сряда, 5 юли 2017 г.

Fwd: JV

4) We would also be interested in getting information on the types of structure which you have experienced in JV arrangements. I know these are deal specific but you mentioned one particular one which protected the smaller partner form being 'ratcheted' due to lack of funds etc.     


There are a number of ways to guarantee your rights under a JV agreement but they all need to be agreed with the Potential Investor.  We can start by putting a clause stipulating that regardless of your respective portions of the shared capital, you will receive preferred shares, which give you the right to receive liquidation quota first.  Usually in return for providing mezzanine finance the Potential Investor will receive a priority repayment of their loan and a second ranking mortgage/pledge, together with a priority coupon charged at a rate (rolled up over the duration of the project) and a determined per cent of the profit share upon exit of the project.  The mezzanine finance may rank behind the senior debt and possibly even behind equity – thus you will not take the "first loss" position.  


The Decision for the additional payments that might be needed for the Project, will require the joint decision of the Parties along with the sale of shares to any third party or the obtaining of any additional loan


In the particular case mentioned a "Specified Proportion" was be allocated in relation to each Shareholder, which was a percentage of the total nominal value of all equity which is the total nominal value of all the Shares in issue and which was a significantly greater percent to the Potential Investor and say around 00-00% to the other party, depending on the valuation of the land.  However, in that particular case the Parties agreed that 00months after the date of the Agreement they will review the Specified Proportions based on Company's activities and performance. There was also a ceiling of up to 00% for the minority Shareholder.


In the event that the Project requires additional funding, the Parties or the Company Board should adopt a resolution requiring the Parties to provide financing to the JV Company, pro rata to their respective Shareholdings.  The decision shall specify the form of the investment (equity, Shareholder Loans, Guarantees or any other form agreed by the Parties) (Guarantees shall be treated as equity).

In the event that such a decision is adopted and the Company is to be provided with additional financing by the Shareholders:

through subscriptions for Shares, then no Shares shall be issued other than in the Specified Proportion to Investor and You;

through Shareholder Loans, then such Shareholder Loans shall be made in the Specified Proportion; or

In the event that a Party fails to provide financing to the JV Company, the other Shareholder providing its pro-rata portion of the funding shall be entitled, to provide all or part of that remaining financing. This additional funding shall be in the form of a loan and the Party providing it shall be entitled:

to (i) require that no Shareholder Loans be due to the other one, until after a repaid; and (ii) to receive interest at the rate of 20%, such interest to be repaid at the same time as repayment of the principal;

At any time, prior to the end of  a specified term (in that case it was 00 days) Party which did not provide the financing may repay in a form of a Shareholder Loan or directly to the other Party.


Upon expiry of such a term the Party, which provided the financing at its sole discretion may demand the conversion of any not repaid to it funding, or any part thereof, into an Interest of the Joint Venture Company  in accordance with the following formula:


I = ------------



A =        amount of Additional Funding plus the accumulated interest calculated.

B =        Negative Cash Flows, as of the date of the demand for conversion.

C =        Total of the investments pursuant to the relevant Decision (not included in B above).

I =         The percentage by which the Party's Interest in the JV shall increase.




The order of seniority of loans or credit facilities of the JV Company and the order of repayment was as follows:

accrued and unpaid principal and interest on any loans obtained from Financial Institutions or third parties;

accrued and unpaid principal and interest on any loans advanced by a Party in excess of its actual pro rata Shareholding in the JV Company including, for the avoidance of doubt, Additional Funding;

accrued and unpaid principal and interest on all Shareholder Loans.

The Positive Cash Flows shall be distributed to the Shareholders in the following priority:

to the Shareholders pro-rata to their respective, until each of the parties capital investment in the JV Company including for the avoidance of doubt, Additional Funding;

thereafter to the Shareholders pro-rata to their respective (i.e. 00% to Potential Investor and 00% to the minority one) until Investor has received an 000 of 00%;

thereafter 00.5% to Potential Investor and 00.5% to the minor shareholder, until the Potential Investor has received an 00of 00%;

thereafter, sixty three percent 6300to Potential Investor and 00% to the other.

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