GLOBAL TRANSACTIONS. Joint ventures & partnerships

Transcription

1 GLOBAL TRANSACTIONS Joint ventures & partnerships *This presentation is offered for informational purposes only, and the content should not be construed as legal advice on any matter. 0

2 Introductory matters Type of joint venture Contractual Good for short-term projects Purchase of existing entity Necessary due diligence on acquisition of existing liabilities Formation of new entity Confidentiality agreement before discussions begin Limit access to certain personnel, customers and other sensitive info until the transaction proceeds Remains in effect after signing and until new agreement supersedes Preservation of attorney-client privilege and work product 1

3 Introductory matters (cont.) Term sheet and joint venture agreement Who creates first draft? Governing language Provisions for severability and survival Due diligence Determine how all due diligence costs will be divided between partners Legal fees Insure partner is not a US restricted entity or under sanctions Possible export restrictions on sharing certain kinds of information 2

4 Introductory matters (cont.) Governing law for pre- and post-formation documents and new entities Jurisdiction has a well tested corporate law regime Allows for remedy of specific performance Contractual agreements Provision that process is valid world-wide Waiver of jury trials Explicit exemption from conflict of laws provisions Regulatory filings and consent of government agencies before and after closing Compliance with antitrust laws Factor approval periods into project timelines 3

5 Non-competition and non-solicitation Scope and duration of non-competition agreements under local law Non-competition covenant of shareholders with respect to company Non-competition covenant of shareholders with respect to each other Especially where there are mandatory buy/sell provisions Non-solicitation of employees Duration negotiations For period of time if negotiations are abandoned During joint venture For period of time after end of joint venture operations 4

6 Creation of a joint venture entity Determine organization type Corporation Limited liability company General or limited partnership Foreign entities Consider tax treatment Pass-through entities Withholdings Double taxation 5

7 Creation of a joint venture entity (cont.) Country specific ownership restrictions Risks specific to local market Government stability Anti-corruption measures Currency risk Enforceability of contracts Consider selecting neutral jurisdictions Cyprus, Netherlands, Luxembourg 6

8 Financing for the joint venture Be aware of local laws regarding minimum required capitalization Foreign ownership restrictions Investment law approvals or licenses may be required Ownership of stock and real property Amounts of initial and authorized share capital New financing Funding percentages Do capital contributions need to be registered with government? Prepare for necessity of unplanned capital injections Future funding calls capped or open-ended Penalties for failure to provide necessary funding 7

9 Control and management of the joint venture Ownership percentages Shareholder meetings When and how often will meetings be held? Ability to grant proxies Ability to call special meetings Ability to bypass notice requirements Voting and quorum requirements for shareholder meetings Supermajority requirements for certain situations One share one vote Cumulative voting Actions requiring shareholder approval Potential use of a shareholder's rights agreement 8

10 Control and management of the joint venture (cont.) Will majority be protected on certain matters? Veto rights Board of directors Board composition Number of board seats filled by each partner Possible foreign management restrictions Election and number of board members Voting and quorum requirements for board meetings 9

11 Control and management of the joint venture (cont.) Do local laws require both board and shareholder meetings? Director's and officer's liability in foreign countries Directors and officers need to be made aware of person liabilities they may be subject to in foreign jurisdiction prior to accepting position Compliance with corporate formalities Liability for unpaid income and payroll taxes Data protection 10

12 Control and management of the joint venture (cont.) Dispute resolution Escalation procedures Negotiations between CEO of each partner Mediation and/or binding arbitration Deadlock resolution Rights of parties during deadlock situation Tie-breaking vote of previously determined third party Possible exit strategy for deadlock over key issues Determine key issues in advance 11

13 Indemnities General indemnities Provisions in articles and bylaws may not provide protection Can be difficult to enforce Consider having US employees enter into indemnification agreements with both the joint venture and the US partner Many countries may limit certain types of indemnification even with agreements in place Obtain directors' and officers' insurance where available Consider provisions for advancement of litigation expenses in certain instances 12

14 Intellectual property Licensed marks Sub-brands Endorsing company products with licensed marks 13

15 Transfers Permitted transfers Prohibitions on transfers What rights of transfer are enforceable under local law? Put/call options Lock-in period before options could be exercised Drag-along rights 14