CL@CAMEIRA LEGAL1

Governance Structures:The Heart of Joint Ventures and Alliance Arrangements

UIA - 2014 Florence Congress

Joint SessionMergers and Acquisitions Commission and Corporate Law Commission

November 2014

CL@ CAMEIRA LEGAL2014

Maria Antónia Cameira

CL@CAMEIRA LEGAL

• Tailored according to decision making structures.

• Depending on equity ownership, size of the project and industry.

• Substantially different from wholly owned companies

Governance Structures as Management Challenges

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• 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.

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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

Key issues in structuring governance

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• Governance matters reserved to parents

• Operational management

• Minority protection

• Deadlock and dispute resolution

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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

Governance structuresEquity Joint Ventures Vs Contractual Alliances

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Available management models:

• Transplant model

• Dominant parent

• Independent roles with separate blocks of responsibility

• Shared management

Governance of Equity Joint Ventures

Management models V Balance of control

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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.

Balance of controlDirectors V Shareholders

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Non voting rights with enhanced economic rights;

Different classes of shares with different voting rights.

Control at shareholder level

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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

Composition of the board of directors

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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

The rights of minoritiesOptions and protection devices

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QuorumsDecisions with greater majorities

At shareholder level

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• 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

Board structuresElections, destitutions and powers

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Elections, destitutions and powers

• Balance power tools• Roles and responsibilities

The Secretary

The Vice- chairman as the co-chairman with a rotating role.

Chairman and Vice Chairman as deadlock breakers

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• 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

Reserved powers : General Meetings

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A crucial 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.

Aims of effective governance

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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

Management skills in Joint Ventures

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Questions?

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