22 February 2012

Vessel Ownership and Joint Ventures22 February 2012

Owen McHugh

Joint Venture

Why set up a Joint Venture?

Sharing of Risk

Access to Financing – Equity and Debt

Pooling of Expertise and Assets

Access to Markets and Employment Opportunities

But…

There is always a sacrifice of control and flexibility

Joint Venture Structure

Joint Venture Structures

A Company

A Partnership (or limited partnership)

A Contractual Co-operation Agreement

Considerations

type of venture

liability

legal protection and control

finance

publicity

accounting

Inputs and Outputs

JV Co

Assets Equity Debt

Shareholders Contributions

Interest and Shareholder Loan Repayments Management Fees

Dividends

Control and Management of JV Co

Board Level

equal number of directors?

what level of authority is delegated to the board?

directors’ duties

Shareholder Level

Reserved Matters

what are these?

how are they dealt with?

Appointment of Related Parties by JV Co

pre-approval?

termination of appointment

Deadlock

Definition of “deadlock”

failure to agree on a matter requiring unanimous agreement

quorum not present

non-attendance at meetings

Dispute resolution procedures

Chairman’s casting vote

Outsider’s swing vote

mediation

Escalation

If deadlock persists…termination / exit strategy

Termination

How does this typically rise?

failure to resolve deadlock

default

consensual termination

expiry of purpose / completion of project

sale by a party of its interest

Treatment of assets

buyout of other party’s shares

division between the parties?

market sale to third parties with right of first / last refusal

financing considerations?

Documentation

Letter of Intent / Memorandum of Understanding

Shareholders’ Agreement

Articles of Association

Asset transfer agreements – MOAs, Shipbuilding Contract Novations

Share transfer agreements

Management Agreements – technical, commercial, accounting

Guarantees / Counter Indemnities

Finance Documentation – shareholder loan agreements and bank facilities

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