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Governance Structures: The Heart of Joint Ventures and Alliance Arrangements

Governance Structures: The Heart of Joint Ventures and Alliance Arrangements UIA - 2014 Florence Congress Joint Session Mergers and Acquisitions Commission and Corporate Law Commission November 2014. CL@ CAMEIRA LEGAL 2014 Maria Antónia Cameira.

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Governance Structures: The Heart of Joint Ventures and Alliance Arrangements

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  1. Governance Structures: The Heart of Joint Ventures and Alliance Arrangements UIA - 2014 Florence Congress Joint Session Mergers and Acquisitions Commission and Corporate Law Commission November 2014 CL@ CAMEIRA LEGAL 2014 Maria Antónia Cameira

  2. Governance Structures as Management Challenges • Tailored according to decision making structures. • Depending on equity ownership, size of the project and industry. • Substantially different from wholly owned companies

  3. Integration of different business cultures, personalities and languages • Supervision of the investment • Choice the right SPV vs. Options available in establishing the governance and management structure of the venture.

  4. Key issues in structuring governance • Role and key responsibilities of the alliance governing body: • Composition and procedures • Decision making authority • Control: • Who controls direction and management? • How is control shared? • Composition of the Board: • Appointment • Numbers • Independents • Executives

  5. Governance matters reserved to parents • Operational management • Minority protection • Deadlock and dispute resolution

  6. Governance structuresEquity Joint Ventures Vs Contractual Alliances • Contractual alliances • The role of a management or steering committee: binding powers. • Management • Supervision • Rights of appointment • Supervisory or coordinating role • Alternates • Chairman • Quorum • Frequency of meetings

  7. Governance of Equity Joint VenturesManagement models V Balance of control • Available management models: • Transplant model • Dominant parent • Independent roles with separate blocks of responsibility • Shared management

  8. Balance of controlDirectors V Shareholders • Control at board level • Following ownership of shares, where: • Right to appoint a number of directors proportionate to the its equity shareholding. • The case for equal voting rights and control rights with different economic rights, where: • Encouraging consensus, cooperation and shared management responsibilities becomes paramount.

  9. Control at shareholder level • Non voting rights with enhanced economic rights; • Different classes of shares with different voting rights.

  10. Composition of the board of directors • Equal proportions of Equity • Mechanisms to break deadlocks: • Different equity contributions: Greater equity greater control. • Rights to appoint majority of Directors • Rights to appoint Chairman with casting vote • Weighted casting votes in certain matters

  11. The rights of minoritiesOptions and protection devices • At board level: • Board representation and rights of veto • Rights of nomination of at least one third of the board attached to certain shares • Special rights of nomination of one shareholder • Arrangements in shareholders agreements to support certain nominations

  12. At shareholder level • Quorums • Decisions with greater majorities

  13. Board structuresElections, destitutions and powers • Unitary Board • Two tiers • Operational structures • Appointment of executives as a point of stress • Functional responsibilities • Alternates • Independents • CEO election and delegation of powers : a Portuguese perspective

  14. Chairman and Vice Chairman as deadlock breakers • Elections, destitutions and powers • Balance power tools • Roles and responsibilities • The Secretary • The Vice- chairman as the co-chairman with a rotating role.

  15. Reserved powers : General Meetings • Matters withdrawn from the power or authority of the board • Small Joint Ventures V Large Joint Ventures • Settling the list of reserved matters V Autonomy and efficiency of the board. • Decisions relating to business operations : share structure and long term investments

  16. Aims of effective governance • Acrucial factor to the success of the Joint Venture and to the relationship between the parties. • Duties and responsibilities of directors as a means to an end. • Avoiding deterioration of relations, inter-party claims and breach of inter-party duties.

  17. Management skills in Joint Ventures • A recipe for the success of a JV at management level: • Relationship management plan to capture operating structure • Clearly defined operational roles and responsibilities • Benchmarking of the approach to collaborative working and successful partnering

  18. Questions?

  19. Berkeley Square HouseBerkeley SquareMayfairLondon W1J 6BDTel.: +44 (0)20 7887 6020Fax.: +44 (0)20 7887 6001 Avenida Eng. Duarte Pacheco, Torre 1, 6º Piso1070-101 LisboaTel. +351 21 342 1086 +351 21 389 4230 Fax. +351 21 386 0762 Avenida Paulista, 1079, 15º 01311-200 São Paulo – SP Tel.: + 55 11 3145 6000 Fax.: + 55 11 3145 6050 www.aidarsbz.com CL@CAMEIRA LEGALhttp://www.cameiralegal.com

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