"It means giving your credit card to a person--not a vending machine." |
Joint ventures are a potentially less risky way to expand your company's market and production facilities into newly emerging markets. By partnering with local entrepreneurs or established businesses who know the target market and possess either land or facilities and/or a capable work force, you can only increase your chances for success. For the foreign partner, too, the acquisition of Canadian technology and expertise, and access to Canadian capital and markets, is an equally attractive proposition.
Yet there are stumbling blocks. Many of these markets will restrict the percentage of foreign ownership and/or control over local enterprises or will otherwise place restrictive conditions on foreigners attempting to locate in their jurisdictions.
One such difficulty may involve restrictions on private companies owning land, and while leasing arrangements can usually be worked out, just who can contribute to the lease rights is often unclear.
To avoid any problems that may arise while finalizing the leasing (and other) arrangements, it will be necessary to have frank discussions with your proposed partner to determine whether you share similar philosophies and commitments. If you're serious about engaging such a partner, it is advisable to develop a non-binding memorandum of understanding that addresses the scope of the venture, your respective contributions (you will want to cap your financial contributions if possible), management and decision making processes, financial reporting, termination and dispute resolution mechanisms, and confidentiality agreements. I have a checklist that covers these and other concerns that you must consider before finalizing any deal. Contact me directly and I will forward them under separate cover.
Beyond this, many emerging market nations have established special free enterprise zones within their countries to attract foreign investment and that may also afford certain tax benefits or duty-free rights. These benefits are often negotiable and may also permit looser exchange controls for foreign businesses willing to make substantial investments. If your plan is to export your product back to North America, these zones must be investigated.
Start by checking with "CIDA" (the Canadian International Development Agency), The Asian Development Bank, and The World Bank, each of which provide various forms of financing and/or funding for market analysis, environmental impact studies, training programmes, and the like. Contact me for a useful chart of all the available programmes.
THE SAXLAW REPORT has been prepared by Michael M. Sax for information purposes only and does not constitute a legal opinion. This representation is not intended to create, and the receipt of it does not constitute a solicitor-client relationship. Readers should not act upon this information without seeking professional counsel. This information is forwarded on the basis and understanding that Michael M. Sax, Barrister & Solicitor is under no responsibility or liability whatsoever in respect thereof.