed place of business within the
Republic of Cyprus.
The Redomicilation
The Redomiciliation will not create taxing circumstances under the provisions of Cyprus tax law since the redomiciliation per se does not automatically cause us to become a Cyprus tax resident
entity and in any case the law does not include provisions concerning an inward redomiciliation from a non-EU jurisdiction.
Taxation of Frontline (Cyprus)’s Shipping Income: In General
Noting the comments made under previous paragraphs concerning the nature of Frontline (Cyprus)’s shipping income this under the provisions of Cyprus Tax laws, such income shall be included in the
estimation of taxable income to be taxed at the rate of 12.5%.
Taxation of Frontline (Cyprus)’s Shipping Income: The Cyprus Tonnage Tax System
The application of the Tonnage Tax System (“TTS”) is obligatory for all owners of Cyprus flagged eligible vessels which are involved in an eligible shipping activity (in relation to such shipping
activities) irrespective of tax residency (and therefore the laws of the jurisdiction of tax residency shall need to also be observed), whereas it is optional for owners of EU flagged
eligible vessels which are involved in an eligible shipping activity, provided they are Cyprus tax residents. TTS is also available as an option to owners of mixed flag fleets consisting of EU and non-EU flagged eligible vessels, provided they are
Cyprus tax residents and, if the EU flagged share is under 60%, the commercial and strategic management of the fleet is carried out within the EU.
The application of TTS is optional for charterers of eligible vessels involved in eligible shipping activities regardless of the flag of the vessels, provided they are Cyprus tax residents.
Charterers of mixed fleets are eligible to apply TTS subject to EU share provisions.
The application of TTS is also optional for ship managers that are Cyprus tax residents and offer eligible ship management services to any vessel, provided they maintain a fully-fledged office in
the Republic, staffed with competent personnel (the definition of competency is given in the Law and depends on the number of vessels under management and the nature of services rendered) and at least 51% of the staff employed are EU citizens.
Where the activities of an entity are mixed (i.e., involve both eligible shipping activities and non-eligible activities) and TTS is applied to the eligible shipping activities, normal corporation
tax shall be applied to the remaining activities.
Gain on Sale of Vessels
Frontline (Cyprus) shall be subject to income tax at the rate of 12.5% in relation to gains that are realized from the disposal of a vessel (through inclusion of such gain in the calculation of
taxable income), calculated as the difference between the proceeds from the disposal and the tax written down value of the vessel at the point of disposal, provided always, that such gain cannot exceed the capital allowances (tax depreciation)
claimed on the vessel.
Where TTS is applied instead, the gains on the disposal of an eligible vessel under TTS shall be deemed to be eligible shipping income and shall be exempt from corporate tax.
Distributions
Ordinarily no withholding tax (“WHT”) is applied on dividend distributions or interest payments to non-Cyprus tax residents. However, any dividends or interest payable to a non-Cyprus tax resident
corporate shareholder may be subject to WHT at the rate of 17% for dividends and 30% for interest, in the case where the recipients shall be tax residents of a jurisdiction judged to be non-cooperating for tax purposes, by the member states. This
provision for WHT shall not apply if the titles of the paying entity on which the said income shall be paid, are listed in a recognized stock exchange.
Special Defence Contribution (“SDC”) is payable on dividend distributions to Cyprus tax residents and domiciled non-corporate shareholders at the rate of 17%. Dividend payments to Cyprus tax
residents corporate shareholders or Cyprus tax residents but non-domiciled, non-corporate shareholders, shall be exempt from SDC.
Furthermore, SDC shall be payable on interest income received by all Cyprus tax residents, deemed not to arise in the ordinary course of business, at the rate of 30% (3% in the case of listed
corporate bonds).
Sale, Exchange or other Disposition of Shares
The gain on disposal of shares is not taxable income under the provisions of the Cyprus income tax law, but may be considered to be taxable under the provisions of the Cyprus Capital Gains Tax Law
at the rate of 20%, where the entity whose titles are the subject matter of the sale owns directly or indirectly immovable property in Cyprus.
Material Tax Consequences of the Redomiciliation
We do not believe that we or our shareholders will be subject to taxation in Bermuda or Cyprus as a result of the Redomiciliation.
Specifically, in relation to Cyprus tax law provisions, no taxing circumstances arise at the time of the Redomiciliation of Frontline (Cyprus) and, consequently, no tax liabilities arise as a result of any provision under Cyprus tax law. However,
the provisions of Cyprus tax law shall apply on the assessment of the incomes of Frontline (Cyprus) once it becomes a Cyprus tax resident, which may result in a higher tax rate being applied to taxable profits, depending on the nature of such
profits and/or income. Similarly, the provisions of the Cyprus tax law and double tax treaties shall apply in relation to the distributions of profits to the company to its shareholders.
We expect the Redomiciliation to qualify as a tax-free “reorganization” for purposes of U.S. federal income tax matters and, as such, we
expect that neither we nor U.S. Holders will be subject to U.S. federal income taxation as a result of the Redomiciliation.
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ACCOUNTING TREATMENT OF THE REDOMICILIATION
There will be no accounting effect or change in the carrying amount of the consolidated assets and liabilities of Frontline Ltd. as a
result of the Redomiciliation. The consolidated business, capitalization, assets, liabilities and financial statements of Frontline Ltd. immediately following the Redomiciliation will be the same as those of Frontline Ltd. immediately prior to
thereto.
LEGAL MATTERS
Certain legal matters in connection with this offering relating to U.S. and New York law are being passed upon for us by Seward &
Kissel LLP, New York, New York. Certain legal matters in connection with this offering relating to Bermuda law are being passed upon for us by MJM Limited, Hamilton, Bermuda. The validity of the securities offered by this Proxy Statement/Prospectus
will be passed upon for us by K.C. Saveriades & Co. LLC.
EXPERTS
The financial statements and management’s assessment of the effectiveness of internal control over financial reporting (which is included
in Management’s Annual Report on Internal Control over Financial Reporting) incorporated in this Proxy Statement/Prospectus by reference to the 2021 Annual Report have been so incorporated in reliance on the report of PricewaterhouseCoopers AS, an
independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting. PricewaterhouseCoopers AS is a member of Den norske Revisorforening.
WHERE YOU CAN FIND MORE INFORMATION
We are required to file annual and current reports, and other information with the SEC. Our filings with the SEC are available to the
public through the SEC’s Internet site at http://www.sec.gov.
We have filed with the SEC a registration statement on Form F-4 relating to the securities covered by this Proxy Statement/Prospectus. This
Proxy Statement/Prospectus is a part of the registration statement and does not contain all of the information in the registration statement. Whenever a reference is made in this Proxy Statement/Prospectus to a contract or other document of ours,
please be aware that the reference is only a summary and that you should refer to the exhibits that are a part of the registration statement for a copy of the contract or other document. You may review a copy of the registration statement through the
SEC’s Internet site.
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INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The SEC allows us to “incorporate by reference” the information we file with them, which means that we can disclose important information
to you by referring you to those documents. The information incorporated by reference is considered to be part of this Proxy Statement/Prospectus, and information that we file later with the SEC will automatically update and supersede this
information. We incorporate by reference the documents listed below and any future filings we will make with the SEC under Sections 13(a), 13(c) or 15(d) of the Exchange Act after the date of this Proxy Statement/Prospectus and on or before the
effective date of the Redomiciliation (other than, in each case, documents or information deemed to have been furnished and not filed in accordance with the SEC rules):
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Our Annual Report on Form 20-F for the year ended December 31, 2021, filed with the
SEC on March 17, 2022, which contains our audited consolidated financial statements for the most recent fiscal year for which those statements have been filed;
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| (2) |
Our current report on Form 6-K, furnished with the SEC on April 7, 2022 containing
announcements relating to the signing of a term sheet on a potential stock-for-stock combination between the Company and Euronav (excluding the commentary of John Fredriksen, Lars Barstad, Carl Steen and Hugo De Stoop in the exhibit attached
thereto);
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Our current reports on Form 6-K, furnished with the SEC on June 1, 2022 and June 13, 2022 containing announcements relating to agreements to acquire, in privately negotiated transactions with certain shareholders of
Euronav, certain shares in Euronav;
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Our current report on Form 6-K with the SEC on July 12, 2022 containing announcements that the
Company has entered into the Combination Agreement with Euronav (excluding the commentary of John Fredriksen, Lars Barstad, Carl Steen and Hugo De Stoop in Exhibit 99.2 attached thereto); and
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Our current report on Form 6-K, furnished with the SEC on September 9, 2022
containing the unaudited condensed interim financial statement and related Management’s Discussion and Analysis of our Financial Condition and Results of Operations for the six months ended June 30, 2022.
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ANNEX A:
PROPOSED DISCONTINUATION AMENDMENT TO AMENDED AND RESTATED BYE-LAWS
To approve an amendment to the Company’s Amended and Restated Bye-laws by the inclusion of a new Bye-law 157 as follows:
CONTINUATION
157. Subject to the Companies Act, the Company may by Ordinary Resolution, approve the discontinuation of the Company in Bermuda and the
continuation of the Company in a jurisdiction outside Bermuda.
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ANNEX B:
PROPOSED FRONTLINE
CYPRUS AMENDED AND RESTATED CHARTER
[To be included in a subsequent amendement]
B-1
ANNEX C:
PROXY CARD
[To be included in a subsequent amendement]
C-1
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Section 98 of the Companies Act of 1981 of the Islands of Bermuda, as amended, or the Companies Act, permits the Bye-Laws of a Bermuda
company to contain a provision eliminating personal liability of a director or officer to the company for any loss arising or liability attaching to him by virtue of any rule of law in respect of any negligence, default, breach of duty or breach of
trust, of which the officer or person may be guilty.
Section 98 of the Companies Act grants companies the power (except in relation to an allegation of fraud or dishonesty proved against them)
to indemnify directors and officers of the company if any such person was or is a party or threatened to be made a party to a threatened, pending or completed action, suit or proceeding by reason of the fact that he or she is or was a director and
officer of the company or was serving in a similar capacity for another entity at the company’s request.
Section 98A of the Companies Act permits a company to purchase and maintain insurance on behalf of an officer or director for any liability
asserted against him or her and liability and expenses incurred in his or her capacity as a director, officer, employee or agent arising out of his or her status as such in respect of any loss arising or liability attaching to him or her by virtue of
any rule of law in respect of any negligence, default, breach of duty or breach of trust of which the officer may be guilty in relation to the company or any subsidiary thereof.
Bye-laws number 147 through 155 of Frontline Ltd., or the Company, provide as follows:
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No Director, Alternate Director, Officer, member of a committee authorised under Bye-law 108, Resident Representative of the Company or their respective heirs, executors or administrators
shall be liable for the acts, receipts, neglects, or defaults of any other such person or any person involved in the formation of the Company, or for any loss or expense incurred by the Company through the insufficiency or deficiency of title
to any property acquired by the Company, or for the insufficiency of deficiency of any security in or upon which any of the monies of the Company shall be invested, or for any loss or damage arising from the bankruptcy, insolvency, or
tortious act of any person with whom any monies, securities, or effects shall be deposited, or for any loss occasioned by any error of judgment, omission, default, or oversight on his part, or for any other loss, damage or misfortune whatever
which shall happen in relation to the execution of his duties, or supposed duties, to the Company or otherwise in relation thereto.
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Every Director, Alternate Director, Officer, member of a committee constituted under Bye-Law 108, Resident Representative of the Company or their respective heirs, executors or administrators
shall be indemnified and held harmless out of the funds of the Company to the fullest extent permitted by Bermuda law against all liabilities loss damage or expense (including but not limited to liabilities under contract, tort and statute or
any applicable foreign law or regulation and all reasonable legal and other costs and expenses properly payable) incurred or suffered by him as such Director, Alternate Director, Officer, committee member or Resident Representative and the
indemnity contained in this Bye-Law shall extend to any person acting as such Director, Alternate Director, Officer, committee member or Resident Representative in the reasonable belief that he has been so appointed or elected notwithstanding
any defect in such appointment or election.
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Every Director, Alternate Director, Officer, member of a committee constituted under Bye-Law 108, Resident Representative of the Company and their respective heirs, executors or administrators
shall be indemnified out of the funds of the Company against all liabilities incurred by him as such Director, Alternate Director, Officer, member of a committee constituted under Bye-Law 108, Resident Representative in defending any
proceedings, whether civil or criminal, in which judgment is given in his favour, or in which he is acquitted, or in connection with any application under the Companies Acts in which relief from liability is granted to him by the court.
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| 150. |
To the extent that any Director, Alternate Director, Officer, member of a committee constituted under Bye-Law 108, Resident Representative of the Company or any of their respective heirs,
executors or administrators is entitled to claim an indemnity pursuant to these Bye-Laws in respect of amounts paid or discharged by him, the relative indemnity shall take effect as an obligation of the Company to reimburse the person making
such payment or effecting such discharge.
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| 151. |
The Board of Directors may arrange for the Company to be insured in respect of all or any part of its liability under the provision of these Bye-laws and may also purchase and maintain
insurance for the benefit of any Directors, Alternate Directors, Officers, person or member of a committee authorised under Bye-law 108, employees or Resident Representatives of the Company in respect of any liability that may be incurred by
them or any of them howsoever arising in connection with their respective duties or supposed duties to the Company. This Bye-law shall not be construed as limiting the powers of the Board of Directors to effect such other insurance on behalf
of the Company as it may deem appropriate.
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| 152. |
Notwithstanding anything contained in the Principal Act, the Company may advance moneys to an Officer or Director for the costs, charges and expenses incurred by the Officer or Director in
defending any civil or criminal proceedings against them on the condition that the Director or Officer shall repay the advance if any allegation of fraud or dishonesty is proved against them.
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| 153. |
Each Member agrees to waive any claim or right of action he might have, whether individually or by or in the right of the Company, against any Director, Alternate Director, Officer of the
Company, person or member of a committee authorised under Bye-law 108, Resident Representative of the Company or any of their respective heirs, executors or administrators on account of any action taken by any such person, or the failure of
any such person to take any action in the performance of his duties, or supposed duties, to the Company or otherwise in relation thereto.
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| 154. |
The restrictions on liability, indemnities and waivers provided for in Bye-laws 147 to 153 inclusive shall not extend to any matter which would render the same void pursuant to the Companies
Acts.
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| 155. |
The restrictions on liability, indemnities and waivers contained in Bye-laws 147 to 153 inclusive shall be in addition to any rights which any person concerned may otherwise be entitled by
contract or as a matter of applicable Bermuda law.
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II-2
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits
A list of exhibits included as part of this registration statement is set forth in the Exhibit Index which immediately precedes such exhibits and is
incorporated herein by reference.
Item 22. Undertakings
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration
statement:
(a) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933;
(b) To reflect in the prospectus any facts or events arising after the effective date of the
registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in
the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table
in the effective registration statement; and
(c) To include any material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such information in the registration statement.
(2) That, for the purpose of determining liability under the Securities Act to any purchaser, each prospectus filed
pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the
registration statement as of the date it is first used after effectiveness; provided, however, that no statement made in a registration statement or prospectus that is
part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale
prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
(3) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act,
each filing of the registrant’s annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
(4) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and
controlling persons of the registrants, the registrants have been advised that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrants in the successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with the securities being registered, each registrant will, unless in the opinion of its counsel, the matter has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
(5) The undersigned registrant hereby undertakes: (i) to respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means, and (ii) to arrange or
provide for a facility in the United States for the purpose of responding to such requests. The undertaking in subparagraph (i) above include information contained in documents filed subsequent to the effective date of the registration statement
through the date of responding to the request.
(6) The undersigned registrant hereby undertakes: that for the purposes of determining any liability under the Securities
Act of 1933, each filing of the annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 of a third party that is incorporated by reference in the registration statement in accordance with Item 1100(c)(1) of
Regulation AB (17 CFR 229.1100(c)(1)) shall be determined to be a new registration statement relating to the securities offered therein, and the offering of such securities at the time shall be deemed to be the initial bona fide offering thereof.
(7) The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information
concerning a transaction and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective.
II-4
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Hamilton, County of Bermuda, on September 14, 2022.
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FRONTLINE LTD.
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|
By:
|
/s/ Lars H. Barstad
|
||
|
Name:
|
Lars H. Barstad
|
||
|
Title:
|
Principal Executive Officer
|
||
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of Keith
Billotti, Daniel Lin and Michael Indelicato his or her true and lawful attorney-in-fact and agent, with full powers of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any
or all amendments (including post-effective amendments) to this Registration Statement and any related registration statement filed pursuant to Rule 462(b), and to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully for all intents and purposes
as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following
persons in the capacities and on the dates indicated.
|
Name
|
Position
|
Date
|
||
|
/s/ John Fredriksen
|
||||
|
John Fredriksen
|
Director
|
September 14, 2022
|
||
| /s/ James O’Shaughnessy | ||||
|
James O’Shaughnessy
|
Director
|
September 14, 2022
|
||
|
/s/ Ola Lorentzon
|
||||
|
Ola Lorentzon
|
Chairman and Director
|
September 14, 2022
|
||
|
/s/ Steen Jakobsen
|
||||
|
Steen Jakobsen
|
Director
|
September 14, 2022
|
||
|
/s/ Jens Martin Jensen
|
||||
|
Jens Martin Jensen
|
Director
|
September 14, 2022
|
||
|
/s/ Ole B. Hjertaker
|
September 14, 2022
|
|||
|
Ole B. Hjertaker
|
Director
|
|||
|
/s/ Lars H. Barstad
|
September 14, 2022
|
|||
|
Lars H. Barstad
|
Principal Executive Officer
|
|||
|
/s/ Inger M. Klemp
|
September 14, 2022
|
|||
|
Inger M. Klemp
|
Principal Financial Officer
|
|||
II-5
AUTHORIZED REPRESENTATIVE
Pursuant to the requirements of the Securities Act of 1933, as amended, the undersigned, the duly authorized
representative of the Registrant in the United States, has signed this registration statement in the City of Newark, State of Delaware, September 14, 2022.
|
PUGLISI & ASSOCIATES
|
||
|
By:
|
/s/ Donald J. Puglisi | |
|
Name:
|
Donald J. Puglisi
|
|
|
Title:
|
Authorized Representative
|
|
II-6
EXHIBIT INDEX
|
Exhibit
|
|
|
Number
|
Description
|
|
2.1
|
|
|
3.1
|
|
|
3.2
|
|
|
3.3
|
|
|
3.4
|
|
|
3.5
|
Form of Frontline Cyprus Amended and Restated Memorandum and Articles of Association**
|
|
3.6
|
|
|
4.1
|
|
|
5.1
|
|
|
8.1
|
|
| 8.2 |
Opinion of KPMG, with respect to certain Cyprus tax matters** |
|
8.3
|
|
|
10.1
|
|
|
10.2
|
|
|
10.3
|
|
|
10.4
|
|
|
10.5
|
|
|
10.6
|
|
|
10.7
|
|
|
10.8
|
|
|
21.1
|
|
|
23.1
|
|
|
23.2
|
Consent of K.C. Saveriades & Co. LLC (included in Exhibit 5.1)*
|
|
23.3
|
Consent of MJM Limited (included in Exhibit 8.1)*
|
| 23.4 |
Consent of KPMG (included in Exhibit 8.2)** |
|
23.5
|
Consent of Seward & Kissel LLP (included in Exhibit 8.3)*
|
|
24.1
|
|
|
107
|
|
*
|
Filed herewith.
|
|
**
|
To be filed in an amendment to this registration statement.
|
|
(1)
|
Pursuant to Item 601(a)(5) of Regulation S-K, certain schedules and similar attachments have been omitted. The registrant hereby agrees to furnish a copy of any omitted
schedule or similar attachment to the SEC upon request.
|
II-7
Exhibit 3.6
PROPOSED DISCONTINUATION AMENDMENT TO AMENDED AND RESTATED BYE-LAWS
To approve an amendment to the Company’s Amended and Restated Bye-laws by the inclusion of a new Bye-law 157 as follows:
CONTINUATION
157. Subject to the Companies Act, the Company may by Ordinary Resolution, approve the discontinuation of the Company in
Bermuda and the continuation of the Company in a jurisdiction outside Bermuda.
Exhibit 5.1
K.C. SAVERIADES & CO. LLC
John Kennedy Street, Iris House, Office 740B
Limassol, Cyprus 3106
To the Addressees named in the Schedule
14 September 2022
Dear Sirs
Frontline Ltd. – Transfer By Way of Continuation to the Republic of Cyprus
We are acting as counsel as to Cyprus law to Frontline Ltd. (the “Company”), a corporation incorporated under the laws
of the Bermuda in connection with (a) the proposed registration by way of continuation of the Company as a public company limited by shares in the Republic of Cyprus (“Transfer by Way of Continuation”) pursuant
to Sections 354(B) – (H) both inclusive of the Cyprus Companies Law Cap. 113 (the “Companies Law”); and (b) the Company’s Form F-4 registration statement (“Registration Statement”)
filed with the United States Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933 on 14 September 2022 (the “Form F-4”).
We refer in particular to the 222,622,889 ordinary shares with par value $1.00 per share of the Company currently issued and outstanding (the “Shares”) which
will be registered with SEC pursuant to the Form F-4 on completion of the Transfer by Way of Continuation.
| 1 |
Documents Reviewed
|
We have reviewed the Form F-4 and such documents as we have considered necessary for the purpose of rendering this opinion.
| 2 |
Assumptions
|
The following opinions are given only as to, and based on, circumstances and matters of fact existing and known to us on the date of this opinion letter. These
opinions only relate to the laws of the Republic of Cyprus which are in force on the date of this opinion letter. In giving the following opinions we have relied (without further verification) upon the following assumptions, which we have not
independently verified:
| 2.1 |
Copies of documents, conformed copies or drafts of documents provided to us are true and complete copies of, or in the final forms of, the originals, and translations of documents provided to us
are complete and accurate.
|
| 2.2 |
All signatures, initials and seals are genuine.
|
| 2.3 |
Under the laws of Bermuda (the “De-Registration Jurisdiction”) and all other relevant laws (other than the laws of the Republic of Cyprus) the Company is,
and at all times relevant for purposes of rendering the opinions as expressed herein, was duly incorporated, validly existing and in good standing under the laws of the De-Registration Jurisdiction, and has, and at all times relevant for
purposes of rendering our opinions as expressed herein had, the full power, authority and legal right to de-register as a company limited by shares from the De-Registration Jurisdiction and to register by way of continuation as a public company
limited by shares in the Republic of Cyprus.
|
| 2.4 |
At all times relevant times for purposes of rendering our opinions as set forth herein, the laws of the De-Registration Jurisdiction permitted the Company to transfer by way of continuation in
to the Republic of Cyprus.
|
| 2.5 |
That the transfer by way of continuation of the Company in to the Republic of Cyprus pursuant to Sections 354(B) – (H) of the Cyprus Companies Law Cap. 113 will by duly authorised by the
Company.
|
| 2.6 |
That all necessary action was taken, or will be taken, under the applicable laws of the De-Registration Jurisdiction to authorise and permit the Company to transfer by way of continuation in to
the Republic of Cyprus pursuant to Sections 354(B) – (H) of the Cyprus Companies Law Cap. 113 and any and all consents, approvals and authorisations from applicable Bermuda governmental authorities required to authorise and permit the Company
to transfer by way of continuation have been, or will be, obtained.
|
| 2.7 |
Immediately prior to the Transfer by Way of Continuation, the Shares will be, or have been, duly and validly authorised, legally and validly issued and fully paid and non-assessable under the
laws of the De-Registration Jurisdiction.
|
| 2.8 |
There is nothing under any law (other than the laws of the Republic of Cyprus) which would or might affect the opinions set out below. Specifically, we have made no independent investigation of
the laws of the De-Registration Jurisdiction and have assumed that the laws of the De-Registration Jurisdiction authorise the Company to continue into the Republic of Cyprus and that the Company has, or shall, comply fully with the laws of the
De-Registration Jurisdiction in respect of the continuation into the Republic of Cyprus.
|
| 3 |
Opinions
|
Based upon, and subject to, the foregoing assumptions, and having regard to such legal considerations as we deem relevant, we are of the opinion that:
| 3.1 |
Upon the issuance of a certificate of registration by way of continuation (“Certificate of Registration”) in relation to the Company by the Registrar of
Companies in the Republic of Cyprus, the Company will have been duly registered by way of continuation as a public company limited by shares under the laws of the Republic of Cyprus.
|
| 3.2 |
Once the registration of the Company by way of continuation as a public company limited by shares in the Republic of Cyprus is effective, and appropriate entries have been made in the register
of members of the Company in respect of the Shares which are to be registered by the Company with the SEC pursuant to Form F-4, the Shares, the will, by operation of law, be duly and validly authorised, legally and validly issued and fully
paid and non-assessable under the laws of the Republic of Cyprus.
|
| 4 |
Qualifications
|
This opinion is subject to the following qualification and limitation that under the Cyprus Companies Law Cap. 113, the register of members of a Cyprus company
is by statute regarded as prima facie evidence of any matters which the Companies Law directs or authorises to be inserted therein. A third party interest in the shares in question would not appear. An entry in
the register of members may yield to a court order for rectification (for example, in the event of fraud or manifest error, default, omission or delay).
Except as specifically stated herein, we make no comment with respect to any representations and warranties which may be made by or with respect to the Company
in any of the documents or instruments cited in this opinion or otherwise with respect to the commercial terms of the transactions the subject of this opinion.
We express no view as to the commercial terms of the de-registration in the De-Registration Jurisdiction or the registration by way of continuation in the
Republic of Cyprus. The opinions in this opinion letter are strictly limited to the matters contained in the opinions section above and do not extend to any other matters.
This opinion is issued solely for the purpose of filing of the Registration Statement and the registration of the Shares by the Company and is strictly limited
to the matters stated herein and is not to be relied upon in respect of any other matter.
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement, and to the reference to us under the heading “Legal Matters” in the
Prospectus, without admitting we are “experts” within the meaning of the Securities Act of 1933, as amended, or the rules and regulations of the SEC thereunder with respect to any part of the Registration Statement.
Yours faithfully,
/s/ K.C. Saveriades & Co. LLC
Schedule
List of Addressees
Frontline Ltd.
Par-la-Ville Place
14 Par-la-Ville Road
Hamilton, HM 08
Bermuda
Exhibit 8.1
 |
 |
14 September 2022
Frontline Ltd.
Par-la-Ville Place
14 Par-la-Ville Road
Hamilton HM 08
Bermuda
Dear Sirs,
Frontline Ltd. (the “Company”)
1. Subject of Opinion
We are lawyers duly qualified to practise in Bermuda. This opinion as to the laws of Bermuda is addressed to you in connection with the
preparation and filing with the Securities and Exchange Commission (the “Commission”) of a registration statement on Form F-4 (such registration statement as amended and supplemented from time to time the “Registration Statement”, which term does not include any other document or agreement whether or not specifically referred to therein or attached as an exhibit or schedule thereto) under the Securities Act of
1933, as amended (the “Securities Act”) and the rules and regulations promulgated thereunder, in respect of the Company. The Registration Statement relates to the
registration by the Company of 222,622,889 ordinary shares of the Company, par value $1.00 per share, as described in the form of Proxy Statement/Prospectus included in the Registration Statement (the “Proxy
Statement/Prospectus”).
2. Documents Examined
For the purposes of this opinion we have examined and relied upon the following (collectively, the “Documents”):
| 2.1. |
a copy of the Registration Statement;
|
| 2.2. |
a copy of the following documents of the Company, as certified by the Secretary thereof on 13 September 2022:
|
| (a) |
Certificate of Incorporation and Certificate of Incorporation on Change of Name;
|
| (b) |
Memorandum of Association;
|
| (c) |
Bye-laws;
|
| (d) |
Minutes of a meeting of the Board of Directors of the Company held on 7 July 2022 (the “Resolutions”);
|
| (e) |
Tax Assurance; and
|
| (f) |
Register of Directors and Officers; and
|
| 2.3. |
such other documents as we have deemed necessary in order to render this opinion.
|
A reference to a document does not include any other instrument or agreement whether or not specifically referred to therein or attached
as an exhibit or schedule thereto. Except as stated in this paragraph 2, we have not examined any contract, instrument or other document entered into by, or affecting, the Company or any corporate records of the Company and have not made any other
enquiries concerning the Company.
| 3. |
Searches
|
We have also relied upon our searches of the documents of public record relating to the Bermuda Companies maintained by the ROC and on
our search of the Cause Book maintained by the Registrar of the Supreme Court of Bermuda (the “Searches”).
| 4. |
Opinion Limited to Bermuda Law
|
We have made no investigation of the laws of any jurisdiction other than Bermuda and this opinion is given only with
respect to Bermuda law as applied by the courts of Bermuda at the date thereof and is governed by, and should be construed in accordance with, those laws. This opinion is limited to the matters stated herein and does not extend to, and is not
intended to be extended by implication to, any other matters. We give this opinion on the basis that it will not give rise to any legal proceedings with respect thereto in any jurisdiction other than Bermuda.
| 5. |
Assumptions
|
In giving this opinion we have assumed:
| 5.1. |
the authenticity, accuracy and completeness of all Documents (including, without limitation, public records) submitted to us as originals and the conformity to authentic original documents
of all Documents submitted to us as certified, conformed, notarised or photo static copies;
|
| 5.2. |
the genuineness of all seals, signatures and markings on the Documents;
|
| 5.3. |
the authority, capacity and power of each of the persons signing the Documents (other than the Company);
|
| 5.4. |
that any representation, warranty or statement of fact or law, other than the laws of Bermuda, made in any of the Documents, is true, accurate and complete;
|
| 5.5. |
that each of the Documents which was received by electronic means is complete, intact and in conformity with the transmission as sent;
|
| 5.6. |
that there are no provisions of the laws or regulations of any jurisdiction other than Bermuda which would have any implication in relation to the opinions expressed herein;
|
| 5.7. |
that there are no provisions of the laws or regulations of any jurisdiction other than Bermuda which would be contravened by any actions taken by the Company in connection
with the Registration Statement or which would have any implication in relation to the opinion expressed herein and that, in so far as any obligation under, or action to be taken under, the Registration Statement is required to be performed
or taken in any jurisdiction outside Bermuda, the performance of such obligation or the taking of such action will constitute a valid and binding obligation of each of the parties thereto under the laws of that jurisdiction and will not be
illegal by virtue of the laws of that jurisdiction;
|
| 5.8. |
that the information disclosed by the Searches has not been materially altered and that the Searches did not fail to disclose any material information which had been delivered for filing or
registration, but was not disclosed or did not appear on the public files or on the Cause Book at the time of the Searches; and
|
| 5.9. |
that the Resolutions certified as being true and accurate and provided to us in connection with the giving of this opinion were duly adopted by the duly elected or appointed directors of the
Company or any duly constituted committee thereof; that any provisions contained in the Companies Act 1981 of Bermuda, as amended, or the bye-laws of the Company relating to the declaration of directors’ interests and the convening of, the
quorum required for, and voting at the meetings of the directors were duly observed; and that such Resolutions have not been amended or rescinded, either in whole or in part, and are in full force and effect.
|
| 6. |
Opinion
|
Based upon and subject to the foregoing and further subject to any matters not disclosed to us, we hereby confirm that the statements in
relation to Bermuda tax matters under the caption “Taxation—Bermuda Taxation” in the Proxy Statement/Prospectus and the Company's Annual Report on Form 20-F for the fiscal year ended December 31, 2021, which is incorporated by reference into the
Registration Statement, to the extent that they constitute statements of Bermuda law, are accurate in all material respects and that such statements constitute our opinion.
| 7. |
Disclosure
|
We hereby consent to the filing of this opinion as an exhibit 8.1 to the Registration Statement, and to the reference to our firm under
the caption “Legal Matters” in the Proxy Statement/Prospectus included therein, without admitting that we are “experts” within the meaning of the Securities Act or the rules and regulations of the Commission thereunder. In giving such consent, we
do not hereby admit that we are in the category of persons whose consent is required under section 7 of the Act.
This opinion speaks as of its date and is strictly limited to the matters stated in it and we assume no obligation to
review or update this opinion if applicable law or the existing facts or circumstances should change.
Yours faithfully,
/s/ MJM Limited
MJM LIMITED
Exhibit 8.3
|
Seward & Kissel llp
ONE BATTERY PARK PLAZA
NEW YORK, NEW YORK 10004
|
|||
|
TELEPHONE: (212) 574-1200
FACSIMILE: (212) 480-8421
WWW.SEWKIS.COM
|
901 K STREET, NW
WASHINGTON, D.C. 20001
TELEPHONE: (202) 737-8833
FACSIMILE: (202) 737-5184
|
||
|
September 14, 2022
|
Frontline Ltd.
Par-la-Ville Place
14 Par-la-Ville Road
Hamilton, HM 08
Bermuda
Par-la-Ville Place
14 Par-la-Ville Road
Hamilton, HM 08
Bermuda
Re: Frontline Ltd.
Ladies and Gentlemen:
You have requested our opinion regarding certain United States federal income tax matters relating to Frontline Ltd. (the “Company”) and
the holders of shares of the Company’s common stock, par value $1.00 per share.
In formulating our opinion as to these matters, we have examined such documents as we have deemed appropriate, including the registration
statement on Form F-4 (File No. 333- ), as amended (the “Registration Statement”), as initially filed by the Company with the U.S. Securities and Exchange Commission (the “Commission”) on September 14, 2022, in connection with
the Redomiciliation of the Company. We have also obtained such additional information as we have deemed relevant and necessary from representatives of the Company.
Capitalized terms not defined herein have the meanings ascribed to them in the Registration Statement.
Based on the facts as set forth in the Registration Statement, and in particular, on the representations, covenants, assumptions, conditions and
qualifications described in the Registration Statement in the section entitled “Taxation,” we hereby confirm that the opinion with respect to United States federal income tax considerations expressed in the discussion in the section listed above is
the opinion of Seward & Kissel LLP and accurately state our view as to the tax matters discussed therein.
Our opinion and the tax discussion as set forth in the Registration Statement are based on the current provisions of the U.S. Internal Revenue
Code of 1986, as amended, the Treasury Regulations promulgated thereunder, published pronouncements of the Internal Revenue Service, which may be cited or used as precedents, and case law, any of which may be changed at any time with retroactive
effect. No opinion is expressed on any matters other than those specifically referred to above by reference to the Registration Statement.
We hereby consent to the filing of this opinion as an exhibit to the Company’s Registration Statement filed with the Commission on the date
hereof. In giving such consent, we do not hereby admit that we are “experts” within the meaning of the Securities Act or the rules and regulations of the Commission promulgated thereunder with respect to any part of the Registration Statement.
|
Very truly yours,
|
|
|
/s/ SEWARD & KISSEL LLP
|
|
Exhibit 21.1
Significant Subsidiaries at September 14, 2022
|
Name
|
Country of
Incorporation
|
Ownership and
Voting Percentage
|
|||
|
Frontline Shipping Limited
|
Bermuda
|
100
|
%
|
||
|
Key Chartering Inc
|
Liberia
|
100
|
%
|
||
|
Frontline Management (Bermuda) Ltd
|
Bermuda
|
100
|
%
|
||
|
ICB Shipping (Bermuda) Limited
|
Bermuda
|
100
|
%
|
||
|
Frontline Corporate Services Ltd
|
United Kingdom
|
100
|
%
|
||
|
Bandama Investment Ltd
|
Liberia
|
100
|
%
|
||
|
Vista International Finance Inc
|
Liberia
|
100
|
%
|
||
|
Chatham Ship Management, Inc.
|
Liberia
|
100
|
%
|
||
|
Frontline Management AS
|
Norway
|
100
|
%
|
||
|
Frontline 2012 Ltd.
|
Bermuda
|
100
|
%
|
||
|
Frontline Chartering Services Inc.
|
Liberia
|
100
|
%
|
||
|
Frontline Tankers Ltd.
|
Bermuda
|
100
|
%
|
||
|
Frontline Shipping Singapore Pte Ltd.
|
Singapore
|
100
|
%
|
||
|
Frontfleet Ltd
|
Bermuda
|
100
|
%
|
||
|
Frontfleet II Ltd
|
Bermuda
|
100
|
%
|
||
|
Front Thor Inc.
|
Liberia
|
100
|
%
|
||
|
Front Odin Inc.
|
Liberia
|
100
|
%
|
||
|
Front Loki Inc.
|
Liberia
|
100
|
%
|
||
|
Front Njord Inc.
|
Liberia
|
100
|
%
|
||
|
Front Ull Inc
|
Liberia
|
100
|
%
|
||
|
Front Idun Inc
|
Liberia
|
100
|
%
|
||
|
Front King Inc.
|
Liberia
|
100
|
%
|
||
|
Front Queen Inc.
|
Liberia
|
100
|
%
|
||
|
Front Sovereign Inc.
|
Liberia
|
100
|
%
|
||
|
Front Monarch Inc.
|
Liberia
|
100
|
%
|
||
|
Front Eminence Inc.
|
Liberia
|
100
|
%
|
||
|
Front Endurance Inc.
|
Liberia
|
100
|
%
|
||
|
Front Duke Inc.
|
Republic of the Marshall Islands
|
100
|
%
|
||
|
Front Brage Inc.
|
Liberia
|
100
|
%
|
||
|
Front Balder Inc.
|
Liberia
|
100
|
%
|
||
|
Front Challenger Inc.
|
Liberia
|
100
|
%
|
||
|
Front Crown Inc.
|
Liberia
|
100
|
%
|
||
|
Front Coral Inc.
|
Liberia
|
100
|
%
|
||
|
Front Crystal II Inc.
|
Liberia
|
100
|
%
|
||
|
Front Classic Inc.
|
Liberia
|
100
|
%
|
||
|
Front Clipper Inc.
|
Liberia
|
100
|
%
|
||
|
Front Cosmos Inc.
|
Liberia
|
100
|
%
|
||
|
Front Cascade Inc.
|
Liberia
|
100
|
%
|
||
|
Front Duchess Inc.
|
Republic of the Marshall Islands
|
100
|
%
|
||
|
Sea Hull L0037 Corp.
|
Liberia
|
100
|
%
|
||
|
Sea Hull L0044 Corp.
|
Liberia
|
100
|
%
|
||
|
Sea Hull L0045 Corp.
|
Liberia
|
100
|
%
|
||
|
Name
|
Country of
Incorporation
|
Ownership and
Voting Percentage
|
|||
|
Sea Hull L0046 Corp.
|
Liberia
|
100
|
%
|
||
|
Front Cheetah Inc.
|
Liberia
|
100
|
%
|
||
|
Front Cougar Inc.
|
Liberia
|
100
|
%
|
||
|
Front Aphrodite Inc.
|
Liberia
|
100
|
%
|
||
|
Front Athena Inc.
|
Liberia
|
100
|
%
|
||
|
Front Hebe Inc.
|
Liberia
|
100
|
%
|
||
|
Front Hera Inc.
|
Liberia
|
100
|
%
|
||
|
Front Altair Inc.
|
Liberia
|
100
|
%
|
||
|
Front Antares Inc
|
Liberia
|
100
|
%
|
||
|
Front Vega Inc.
|
Liberia
|
100
|
%
|
||
|
Front Sirius Inc.
|
Liberia
|
100
|
%
|
||
|
Front Castor Inc.
|
Liberia
|
100
|
%
|
||
|
Front Pollux Inc.
|
Liberia
|
100
|
%
|
||
|
Front Capella Inc.
|
Liberia
|
100
|
%
|
||
|
Front Polaris Inc.
|
Liberia
|
100
|
%
|
||
|
Front Earl Inc.
|
Liberia
|
100
|
%
|
||
|
Front Empire Inc.
|
Liberia
|
100
|
%
|
||
|
Front Prince I Inc.
|
Liberia
|
100
|
%
|
||
|
Front Princess I Inc.
|
Liberia
|
100
|
%
|
||
|
Front Defender Inc.
|
Liberia
|
100
|
%
|
||
|
Front Discovery Inc.
|
Liberia
|
100
|
%
|
||
|
Front Cruiser Inc.
|
Liberia
|
100
|
%
|
||
|
Front Dynamic I Inc.
|
Liberia
|
100
|
%
|
||
|
Front Favour Inc.
|
Republic of the Marshall Islands
|
100
|
%
|
||
|
Front Feature Inc.
|
Republic of the Marshall Islands
|
100
|
%
|
||
|
Front Future Inc.
|
Liberia
|
100
|
%
|
||
|
Front Fusion Inc.
|
Liberia
|
100
|
%
|
||
|
White Flag Ventures XXXVI LLC
|
Republic of the Marshall Islands
|
100
|
%
|
||
|
White Flag Ventures XXXIX LLC
|
Republic of the Marshall Islands
|
100
|
%
|
||
|
White Flag Ventures XL LLC
|
Republic of the Marshall Islands
|
100
|
%
|
||
|
White Flag Ventures XLI LLC
|
Republic of the Marshall Islands
|
100
|
%
|
||
|
White Flag Ventures XLII LLC
|
Republic of the Marshall Islands
|
100
|
%
|
||
|
White Flag Ventures XLIII LLC
|
Republic of the Marshall Islands
|
100
|
%
|
||
|
White Flag Ventures XLIV LLC
|
Republic of the Marshall Islands
|
100
|
%
|
||
|
White Flag Ventures XLV LLC
|
Republic of the Marshall Islands
|
100
|
%
|
||
|
White Flag Ventures XLVI LLC
|
Republic of the Marshall Islands
|
100
|
%
|
||
|
White Flag Ventures XLVII LLC
|
Republic of the Marshall Islands
|
100
|
%
|
||
|
Hull 3240 Inc.
|
Republic of the Marshall Islands
|
100
|
%
|
||
|
Hull 3241 Inc.
|
Republic of the Marshall Islands
|
100
|
%
|
||
|
Hull 3283 Inc.
|
Republic of the Marshall Islands
|
100
|
%
|
||
|
Hull 3284 Inc.
|
Republic of the Marshall Islands
|
100
|
%
|
||
|
Hull 3285 Inc.
|
Republic of the Marshall Islands
|
100
|
%
|
||
|
Hull 3286 Inc.
|
Republic of the Marshall Islands
|
100
|
%
|
||
|
Front Driva Inc.
|
Republic of the Marshall Islands
|
100
|
%
|
||
|
Front Nausta Inc.
|
Republic of the Marshall Islands
|
100
|
%
|
||
|
Frontfleet Chartering Inc.
|
Republic of the Marshall Islands
|
100
|
%
|
||
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in this Registration Statement on Form F-4 of Frontline Ltd. of our report dated March 17, 2022 relating to the financial statements and the effectiveness of internal control over financial reporting, which appears in Frontline Ltd.'s Annual Report on Form 20-F
for the year ended December 31, 2021. We also consent to the reference to us under the heading “Experts” in such Registration Statement.
/s/ PricewaterhouseCoopers AS
Oslo, Norway
September 14, 2022
Oslo, Norway
September 14, 2022