Greater Miami Chamber of CommerceGreater Miami Chamber of CommerceAmericas Linkage 2007Americas Linkage 2007

Latin American & Caribbean ProgramLatin American & Caribbean Program

Legal Aspects of Doing Legal Aspects of Doing Business in Florida Business in Florida

Joint VenturesJoint Ventures

Presented by: Jose I. RojasPresented by: Jose I. Rojas Rojas Law Firm LLPRojas Law Firm LLP

Why Miami?Why Miami?

Strategically located for business with Latin Strategically located for business with Latin America and the CaribbeanAmerica and the Caribbean

Multicultural diverse communityMulticultural diverse community World class trade infrastructureWorld class trade infrastructure International consulates and chambers of International consulates and chambers of

commercecommerce Foreign trade officesForeign trade offices International banking centerInternational banking center Consistently ranked as one the “Best Cities” for Consistently ranked as one the “Best Cities” for

doing business in Latin America by doing business in Latin America by América América EconomiaEconomia

Joint VenturesJoint VenturesPros and ConsPros and Cons

Pros:Pros:• Complementary businessesComplementary businesses• Knowledge of local marketKnowledge of local market• Funding and risk-sharingFunding and risk-sharing

Cons:Cons:• Cultural differencesCultural differences• Distinct objectives and philosophiesDistinct objectives and philosophies• CompetitorsCompetitors

Alternatives:Alternatives:• Strategic alliancesStrategic alliances• Equity investmentsEquity investments• Independent contractorsIndependent contractors• FranchisingFranchising

Seek Professional AdviceSeek Professional Advice

Professional expertise required (corporate, tax, Professional expertise required (corporate, tax, intellectual property, regulatory, employment, intellectual property, regulatory, employment, economics, marketing)economics, marketing)• Note civil code vs. common law differences; Note civil code vs. common law differences;

reliance on contracts and private termsreliance on contracts and private terms• Different approaches to duties to disclose; due Different approaches to duties to disclose; due

diligence; pre-contract conductdiligence; pre-contract conduct• ““Pay me now” or “Pay me much more later” Pay me now” or “Pay me much more later”

approachapproach• Planning and preventative measuresPlanning and preventative measures

Planning the Joint VenturePlanning the Joint Venture

Preliminary Agreements:Preliminary Agreements:• Non-disclosure agreementNon-disclosure agreement• Formation agreement/term sheetFormation agreement/term sheet

Basis terms of joint venture:Basis terms of joint venture:• Purpose and scopePurpose and scope• Allocation of liabilities and responsibilitiesAllocation of liabilities and responsibilities• Survival of terms after formation of joint venture vehicleSurvival of terms after formation of joint venture vehicle

Parties:Parties:• Use existing companies?Use existing companies?• Form a new company or partnership?Form a new company or partnership?

Nature of the business:Nature of the business:• Identify licenses, permits, consents or professional Identify licenses, permits, consents or professional

qualificationsqualifications• Antitrust concernsAntitrust concerns

Market power of combined entitiesMarket power of combined entities Impact on U.S. commerceImpact on U.S. commerce

Formation of Joint Venture VehicleFormation of Joint Venture Vehicle

Choice of joint venture vehicle:Choice of joint venture vehicle:• PartnershipPartnership• Corporation Corporation • Limited partnership Limited partnership • Limited liability companyLimited liability company

Name:Name:• Compliance with local business laws and regulationsCompliance with local business laws and regulations• Trademark issuesTrademark issues

Intellectual property:Intellectual property:• TypesTypes• OwnershipOwnership• Protection in local marketsProtection in local markets• Non-infringement of others’ rightsNon-infringement of others’ rights

Premises & CapitalizationPremises & Capitalization

Premises:Premises:• Registered officeRegistered office• Registered agent for service or processRegistered agent for service or process• Principal place of businessPrincipal place of business

Lease or purchase?Lease or purchase? Initial capital contributions and start-up expensesInitial capital contributions and start-up expenses

• Contributions in cash, assets, specialized Contributions in cash, assets, specialized expertise or intellectual propertyexpertise or intellectual property

• Valuation of contributions – tax considerationsValuation of contributions – tax considerations• Payment and reimbursement of start-up Payment and reimbursement of start-up

expensesexpenses

Stages of Joint VentureStages of Joint Venture

Funding:Funding:• Cash from parties (in proportion to equity participation Cash from parties (in proportion to equity participation

or other)or other)• Loans from shareholders or third parties; security Loans from shareholders or third parties; security

required; personal guaranteesrequired; personal guarantees• Raising capital (U.S./state/foreign securities issues)Raising capital (U.S./state/foreign securities issues)

Duration and termination:Duration and termination:• Limited or open-endedLimited or open-ended• Events causing terminationEvents causing termination

Consequences of termination:Consequences of termination:• Liquidation, buy-out, formulas, valuationLiquidation, buy-out, formulas, valuation

Anti-competition restrictions after termination of Anti-competition restrictions after termination of joint venturejoint venture

Managing the Joint VentureManaging the Joint Venture

Management of business of joint venture:Management of business of joint venture:• Board of directors:Board of directors:

Number on boardNumber on board Appointed or elected and by whom?Appointed or elected and by whom? Number required for decisionsNumber required for decisions Will chairman have vote?Will chairman have vote? Quorum; notice requirements; place/method of meetingsQuorum; notice requirements; place/method of meetings

• Decisions reserved for shareholders:Decisions reserved for shareholders: Change in nature of business or territory of operationChange in nature of business or territory of operation New shares and shareholdersNew shares and shareholders Loans and security for sameLoans and security for same Employment and dismissal of senior employeesEmployment and dismissal of senior employees Entry into other joint venturesEntry into other joint ventures

• Shareholders:Shareholders: Weighted voting rightsWeighted voting rights Percentages required for ordinary and special resolutionsPercentages required for ordinary and special resolutions Quorum and notice period for shareholder meetingsQuorum and notice period for shareholder meetings

Risks & Benefits of OwnershipRisks & Benefits of Ownership

Transfers of ownership rights to the joint venture:Transfers of ownership rights to the joint venture:• Preemption rights/dilution of ownership interestPreemption rights/dilution of ownership interest• Valuation of shares: by agreement, audit, formulas?Valuation of shares: by agreement, audit, formulas?

Profits and losses:Profits and losses:• How shared: in proportion to equity or other ratios?How shared: in proportion to equity or other ratios?• Minimum annual distribution of profitsMinimum annual distribution of profits

Liabilities and indemnification:Liabilities and indemnification:• Separate operationsSeparate operations• Separate taxesSeparate taxes• Intellectual property rightsIntellectual property rights

Employees & ReportingEmployees & Reporting Employees and laws pertaining to employment rights and Employees and laws pertaining to employment rights and

benefits:benefits:• Non-compete, non-solicitation, confidentiality Non-compete, non-solicitation, confidentiality

agreementsagreements• At-will vs. contract employmentAt-will vs. contract employment• U.S. employment lawU.S. employment law• Immigration issues regarding key employeesImmigration issues regarding key employees

Registrations/licenses/miscellaneous:Registrations/licenses/miscellaneous:• FEIN applicationFEIN application

Available in four (4) daysAvailable in four (4) days May be obtained over the telephone by an officerMay be obtained over the telephone by an officer

• IRS forms to classify taxation as corporation or IRS forms to classify taxation as corporation or partnershippartnership

• Bank accounts: resolutions, signatories, limitsBank accounts: resolutions, signatories, limits• Bureau of Economic Analysis Reports regarding foreign Bureau of Economic Analysis Reports regarding foreign

investmentsinvestments

Law, Disputes & Other AgreementsLaw, Disputes & Other Agreements

Law and disputes:Law and disputes:• Governing lawGoverning law• ArbitrationArbitration

Place, language, choice of law, choice of Place, language, choice of law, choice of rulesrules

Binding or non-bindingBinding or non-binding Collateral agreements:Collateral agreements:

• Distribution agreementsDistribution agreements• License agreementsLicense agreements• OtherOther

Liability IssuesLiability Issues

Additional types of liability:Additional types of liability:• ProductsProducts• Securities lawSecurities law• ContractualContractual• General OperationsGeneral Operations

Administrative and regulatoryAdministrative and regulatory Common law tortCommon law tort

Insurance & Risk ManagementInsurance & Risk Management