1 / 16

Investing in Africa. Investors’ protection and general issues.

Investing in Africa. Investors’ protection and general issues. Joint VENTURE Agreements. Rebecca Major Herbert Smith Freehills LLP 7 November 2013. Why form a joint venture?.

niesha
Download Presentation

Investing in Africa. Investors’ protection and general issues.

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Investing in Africa. Investors’ protection and general issues. Joint VENTURE Agreements • Rebecca Major • Herbert Smith Freehills LLP • 7 November 2013

  2. Why form a joint venture? • Local law or nature of industry (e.g. upstream oil and gas, mining, telecoms) may require minimum local shareholder / government shareholder requirement • Different partners with relevant assets / rights, knowledge, expertise and contacts • Risk sharing • Staged investment • Test the market by sharing the risks and costs of a particular project or business • Strategic alliance to gain an advantage • … but sacrifice the control and flexibility of undertaking the business or project independently

  3. Scope of a Joint venture agreement • Primary purpose to allocate risk and outline parties’ roles • The “operations manual” for a JV: a living useful practical document • Start with a term sheet • Should cater for all aspects of the joint venture and all eventualities: • rights, duties and liabilities, decision-making and day-to-day management, funding, realising value, transfers, exit, disputes and deadlock

  4. Forms of JV Unincorporated JV Joint Venture Company SHAREHOLDERS’ AGREEMENT COMPANY A COMPANY B COMPANY C COMPANY A COMPANY C COMPANY B SHARES SHARES SHARES JOINT VENTURE AGREEMENT SPECIAL PURPOSE VEHICLE (Constitutional documents)

  5. Forms of JV

  6. Assets Personnel Local knowledge Contacts Access to funds Parties Different entities contribute different advantages to the project Political influence Expertise Access to markets

  7. PARTIES Also consider • Conflicts of interest • Governance and decision-making • Ability to fund • Different profit objectives (long term vs. short term)

  8. Funding • How will the JV be funded? • Balance of third party debt, shareholder loans and equity – flexibility in the shareholders’ agreement • Local thin capitalisation rules • Choosing your lenders – who are partners in the project too (financial terms, risk appetite, understanding of country, likely reaction if things go wrong, political influence)

  9. Making sure all partners pay • Agree upfront how to deal with parties who cannot / do not want to pay pro rata share • Carry or carry finance arrangements with other co-venturers • Third party funding • Mechanisms to deal with future inability to pay • Dilution • Default transfer • Forced sale • Guarantees • Keeping the JV going • Consider disaster scenarios (e.g. deadlock but also unexpected inability of party to pay its cash call)

  10. PARTNERS • From local partner perspective and international partner perspective • Do your due diligence on the other party or parties • “Putting all your eggs in one basket”: consider exclusive arrangements carefully • Make sure that you have identified your exits before you enter • Make sure roles and reporting lines are clear • Consider conflicts of interest and decision-making openly • Trust and communication and shared goals

  11. Local Partner • From local partner perspective

  12. International Partner • From international partner perspective • Beware of building a JV around one person • Political capital can go up and down

  13. Exit Strategy • Structuring investment to exit easily • Special purpose vehicles • Consider pre-emption / transfer consents / change of control provisions very carefully • Consider capital gains tax position very carefully • Consider impact on local / regional reputation

  14. DISPUTES • New York Convention • ICSID Convention (or Washington Convention) • Recognition and enforcement of court judgments • Make sure dispute resolution clauses work throughout suite of JV contracts

More Related