Greater Houston Partnership City of Houston MIADC – Europe Primer on Doing Business in Texas

MIADC – Europe www.miadc.com

City of Houston www.houstontx.gov/moiad/miadc

Greater Houston Partnershipwww.houston.org

Primer on

Doing Business in Texas Presentation to Australian American Chamber of Commerce

James PrappasJohn Stephenson

Jackson Walker L.L.P.May 4, 2010

Houston







HOW TO OPERATE TODAY SUCCESSFULLY IN TEXAS AS AN OIL & GAS SERVICE COMPANY

I. Current Business Climate in the U.S. and Texas

A. International & U.S. Recession & Recovery

1. Global Impact

2. Australia and U.S. Economy

3. The Energy Industry




B. The Texas & Houston Economy & Relationship with Energy Industry

C. The Business Climate in Texas and Houston




II. Establishment of Operations in Texas by Australian Energy Service Providers

A. Market Research, Business Plan & Budget

B. U.S. Federal, State & Local System of Laws & Govt

C. Tax Planning

1. Australian Tax Considerations 2. U.S. Federal Income Taxes

3. Texas State Taxes4. Taxation of Individuals & Estate

Planning 5. Transfer Pricing

D. U.S. Immigration & Visa Considerations




L-1 Intracompany Transferee

• Requirements:

(i) relationship between non U.S. company and U.S. company as parent, branch, subsidiary or affiliate;




(ii) transferred employee has worked 1 year out of last 3 years for non U.S. entity as manager, executive or specialized knowledge employee; and

(iii) employee will for U.S. company as manager, executive or specialized

knowledge employee; and

(iv) office lease required for new U.S. employer.




• Issued for maximum of 7 years for executives and managers.

• 5 years for specialized knowledge with 1 year initial term in new office (3 yrs. if established office) and renewals.

• No limit on number of L-1 visas available.

• Spouse may apply for work permit upon employee admission to U.S.




E -1 Treaty Trader

Requirements include nationality:• The Australian individual (employee) and U.S.

business entity (company) possess Australian nationality [for the company this means that at least 50% of the shares are owned by Australian citizens directly or indirectly who do not have U.S. lawful permanent resident (i.e. “green card”) status];

• Current existence of “substantial trade”;




• Over 50% of Company’s trade is between U.S. and Australia;

• Employee’s work is “executive, supervisory, or essential skill"; and

• Note the definition of trade includes goods and certain services.




E-2 Treaty Investor

Requirements include:

• Employee and Company possess Australian nationality;

• Investment must be substantial;

• Funds or capital must be at risk;

• U.S. business is “commercial enterprise”;




• Employee’s work is “executive, supervisory, or essential skill"; and

• “marginality” (the visa cannot be solely for the purpose of applicant to make a living in the U.S.).




• Apply at U.S. Consulate in Australia.

• Processing time is approximately 4 weeks.

• If approved by Embassy, Company is "Registered".

• After E Registration approval, Employee, spouse, children over 16 years of age must schedule and attend an interview at the U.S. Consulate in Australia.




• Visa may be issued for up to 4 years to Australian citizens.

• Employee, spouse and children may be admitted initially for up to 2 years; extensions may be available.

• There is no maximum time a person may hold E visa status.




H-1B Visa

Requirements:

(i) Generally the U.S. employer must pay the visa applicant the higher of prevailing wage or the actual wage for such specialty occupation employee.

(ii) Employee has U.S. bachelor’s degree or its equivalent in

relevant field, and position requires a bachelor’s degree

or its equivalent.




• Issued for maximum of 6 years with 3 years initial term.

• Annual caps on the number of H1-B visas available.

• Currently H-1B visas are available for work in U.S. on or after October 1, 2010. Should file as soon as possible.

• Spouse cannot work in U.S. unless qualifies for independent work visa.




E-3 Visa

(i) Available only to Australian citizens.

(ii) Limit of 10,500 per fiscal year.(iii) Similar criteria to H-1B, except can apply directly at

U.S. Consulate in Australia; issued for up to 2 years; no limitation on number of renewals; must have intent to return to Australia and spouse can apply for employment authorization.




OuterContinental Shelf (OCS) Immigration Issues

All foreigners on an offshore structure or vessel require both:

• Some form of USCIS work authorization; and

• One of three different U.S. Coast Guard permissions or "Exemptions" to be on board.




Grants of exemptions:

• Involve a complex calculus of facts and at least three U.S statutes;

• Are discretionary with the USCG; and

• Can be denied with resultant fines if unauthorized personnel are found aboard any offshore rig/platform/vessel.




1. What business entity should be used?• Time and Cost to Organize

2. Who manages a Texas corporation's affairs and who acts for it?---

• Directors - Responsibilities• Officers - Responsibilities• Differences with Australian designations

E. Entity Formation and Operation




3. What Liability exposure does a Director of a Texas corporation have? To whom?

Duties

A. Loyalty- Good Faith- Self-Dealing

Transactions- Oversight




B. Care- Business Judgment

Rule- Reliance on Reports- Charter Limitations

of Director Liability

C. Obedience – No ultra vires act by corporate agents violating statutes or public policy




• Fiduciary Duties of Officers – Care, Good Faith and Loyalty to the corporation. Negotiation by prospective officer of his individual employment agreement possible, but once he becomes an officer, pursuit of self interest is restricted.

4. Who should be in charge on the ground

in Texas?• Someone from Australia?• Someone from the U.S.?




5. Banking• Information Requirements• Current Information re lending to

Upstream activities

F. Labor & Employment

1. "At-Will" Employment in Texas & Employment Agreements

2. Employment Practices & Procedures Manual




3. Restrictive Employment Provisions(a) Covenant not to Compete(b) Covenant of Confidentiality(c) Non-Solicitation(d) Non- Pirating

4. Arbitration of Disputes

5. Statutory Restrictions on Employment Relationship

6. Application of Admiralty and Maritime Law




G. Protection of Intellectual Property – TheFour Major Vehicles for Protecting IP

in the U.S.

1. Trademarks2. Copyrights3. Patents4. Trade Secrets & Know How

H. Insurance

1. Product Liability2. Industrial and Workplace Safety3. General Property and Liability Coverage




I. Sale of Goods

1. Sales to the U.S. from Australia or from other countries (Does CISG apply?) Is U.S. entity sales agent for Australian company?

2. Sales to and from U.S. entity – Distribution Arrangement

3. Contract Terms and Conditions (secured or unsecured)




4. Transfer Pricing

5. Warranties (Limit them under Texas law, or law applicable to contract for sales from Australia) and Product Liability issues

6. Remedies for breach (Arbitration or Litigation)







J. Provision of Services

1. Who is the employer of your personnel?

2. Applicable Laws

3. Terms and Conditions (Master Service Contracts)

4. Warranties

5. Remedies (Arbitration or Litigation) and Lien Possibilities




K. US & Texas Environmental Laws

L. Business Acquisitions [stock vs.

asset; due diligence & documentation]

M. Purchase vs. Lease of Property

N. Operating in Other States and the

Outer Continental Shelf (Deep Water Gulf)

O. Energy Service Sector Opportunities in

Mexico.




IV. Key Elements to Success

1. Plan ahead.2. Coordinate legal, tax and HR matters.3. Send a stakeholder to the U.S.




V. Questions & Answers

James D. PrappasJackson Walker L.L.P.1401 McKinney StreetSuite 1900Houston Texas 77010-4008713-752-4298 - phone713-752-4221 – [email protected]

John M. StephensonJackson Walker L.L.P.901 Main StreetSuite 6000Dallas, Texas 75202-3797214-953-6126 - phone214-661-6802 - [email protected]




Documents

Greater Houston Partnership City of Houston MIADC – Europe Primer on Doing Business in Texas