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By Jonathan Watson Partner, MFB Solicitors Tel: +44 (0)20 7330 8000 Mob: +44 (0)780 1736 148

SHIPPING AND THE LAW 2012. Alternatives to traditional bank finance Joint Ventures, Collaborations and Other Structures 8 October 2012. By Jonathan Watson Partner, MFB Solicitors Tel: +44 (0)20 7330 8000 Mob: +44 (0)780 1736 148. M F B. Introduction.

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By Jonathan Watson Partner, MFB Solicitors Tel: +44 (0)20 7330 8000 Mob: +44 (0)780 1736 148

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  1. SHIPPING AND THE LAW 2012 Alternatives to traditional bank finance Joint Ventures, Collaborations and Other Structures8 October 2012 By Jonathan Watson Partner, MFB Solicitors Tel: +44 (0)20 7330 8000 Mob: +44 (0)780 1736 148 M F B

  2. Introduction • Private Finance versus Bank Finance • What advantages are there, to private finance as opposed to traditional bank finance? • Assessment of Risk – possibly a more commercial approach • A co-venturermay better understand the underlying business • A co-venturer may see advantages to its participation in the business that would not be relevant to, or of interest to, a bank - such as economics of scale and access to new markets/customers • Potentially lower expectations re security and fewer pre-conditions to financing • A common interest in further funding

  3. What is a “Joint Venture” business • Any commercial arrangement where “two or more economically independent entities participate together to share the risks and rewards of a joint enterprise”. • Examples: • The pooling arrangement • Demand-side joint ventures • Supply-side joint ventures • Project-based collaborations • JVs as a condition of business

  4. Structuring your Joint Venture • Headline Issues • Parties • Shares (i) percentage participation (ii) Form of ownership • Decision Making (i) How will the parties co-operate in the decision-making process? (ii) who has the final say in the event of a disagreement? • Scope of JV Business - in terms of geography, duration, business type

  5. Initial Contributions – who will contribute what to the business in terms of cash, assets, personnel and so on, to set it up? • Responsibilities (i) Funding a cash shortfall (ii) Reorganising the venture to accommodate further investment by one or both parties • Exit • voluntary/pre-planned exit • compulsory exit – default, change of control, insolvency

  6. FORMS OF JOINT VENTURE • A joint venture company or “corporate” joint venture (i)Legal entity on its own right (ii) Shareholders have limited liability • Partnerships (i)the legal effect of a business relationship (ii) partners have joint and several liability • Contractual Joint Ventures (i)a relationship defined by contract (ii) no separate legal identity

  7. Financing Issues – Debt versus Equity • Essential differences • An equity funder’s comfort that its investment will be recouped comes from its participation in the business • Conclusion • Joint ventures/collaborations as a way of getting bank finance • Other alternatives to bank finance.

  8. THANK YOU Jonathan Watson MFB Solicitors Fishmongers’ Chambers 1 Fishmonger’s Hall Wharf London EC4R 3AE www.m-f-b.co.uk

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