1. MANUFACTURING COMPANY
SESSION 6
ENGAGING WITH PARTNERS IN OVERSEAS JOINT VENTURE AGREEMENTS
STEPHEN HOLMES
WAREHOUSE
EYEMAX
GROUP HOLDINGS
Delivery of
Spectacle Lenses
Transport & Storage of Spectacle Lenses
External finance
EYEMAX
FINANCE COMPANY
WER
EYEMAX CORP
(manufacturing)
VIZITECH HOLDINGS LTD
EYEMAX CORP.
(Digital Camera Manufacturer)
Sales of Lenses for Digital Cameras
AGENT
Hong Kong
60%
40%
EYEMAX.COM
LTD
Channel Islands
SALES COMPANY
Brazil
SALES COMPANY
USA
MANUFACTURING COMPANY
Hong Kong
SALES COMPANY
Hong Kong
E-Commerce sales
FOREIGN ENTERPRISE SUB China

2. ENGAGING WITH PARTNERS IN OVERSEAS JOINT VENTURE AGREEMENTS
By Anthony Hunt and Annick Bredero
18 November 2016

3. Overview Current structure of Eyemax Structuring
Contractual arrangements
Practicalities

4. It has been suggested that Eyemax creates a private equity fund established as a Cayman Islands entity which would attract the finance required to acquire the solar bowls in sites made available to the Fund by relevant regional authorities, as well as to maintain them once in situ to maximum efficient.
The private equity fund would establish its own corporate organisation which would have contracts with the Eyemax Group for the manufacture and supply of the solar lens bowls. A management team would need to be employed which would have experience in renewable energy, and who would take over the initial contacts with regional energy authorities so that predetermined sales can be effected in advance of manufacture of the solar lens bowls.
Rather than dilute the management expertise currently employed in the principal Eyemax business, the directors are considering joint venture arrangements with large utility companies whose expertise in energy distribution would be crucial to the success of the new operation. Eyemax key personnel are encouraged to discuss the potential for the solar bowls on a confidential basis with prospective partners.

5. Current structure of Eyemax

6. Structuring What is a joint venture?
“A business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task. This task can be a new project or any other business activity.”
Why do people enter into joint ventures?
Combine expertise
Spread risk
Finance purposes

7. Structuring Basic types of joint ventures limited liability company
limited liability partnership (LLP)
partnership
contractual joint venture arrangement

8. Structuring Key impact elements Taxation Funding Choice of Law
Commercial/contractor/counterparty
What are the drivers for the Eyemax Group?

9. Structuring Bankability
mechanism enabling the parties to grant security over the corporate interests in the JV structure
waterfall provisions that provide for the priority repayment of third party debt (in advance of distributions to the parties)
cater for what happens if a party becomes insolvent
evidence of compliance with applicable law and regulation.

10. Structuring Cross border/commercial/counterparty influences
Compliance with applicable law and regulation
scope and application of merger regulations
collective investment scheme/alternative investment fund
if a party is listed on a major stock exchange
choice of law
Cross border/commercial/counterparty influences

11. Contractual arrangements
Documents
Joint Venture Shareholders Agreement (JVSA)
Articles of Association (Articles)
Ancillary documents

12. Contractual arrangements
Main forms of JVSA
50/50 (two parties with equal number of shares)
majority/minority (one party holds the majority of the shares)
Key consideration for a 50/50 JVSA - deadlock
Key consideration for majority/minority JVSA - minority protection rights

13. Contractual arrangements
Matters generally covered
Subscription for shares (if coming in to the JVC)
Business of the JVC
Management of the JVC
Reserved matters (minority shareholder protection)
Finance
Distribution
Deadlock and resolution
Share transfer provisions
Termination
Warranties and indemnities

14. Contractual arrangements
Articles of Association
Constitutional document of a company
Sets out management and administrative structure of the company and regulates its internal affairs
Contract between the company and each of its members in their capacity as members
Public document open to inspection at Companies House
Can be bespoke or in the statutory prescribed form

15. Contractual arrangements
Issues are generally covered in Articles
Dividends
Liquidation/Exit preference
Anti-dilution rights
Pre-emptions rights
Compulsory and permitted transfers of shares
Drag and tag along
Composition of board and requirements for board meeting;
Conduct of general meetings
Variations of rights
Permitted transfers

16. Contractual arrangements
Ancillary documents
Services agreements
Management / employment agreements
Agency and distribution agreements
Licensing and IP-related agreements
Other intra-group transfer agreements

17. Practicalities Pre-contractual phase/ Heads of Terms
Cultural differences
Jurisdictional differences
Language barrier
Negotiations – conduct, participants and style
Use and engagement of other advisers/experts
Managing expectations
Other factors/shared experiences in engaging with partners in cross border JV arrangements