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Practical Hints for Investors Vladimir Iurkovski (LL.M.) 3 February 2017
Content What will we talk about today? Golden Rules of Investing Structuring an Investment in Moldova Conclusions Q&A 2016 Schoenherr 4
Golden Rules of Investing Before entering 1. Make sure your intellectual property is protected in Moldova (Moldova is not an EU-member and local filings may be required). 2. Have proper advisors on board (Moldova offers many pitfalls; do not try to work cross-border with Romanian or Russian advisors). 3. Analyze the sector of interest. 4. Structure while taking into account BITs and DTTs (Moldova has entered into many BITs and DTTs including with Austria ). 5. Can your model fit local particularities? (do consider that Moldova is very advanced in some areas and very burocratic and inflexible in others) 6. Choose the best form to enter with. (in the case of greenfield investments, the SRL = LLC/GMBH appears the best and least expensive option) 2016 Schoenherr 5
Golden Rules of Investing After entering 1. Institute and enforce internal verification rules. (control is key; taking the role as general manager without being present in Moldova may be risky) 2. Be prepared to adjust to changes in legislation. (Moldova is a country in transition and the legislation is in flow) 3. Make sure to have proper personnel. (be aware that you will require a work permit in order to be general manager of a Moldovan SRL) 4. Be prepared to defend your position. 5. Do not be afraid of novelties. 6. Have proper advisors on board. 2016 Schoenherr 6
Structuring an Investment in Moldova Greenfield (Individually) 1. Usual forms LLC (= GmbH) JSC (= AG; two-tier structure is possible). 2. Permanent establishments Yes, doable But cannot hold licenses. 3. One-stop shop principle vastly implemented. 2016 Schoenherr 7
Structuring an Investment in Moldova Greenfield (Individually) 1. Regulatory Over 40 activities licensed Over 100 activities subject to authorizations 2. Banking & monetary regulations. 3. Almost perfect cadaster system. 4. Immigration rules in place. 5. Court system: 3-tier. 2016 Schoenherr 8
Structuring an Investment in Moldova Greenfield (Jointly) To Know Foreign Investor (Be Prepared) 1. Fitting business model to local legislation. 2. Obtain regulatory approvals (if needed). 3. Limited freedom of contract with shareholders agreement & corporate decisions. 4. Not all corporate concepts in place locally (e.g. Prokurist). Local Investor (Be Prepared) i. Structuring shareholding in a foreign jurisdiction. ii. Subjecting JV to a foreign legislation. iii. Less chances for a 50%-50% JV (avoiding deadlocks). iv. Appointment several managing directors. 5. JV to be properly structured. v. Supervising bodies shall be instituted. 6. Appointing your management. 2016 Schoenherr 9
Structuring an Investment in Moldova Greenfield (Jointly) Example Phase I 2016 Schoenherr 10
Structuring an Investment in Moldova Greenfield (Jointly) Example Phase II 2016 Schoenherr 11
Structuring an Investment in Moldova Greenfield (Jointly) Example Phase III 2016 Schoenherr 12
Structuring an Investment in Moldova Brownfield (Individually) Usual Phases 1. Always consider timing. 2. Asset deal vs share deal. 3. DD (crucial). 4. Mergence clearance. 5. Regulatory prior approvals / approvals / notifications. 6. Contract-related formalities (e.g. authentication). 7. Registration formalities. 8. Consider keeping former management under consultancy contract. 9. Post-closing (e.g. mandatory buyout). 2016 Schoenherr 13
Structuring an Investment in Moldova Brownfield (Jointly) To Know Foreign Investor (Be Prepared) 1. Less willingness from counterparties to disclose real situations. 2. Counter-proposal for simpler business model and contractual framework. 3. Counter-proposal for Moldovan substantive law to apply. 4. Counter-proposal for Moldovan / CIS court to settle all disputes. 5. Drafts come in Romanian and/or Russian language(s). Local Investor (Be Prepared) i. Go through DD. ii. Contracts to be in a foreign language. iii. Contracts to be subjected to a foreign law. iv. Arbitration clauses. v. Complex and lengthy negotiations. vi. Hire counsels (including foreign) to assist. 2016 Schoenherr 14
Conclusions Is it worth investing? 1. Yes, it is. 2. Select the sector of interest carefully. 3. Choose your business partners wisely. 4. Adjust your business model to local particularities. 5. Be prepared to defend your position. 6. In the end it will be awesomely great for you! 2016 Schoenherr 15
vladimir iurkovski Attorney-at-law T +373 22 240 300 E v.iurkovski@schoenherr.eu Position Attorney-at-law, Schoenherr Chisinau Practice Areas Corporate M&A, Dispute Resolution Education Stockholm University (LL.M. 2006) Memberships Publications Languages Union of Bars from Moldova, Chisinau Bar Author of articles on commercial & other legal topics English, Russian, Romanian, French 16
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