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gbm October 2010

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INSIDE This Month:





Business Talk With the football World Cup and Olympic Games set to be hosted by Brazil we take an in-depth look at Brazil within this issue of the Global Business Magazine. According to various financial sources, Brazil has been marked as the number one country to invest in over the next ten years. Alongside Brazil, the United Arab Emirates is making significant strides towards becoming the financial powerhouse of the Middle East, we profile the firms that can help investors or trading entities to do business with the UAE. Both countries are broken down and featured in detail within our country profiles, a feature that looks to provide investors with information on the leading countries to invest within. The Microfinance sector has been growing at upwards of 50 per cent per annum– Microfinance was born to reduce poverty, but now it is well known for providing exceptionally high returns to investors and shareholders. In this issue we analyse and report on the process of setting up Microfinance Investments Funds and Vehicles with leading experts in this field and area of work.


Our new Luxury Brand Series is also launched this issue, with a look at Luxury Hotels and Resorts from around the world, this is the first feature of the new series that will profile all things luxury over the coming months.


The Hotels that we have included are the ones that we feel can offer individuals the quality, privacy, exclusivity and services that you would come to expect from brand’s that belong in the upper echelons of the hospitality industry.


Our regular IAF will look to address various issues from the corporate world, these issues will be detailed by experts from within the industry who specialise in the given subject areas.

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Global Business Magazine Corporate ABM Tel. 0044 (0) 121 666 6613 For our full Terms and Conditions please visit

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October 2010 • GBM • 03


• Mixed views on economy at Bank of England With the UK facing the biggest round of budget cuts since the the second world war, the Bank of England’s policy makers have mixed views on how to shore up the country’s economy. Minutes from October’s meeting of the Monetary Policy Committee showed that members split three ways when it came to a vote on interest rates and emergency bond purchases. Led by governor Mervyn King, the Monetary Policy Committee, voted 7-1-1 to keep the benchmark interest rate at 0.5 per cent and the bond-purchase plan at £200 billion. Committee member Andrew Sentance, Professor of Sustainable Business at the University of Warwick, pushed for an increase in the rate to 0.75%, while Adam Posen, a senior fellow at the Peterson Institute for International Economics voted to boost the asset purchases plan by £50 billion. Governor King has subsequently indicated that he may be open to increasing asset purchases in an attempt to stifle deflationary pressures taking hold in the ecomomy, claiming that “monetary policy remains a potent weapon”. But inflation still remains above the the government’s 3 per cent limit, prompting the vote from Sentance to raise interest rates to force it down. His view is that the inflation is facing upward pressure from rising oil and commodity prices, along with the hike in VAT from the new year. According to the minutes, he said that “by failing to respond to persistent above-target inflation, which was forecast to continue for some time, the Committee risked a loss of credibility that would

be damaging to business and consumer confidence over the medium term”. However, the minutes show that most members felt that the balance of risks had not changed sufficiently to warrant a change in the Committee’s policy. They continue to believe that the economy contains a considerable margin of spare capacity and that demand can rise significantly before there is upward pressure on inflation. Some did feel that further monetary stimulus would become necessary in order to meet the inflation target in the medium term, though not at present, and the Committee agreed to evaluate the situation at its November meeting when a clearer picture would be available following Chancellor George Osborne’s announcement of the cuts. After months of speculation, Osborne detailed his government’s plans for reducing the UK’s £156 billion deficit by 2015. Along with cuts in the welfare budget, the plans include imposing a levy on banks and cutting half a million public sector jobs. More gloom came from the National Institute of Economic and Social Research, whose latest Prospects for the UK Economy report says households face “the dismal prospect” of two successive years of falls in real disposable income. Hard-pressed consumers will save less and have less to spend, causing consumer spending to stagnate next year.

• Gamble fails as profits slide at Morgan Stanley

An investment in an Atlantic City casino has proved to be a gamble too far for Morgan Stanley after it recorded third quarter profits down 67 per cent. The American investment bank – which received a $10 billion bailout to stay afloat during the banking crisis - surprised markets with news of its worst trading quarter since 2008.

buyer. Though the bank has been struggling to recover from the 2008 banking crisis, it had been turning in respectable results of late – in the second quarter it recorded profits of nearly $2 billion. The unexpected loss didn’t please markets – Morgan Stanley stock fell around 4.5% on the news, contributing to an overall 16 per cent fall in stock value in the year to date. The bank has now announced a restructuring of its ownership of FrontPoint which will see FrontPoint senior management and portfolio managers taking a majority equity stake in the business and Morgan Stanley retaining a minority stake.

Posting a net loss of $91m on revenue of $6.8 billion, down from $8.5 billion in the same period last year, the bank announced plans to pay bonuses of $3.7 billion – down from $4.9 billion the year before. James Gorman, the bank’s president and chief executive officer, said he was “not satisfied” with his company’s And despite hiring around 400 new sales and overall performance. trading staff since the middle of last year, its trading revenues fell to less than half that of The main cause of the loss was a $229m write rivals JP Morgan Chase, Goldman Sachs and down on the FrontPoint casino business. The Bank of America. Revenue from equity and bank had already decided to get rid of its fixed-income trading at Morgan Stanley fell 45 stake earlier this year but it has yet to find a per cent to $1.77 billion, against $5.63 billion

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at Goldman Sachs and $4.5 billion at Bank of America.

Gorman said, “Although we continued to make progress across some key businesses this quarter, our results in aggregate clearly do not reflect the true potential of Morgan Stanley’s global client franchise.”

He added, “Our sales and trading business was clearly muted; however, we delivered broad-based strength in investment banking and improved performance - and positive flows - in both wealth management and asset management. We continue to invest in our people and our platform, and we are executing our client-focused strategy. While we still have considerable work to do across the firm, Morgan Stanley’s client franchise remains well positioned to benefit as the environment stabilises and investors return to the market.”

• Mortgage rate rise causes loan applications to fall Increases in 15 and 30 year fixed-rate mortgage rates caused a 10.5% fall in the volume of loan applications in a week, according to the US-based Mortgage Bankers Association (MBA). The seasonally adjusted decline was reported in the MBA’s Weekly Mortgage Applications Survey for the week ending October 15, 2010. The organisation, which represents the real estate finance industry in America, said its Market Composite Index, a measure of mortgage loan application volume, showed the decline took place in a week which included the Columbus Day national holiday. The rate rises – up 0.13 per cent on the previous week to 4.34 per cent and the first for six weeks – also affected demand for home refinancing, which fell by 11.2 per cent on the week. The fall in refinancing application was the sixth in seven weeks and is said by industry experts to reflect the increasing number of homeowners who are in negative equity and unable to get finance.

The refinance share of mortgage activity decreased to 82.4 percent of total applications from 83.1 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 5.8 percent from 5.4 percent of total applications from the previous week. The average contract interest rate for 15-year fixed-rate mortgages increased to 3.74 per cent from 3.62 per cent, also the first rise for six weeks.

showed that starts in condominiums and apartments were down by 10per cent on August, while permits to build – for future developments – fell by 20 per cent. Starts for single family homes were up by 4.4 per cent in September, with permits up by 0.5 per cent, and overall starts are up by 28 per cent since the low point in April. Despite this rise, however, starts are down 73 per cent since the construction peak in January 2006.

The figures demonstrate the fragile state of the US housing market. Only the week before, refinancing applications had leapt by 21 per cent triggered by historically low 30-year mortgage rates of 4.21 per cent. At the time, Michael Fratantoni, the MBA’s Vice President of Research and Economics, said: “After five weeks of steadily declining rates to yet another new low, borrowers who had been on the fence jumped off, which factored into surging refinance activity.”

The National Association of Home Builders says each new house built creates around three jobs for a year and generates around $90,000 in taxes, so the building decline does not bode well for the US economy. The fall in loan applications is also an indication of overall economic stagnations, as movement in the housing sector tends to indicate an increase in consumer spending.

Tight lending conditions have affected the number of housing starts too. September figures from the US Commerce department

The MBA survey covers over 50 per cent of all US retail residential mortgage applications, and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts.

• Fertiliser bid stalls over tax claims

A battle over the potential loss of £1.8 billion in tax revenues has broken out over a bid for a Canadian potash producer.

requirements of the net benefit test.

In another move, Potash Corp has asked a US District Court in Anglo-Australian mining giant Chicago to block the bid, saying BHP Billiton has offered £26 that its shareholders did not have billion for the Potash Corp of “clear and accurate information” Saskatchewan – the world’s because of BHP’s “false biggest producer of the statements and half-truths”. At potassium-based product used the centre of the claim are plans in agricultural fertilisers - in a put forward by BHP to develop hostile takeover. But the Canadian its own mine in the Saskatchewan province of Saskatchewan says it region where Potash makes most could lose the tax revenues over of its profits. Potash alleges that the next 10 years if the takeover the plans, made before BHP goes ahead and has urged central launched its takeover bid, were government to block the bid. a deliberate attempt to depress its share price. BHP says it will contest the lawsuit, adding that Canada has until November 3 to stop the takeover, which it can do “it is entirely without merit”. if it finds there is no “net benefit” to the country. Saskatchewan’s In a statement, BHP says, Energy and Resources minister, “We continue to believe that Bill Boyd, has already said the proposed acquisition of there are “serious questions” PotashCorp will create net about BHP’s offer meeting the benefits for Saskatchewan, New

Brunswick and Canada and we are committed to working with the Government of Canada’s Investment Review Division (IRD) to secure the Federal Minister of Industry’s approval under the Investment Canada Act.” BHP goes on to say that it will return the head office and management control of Potash Corp to Saskatchewan – it’s currently in Chicago – and will establish BHP Billiton’s global potash headquarters in Saskatoon. It also pledges to maintain current levels of employment in PotashCorp’s Canadian operations. To muddy the waters further, Sinochem Group, China’s biggest fertiliser producer is said to have approached a Canadian pension fund with a view to bidding for Potash Corp.

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Ultimate Finance acquisition and fundraising power growth surge as SMEs switch to new funding solutions Ultimate Finance Group plc (Ultimate) has topped an impressive 12 months with a transformational acquisition, underlining its position as one of the fastest-growing providers of financial solutions to the small to medium-sized enterprise market.

The AIM-quoted company targeted Ashley Commercial Finance Limited to strengthen its standing in the SME sector, creating an independent national force in the growing factoring and invoice discounting market. The two businesses are highly complementary as each serves clients of different sizes, bringing a wider range of products across the group and major potential synergy benefits. Ultimate is paying up to £7.45m, including £2.7m deferred, and the deal is partly funded by a £2.75m placing of new shares and an acquisition finance facility of £2m. The deal, announced on 12 October 2010, is classified as a reverse takeover under the AIM Rules due to the relative size of the two companies and is subject to shareholder approval on 28 October 2010. Coinciding with this, Lloyds TSB Commercial Finance Limited, a long-time supporter of Ultimate, has agreed to increase the back-toback funding facility available to the enlarged group to £34m. Clive Garston, chairman of Ultimate, said: “Our focus remains the achievement of sustained growth and we see this acquisition as an opportunity to build shareholder value while minimising risk and extending our service into new markets.”

Richard Repler

Jeremy Coombes

Shane Horsell

Ashley is a well-established business with 2010 operating profits of £726,000, a £4.4m loan book and just under £1m net assets. The deal is expected to be greatly earnings enhancing and to produce annual savings of up to £400,000. Ultimate is confident demand for its services will move ahead as banks continue to restrict overdraft facilities available to SMEs. But investors backed the Ashley deal because they also expect progress through the economic cycle, with Ultimate profiting from any market upturn.

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For Ultimate, the acquisition brings access to new clients and introducers, strengthened presence in northwest England and opportunities in new markets through joint marketing and cross selling to respective client and introducer bases. It also means client retention through mutual referrals and the leveraging of Ultimate’s wider product range. The Ashley deal comes after Ultimate unveiled a 37% rise in operating profit for the 12 months to 30 June 2010 to £553,000, up from £404,000 in the same period last year, and turnover up by 35% from £4.8m to £6.4m. The fundraising opens the door to good-quality new investors, while the acquisition establishes Ultimate’s management as a team with a clear vision, and the confidence and ability to act on it. Few companies in this economic climate can boast Ultimate’s level of financial performance or such support from shareholders. As with any business, a major objective has been balanced growth, and Ultimate has tightened its lending criteria in the past 18 months to reduce credit risk and maintain a satisfactory bad-debt record. How has the company progressed where others have fallen short of their ambitions? After it started in 2002, having floated on AIM the previous month, Ultimate grew strongly until a period of more subdued growth in 2007-08. Robust progress resumed with the appointment of Richard Pepler as CEO in March 2008. Under his leadership, the group launched a new business, Ultimate Trade Finance Limited, in March 2010. Four months later, Ultimate Asset Finance Limited commenced trading. Unlike larger lending institutions, Ultimate is transparent, open and communicative with its clients and with everyone else. “We give prospects the whole story before they enter into a facility,” says Pepler. When he or his colleagues pitch to introducers (often accountants) they talk of 40 “golden rules” that they hold dear. These are about funding SMEs, but could inspire business success anywhere, for example, ‘always under-promise and over-deliver’. “These are the same principles on which we were able to establish and float the company,” said Pepler. The message on the presentation page dealing with “winning business” is exactly the same as the part on “retaining it”. Ultimate is fast, flexible, gives clients what they want, with personal service, unafraid of decisions and no red tape.

in 2004. Demand for factoring and invoice discounting is expected to continue its upward trajectory as banks continue to restrict overdraft lending. The trend could have important implications for the overall health of the economy. SMEs are seen as vital to securing Britain’s future, yet are faced with big challenges in obtaining credit to fund their growth. “SMEs are a vital part of the UK economy. There are around 4.8 million businesses in this category (99.9% of all UK businesses), accounting for over half of private sector employment and turnover,” according to the July 2010 government report ‘Financing a Private Sector Recovery’. “SMEs have generally experienced greater difficulties than their larger counterparts in accessing finance primarily due to the higher risk they represent, especially those without a significant credit history or track record.” In other words, firms that feel overlooked by banks are finding reliable credit lines and better service elsewhere. Pepler traces the trend to the last major recession of the early 1990s. His company has since stepped in to fill a yawning gap in the market left by the high-street lenders. Pepler has tracked closely the transformation of Britain’s high-street institutions over three decades in their relationships with SMEs. Back then, banks invested heavily in training to ensure branches had the skills to serve local customers. He watched as service became secondary in importance, seasoned bankers were made redundant and decision-making was transferred to regional centres. As layers of bureaucracy were introduced, local branches closed, replaced by ATMs, and training was done by VHS video, with staff sitting in front of the TV. No wonder there was confusion. “When customers applied for a loan, there were arbitrary rules and a points-based system that could so easily fail to reflect reality. It was very much driven by IT, and if there was a problem you had to ring a call centre overseas,” says Pepler. When recession came in the early 1990s, everything changed. With overdrafts repayable on demand, banks controversially called in many loans at short notice. Meanwhile, other bank subsidiaries,

Empowering staff to take responsibility in their dealings with clients is key to success, says Pepler. “Almost all our employees have shares in the company. They are able, well trained, confident and don’t feel they have to refer decisions upward. We don’t need to keep reminding people what the business is all about. Our culture starts with these principles and clients respond to them.” Ultimate has also seized the opportunity thrown up by the growing tendency of banks to offer a one-size-fits-all approach to SME funding. Factoring and invoice discounting bring companies flexibility, says Pepler. Both services provide finance against debtor balances outstanding, while factoring provides the additional advantage of a full sales ledger and collections service under which the factor takes on the responsibility for the full credit management. With invoice discounting, by contrast, clients continue to administer their sales ledger and the service is undisclosed to their customers. This may sound complex, but the concept is simple – firms hand over some or all of their invoicing function in exchange for ready cash. As the money advanced grows with the sales ledger, SMEs find they have the credit they need, no matter how fast they grow. Borrowers have not been slow to see the benefits. According to figures from the trade body the Asset Based Finance Association, the industry grew from £132bn to £191bn turnover in the four years to 2009, with 43,590 businesses funded last year compared to 39,895

October October2010 2010• •GBM GBM• •07 07


Small businesses suffered badly. Many went to the wall. Many more people lost their jobs. Inevitably, banks were often blamed. With the recession over, those SMEs that survived emerged older and wiser. Sourcing all a small firm’s financial needs through the bank may have made sense at one time. Since then, according to Pepler, SMEs have taken to spreading their risk. “I have heard on occasion that some bank managers have had their lending targets removed and were urged to sell other services,” he says. Entrepreneurs walking into banks are likely to be targeted for pensions, insurance and other services in addition to straight credit. “Before the last major recession, the big banks and their subsidiaries had a high proportion of leasing, asset finance and hire purchase. Now customers wanted to spread the risk rather than having all their eggs in one basket,” he adds. Independent financing businesses sprang up. “That is why you saw a significant increase in invoice financing generally - people worried that next time there were difficulties, they would have the rug pulled from under them. We benefited as customers spread the risk among different lenders.” Independent providers discovered that firms still wanted good service from local people, with no red tape, nor the loss of services to regional offices or credit scoring that people now associated with banks. They also wanted someone else to outsource the responsibility for credit control and collections - hence the rise in factoring.

management and debtor protection for recruitment and labour agencies). Clients can expect to see increased services as Ultimate develops sector-specific products in conjunction with major partners. “We tried hard to bring back the service you used to see in banking,” says Pepler. “Clients have found they very often get a better service from the independent sector.” Just as important as the high service standards is the culture of common purpose driven by employee ownership. “Clients get more from us because most of our employees are owners of the business,” he adds. Invoice financing sometimes attracts attention for its pricing structure but, according to Pepler, charges are kept reasonable by competition in the sector, and SMEs understand the concept of paying for quality. “I read a few months ago a high-street bank director saying the average rate of interest for an overdraft in the UK was 6.6% that is, 6.1% above the Bank of England base rate, where typically our interest rate would be 3.5%. But you have to remember with bank overdrafts there are setup and renewal fees. While we have charges for credit management facilities, our funding comes with a higher level of personal service and attention, and grows automatically. “That means if you want more money you don’t have to go to the bank, cap in hand. The funding provided reflects the business coming in, not your annual accounts, which could be nine months or a year out of date when you last produced them to the bank. We lend money as a percentage of the sales ledger so if it grows from £100,000 to £500,000, your funding automatically grows in proportion.”

Pepler and Ultimate’s managing director Jeremy Coombes, were quick to spot the opportunity. Now that challenging times are back and the outlook is uncertain, demand for With more people, an enhanced introducer good service and reliability is higher than ever. network, a growing body of loyal clients, wider national coverage and a Midlands office “We are creating the sort of service that bank opening in November 2010, Ultimate is well managers used to give 20 years ago,” says placed to exploit a substantial opportunity. Pepler. “They knew their customers, and The additional funding also positions Ultimate people knew who they were dealing with. to expand its workforce through selective They could knock on the door, come in, sit recruitment. down and talk. Some of my clients have my home number and don’t hesitate to use it  and I wouldn’t have it any other way.” In “What we provide works and we make a big contrast, he knows of one hard-pressed bank difference to our customers,” says Pepler. manager who has taken customers to lunch, then been told to send them the bill. Advising Ultimate on the acquisition and fundraising were Arbuthnot Securities Limited Key to the elevated offering is a wide range as nominated adviser, and joint broker with of services - not add-ons, but products the WH Ireland Limited, solicitors Davies Arnold Ultimate team know their clients want Cooper LLP and BDO LLP as registered because they stay in touch with them. Apart auditor and reporting accountant. Ultimate from factoring and invoice discounting, this registrars were Neville Registrars Limited; includes the trade finance and asset finance principal bankers were Lloyds TSB Bank plc. businesses, both launched earlier this year. Corporate finance advisers to Ashley were Also among the product range are CHOICE Ford Campbell Corporate Finance LLP and (advances with real-time, online access to solicitors to Ashley were Gunnercooke LLP. sales ledger and account) and CASH (funding, Solicitors to the nominated adviser and joint sales ledger administration, optional payroll brokers were Cobbetts LLP.

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Clients get more from us because most of our employees are owners of the business

providing equipment leasing through to factoring, got jittery and started reviewing relationships and limiting credit.

For further information please visit


Setting up Microfinance Investment Vehicles Microfinance Investment Vehicles play an increasing role in channelling supplementary resources to microfinance institutions. According to the CGAP, the Microfinance Investment Vehicles market has been steadily growing both in number and assets over recent years. These Microfinance Investment Vehicles can use widely varying legal structures from donor funds to regulated commercially oriented mutual funds. Worldwide there are more than hundred Microfinance Investment Intermediaries. Most are set up as Microfinance Investment Vehicles. Eight Microfinance Investment Vehicles have been created in 2009 and so far at least three new ones have been launched in 2010. Microfinance Investment Vehicles may be set up in different jurisdictions. In Europe, the Netherlands and Luxembourg emerge as pivotal hubs for setting up, structuring and registering Microfinance Investment Vehicles. Luxembourg appears to have a head start in the microfinance niche market as its hosts the majority of the regulated microfinance funds worldwide. Generally speaking Luxembourg offers an appropriate legal, regulatory and fiscal framework for the incorporation of Microfinance Investment Vehicles. The flexibility of the available product range combined with a recognised regulatory framework and a favourable tax environment shape the Luxembourg financial sector’s attractiveness. With regard to the fiscal year 2010, microfinance investment funds set up in Luxembourg have been exempted from the annual subscription tax. It appears furthermore that service providers present in Luxembourg offer the skills and experience which are required in order to respond to the somewhat specific needs of Microfinance

Investment Vehicles. The overall reputation and the professional experience of the service providers with regard to investment funds generally speaking are beneficial for the Luxembourg financial centre to attract investment vehicles dedicated to microfinance. In the light of the characteristics of the Microfinance Investment Vehicles it appears that Microfinance Investment Vehicles may choose to set up as Specialised Investment Funds (SIF), risk capital investment companies (SICAR or part II undertakings for collective investment (SICAV or FCP). Actually the Luxembourg financial sector has already attracted a proportionally significant number of Microfinance Investment Vehicles and a number of further projects are about to launched. At the end of 2009, seven of the top ten Microfinance Investment Vehicles have been established in Luxembourg. Six of the top ten Microfinance Investment Vehicles have been granted the LuxFLAG (Luxembourg Fund Labelling Agency) microfinance label. Overall, the label has been granted to nine Microfinance Investment Vehicles as of end of August 2010, with some more labels expected to be added before the end of 2010. The funds labelled by LuxFLAG account for more than 80% of the total microfinance fund assets in Luxembourg. The interest of institutional and retail investors for responsible investment opportunities remains strong. This may also be reinforced by the fact that due to the financial crisis, investors may want to re-think the allocation of their

Daniel Dax

General Manager LuxFLAG

investments, balancing heir decisions between socially responsible and purely profit motivated investments. As the number of Microfinance Investment Vehicles expands, there is a need to assist investors in their choice of investment, especially since the complexity of the different structures and similarity of investment policies make it difficult for potential investors to make to choose their microfinance investment. Furthermore the current financial crisis has highlighted a strong demand for more transparency and risk avers investors will in future require better, clearer, accurate and more regular reporting and information dissemination. Providing a concrete tool to reassure investors that the Microfinance Investment Vehicle actually invests directly or indirectly in the microfinance sector is the key element that sustains the objectives of LuxFLAG. By awarding a distinctive label to eligible Microfinance Investment Vehicles LuxFLAG contributes to continuously enhance transparency. Overall, the label has been granted to nine Microfinance Investment Vehicles as of end of August 2010, with some more labels expected to be added before the end of 2010. The Microfinance Investment Vehicles labelled by LuxFLAG account for more than 80% of the total Microfinance Investment Vehicles’ assets in Luxembourg. The present emerging market special of the global business magazine provides an overview of the current microfinance industry, deals with the investors’ perspective, tackles the microfinance industry’s main challenges and opportunities. You will get an insight into product innovation, legal and regulatory frameworks as well as into fund managers and administrator’s perspectives. Enjoy reading.

October 2010 • GBM • 09


Oppenheim Asset Management Services S.à r.l. Johann Will

Vice President Tel: 352 221522 423 Fax: +352 221522 500

The risks may be manageable, but pension funds, family offices and foundations considering the EFSE might look at the relatively high interest rates that microfinance institutions charge their customers as ethical stumbling blocks? Will lists several counterarguments.

At first glance, investing in countries such as Serbia or Bosnia and Herzegovina seems to be a risky option, but a closer look at the European Fund for Southeast Europe (EFSE) tells a different story. The microfinance Fund was initiated by KfW Entwicklungsbank, the German Development Bank, with strong support from the German Federal Ministry for Cooperation and Development, and is run out of Luxembourg by Oppenheim Asset Management Services S.à r.l. and Finance in Motion, an investment specialist in the area of development finance, supports Oppenheim as Fund Advisor The Fund started with an investment portfolio of EUR65.5m in December 2005 and has grown to EUR566.6m by September 2010. In support to its mission of promoting economic development and prosperity in the region of Southeast Europe, the Fund provides long-term capital to financial institutions in the region, including microfinance institutions and commercial banks, which then lend these funds to local micro and small enterprises as well as to low-income private households that have limited access to financial services. For Fund manager Johann Will there are two reasons why private investors should consider the Fund. The first one is its performance. A-shares (available for private investors) have performed well in the first half of 2010. By 2014, the Fund is expected to have an investment portfolio of EUR900m, and should have provided more than 500,000 business loans to micro and small enterprises as well as housing loans to low-income private households, the eventual borrowers. Since its inception, the Fund has facilitated a total of EUR1.2bn in loans and thus has contributed to the generation and sustainment of over 200,000 jobs. The second benefit is the positive development impact in Southeast Europe where some areas have

10 • GBM • October 2010

been devastated by war and poverty. On average, the default rate of microfinance institutions or banks focused on the micro and small enterprise sector is significantly lower than that of traditional banks which mostly focus on their core business of providing consumer and corporate loans. The ongoing economic crisis in South East Europe has naturally had an effect on micro and small business but overall there is strong crisis resilience and payment discipline on the business and financial sector side. Will says “It is worth mentioning that EFSE has never recorded any losses or write-offs on the loans it has provided to its partners. ” To the advantage of its private investors, the F’s public-private partnership structure minimises their investment risk. The Fund is divided into tranches that ensure that private investors are the first to earn income, but the last to lose money in case of default. Initial losses are borne by the C-shares, which are held by public investors such as the European Investment Fund as the Trustee for the European Commission, the German Federal Ministry for Economic Cooperation and Development, and the Austrian and Swiss Governments. When these are depleted, losses fall on the B-shares (Mezzanine capital), which are owned by large international financial institutions such as KfW, EBRD, EIB and FMO. Finally, in the rare event of major losses, the A shares and the Notes would have to pay up. Both are open to private institutional investors. The sheer scale of operations also minimises risk. “Microfinancing is arguably not directly correlated to other asset classes,” says Will. “You cannot compare a portfolio of 150,000 small loans in 14 countries to a fixed income fund or an equity fund. It would take a real crisis to every economy involved to send shock waves back to investors. ”

“Like other financial institutions, banks and microfinance institutions that offer loans to micro and small enterprises have to charge interest on their loans. The interest payments cover the costs involved in lending such small amounts of money. Transaction costs for smaller loans, along with follow-up and support expenses, are higher than for larger loans, especially in relation to the size of the transactions involved. Evidence shows that clients willingly pay the higher interest rates necessary to ensure swift and long-term access to credit. The interest rate does not matter as much as the accessibility and quality of financial services. Clients recognise that their alternatives – even higher interest rates charged by money lenders in the informal finance sector or simply no access to credit at all – are much less attractive . Will also highlights that the Fund’s closeness to the target region has proven to be one critical factor in its successful development. “The Fund is represented in the region through regional offices of the Fund Advisor. They are staffed by locally recruited professionals who facilitate the day-to-day contact with the Fund’s partner lending institutions and local stakeholders. Moreover, they help EFSE to always be informed about changes in regulatory policies, lending practices, macro trends, governance, and general information affecting market sectors.” In addition, the Fund has an Advisory Group in which the Central Banks in the target region are represented. It provides EFSE’s fund management with important information to stay abreast of financial sector developments in the region from a policy maker’s perspective. Investors can rest reassured that the money is invested in an ethical manner. “Unlike some active participants in the world's financial industry, EFSE has set itself the goal right from the beginning to implement its mission and provide its services in a responsible manner. We base our corporate values on high standards of business ethics and on long-term partnerships with our partner lending institutions and investors that all share similar corporate values and business principles. The Fund places more emphasis on responsibility than on return expectations. However, as the financial performance over the last years has shown, being a responsible investor does not mean having to forego profits. With responsible investments, the EFSE has generated adequate returns for its shareholders, which is key to ensuring its own long-term sustainability.”

The development of a Microfinance Investment Vehicle Over the past ten years, Luxembourg has gained a reputation as the centre for microfinance investment vehicles (MIVs). Thanks to its flexible legal and regulatory framework, the market has seen the creation of securitisation vehicles, publiclyoffered funds, equity funds and debt funds that have enabled public investors, institutional investors and also private individual investors to support the development of microfinance throughout the world. While this is a short list of examples, there are as many structures as investment strategies pursued by the initiators of these vehicles. Indeed, just as microfinance at its core is traditional finance tailored to microentrepreneurs, MIVs can be considered as traditional funds tailored to the needs and specificities of investing in microfinance institutions (MFIs).

Innpact Patrick Goodman Arnaud Gillin Partners

Tel : +352 27 02 93 1

Before examining the structures and other features to select when setting up an MIV, it is essential to carefully design a clear and robust investment strategy. This can be complicated by the potential dual objectives of the fund, combining financial and social objectives (and, in some cases, environmental goals). The importance of a strong strategy and related business plan cannot be overestimated  it is the strongest determinant of success. The development of a strategy is a cyclical process of testing the concept of the fund with the market of MFIs and with the investors identified by the fund’s developer. Success lies in the fund’s ability to meet the demands of its targeted investors and the needs of the microfinance sector. Microfinance is not a homogeneous sector and the demands of the sector are diverse. To clearly position its fund in the universe of available funding for MFIs, an MIV promoter will need to identify the geographic focus, the targeted end-client (e.g. rural borrowers), the type of financial institution (e.g. developed, developing or greenfield MFIs), the products the MFIs offer (e.g. tailored to microfinance only or also to SME finance or microinsurance). Finally, the instruments that the fund would offer (such as debt, equity or guarantees, hard or local currencies, short- or long-term) would need to be appropriate considering the investment focus of the fund. The portfolio strategy would also need to be attractive to the target investors. From past experience, the identification of the targeted investors and gauging their level of interest tends to be the weakest aspect of the business plan development, as developers of funds may have a ‘build it and they will come’ attitude. The key is to develop deep market knowledge of investors, including their risk appetite, their liquidity and return expectations, and a key understanding of why they are investing in such a market. A benefit to setting up a structure in Luxembourg is that fund developers do not need to focus on just one type of investor; funds can be set-up so that investors take different levels of risk. It is possible to target more than one type of investor such as institutional investors, private individuals, donors and development finance institutions within a single vehicle. This has recently been developed with the establishment

of several structured investment funds, such as the European Fund for southeast Europe, the Rural Impulse Fund and REGMIFA. Once a general strategy has been decided, the feasibility needs to be more formally tested, with a focus on quantitative testing (specifically financial modelling), and scenario and stress testing, and the structure of the fund chosen. Combining the strategy, the feasibility and the structure is a cyclical process whereby the idea of the fund is tested and revised as necessary, and the legal and financial structure gradually adjusted to the investment strategy. The structure of the fund needs to reflect the choices of the promoter in terms of social goals as well as in terms of financial aspects, such as the timeframe of the investments, target financial institutions or risk factors. One of the benefits of establishing a fund in Luxembourg is the deep knowledge base of experts in the field. In addition to the fund manager, MIVs (as any other funds) are required to have legal advisers, custodian and administrative agents, and auditors  there is a diverse group from which to choose. There are firms with a strong expertise in the microfinance field and, in the particular, issues of concern to investors, fund managers, and promoters. Choosing those strong partners is a key component of creating a successful fund. There are clear factors to the development and execution of a successful fund: a clear fund strategy that integrates the needs of targeted investors and investees; offering products that meet both demand; and, having sufficient resources (monetary and otherwise) to support development of the fund. Innpact is a consulting company based in Luxembourg with expertise in the development of socially responsible investment funds (particularly in microfinance) and in consulting on strategic matters related to the ongoing development of those funds. Innpact has provided consultancy services on a large number of projects, supporting the development of a concept, the feasibility study and the set-up of the fund, both in Luxembourg and abroad. Innpact is composed of financial professionals with strategic consulting, fund administration, legal and fund management expertise fully dedicated to the development of socially responsible finance.

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Luxembourg - an adequate framework for microfinance investment vehicles Luxembourg has a unique track record as domicile for microfinance investment vehicles (MIV), a fact that the Luxembourg community is particularly proud of, given the significant social and economic benefits these funds bring to their target markets. A stable and flexible regulatory framework, the understanding of supervisory authorities, highly tax efficient structures and clusters of service providers experienced with MIVs, all contributed to making the Grand Duchy one of the leading global platforms for the set-up of MIVs. As of today, 46% of the worldwide assets of MIVs are administered out of Luxembourg. A good investment management is of key importance to the success of a MIV, and the efficiency of the legal and tax structuring and of the vehicle’s operations contributes to a large extent to the MIV’s positioning in the market.

Ernst & Young Samuel Kreber

Senior Manager - Banking and Private Equity Tel: +352 42 124 8163

Dr. Carmen von Nell-Breuning

Senior Manager - Private Equity Business Development Tel: +352 42 124 8733 carmen.von-nell-breuning@ Website:

During the set-up phase of a MVI, key areas of focus from an operational perspective are: determination of the adequate overall structure combined with a fiscal optimisation; the correct structuring against the background of the subordination of foreign exchange and credit risks; the clear definition of income waterfall; and, the selection of the accounting standard, which depends to a large extent on types of investors. Before seeking detailed legal advice to lock these concepts into fund documentation, each promoter should closely interact with the external auditor at an early stage of the project to ensure technical financial and tax concepts are properly formulated. Once the MIV has been launched, the correct functioning of all business and transaction processing is a prerequisite for efficient day-to-day administration of the MIV, and often they are highly specialised. The promoter needs to bear this in mind when selecting the service providers. The external auditor needs to ensure that key risks of the MIV as regards business and transaction processes are identified and addressed at the launch, doing so through prior meetings and discussions with service providers. At the start of the MIV, the external auditor should focus on stabilising the operating and financial platform, in particular: The stabilisation of the key elements of the financial framework: The valuation of debt instruments not listed or dealt on any stock exchange or any regulated market varies with the accounting framework that has been chosen. Under Luxembourg legal and regulatory requirements, debt instruments are initially valued at fair value and subsequently valued at cost less impairment provision, if any. Under IFRS, and if the instrument is classified as loan and receivable, the valuation of debt instruments is at amortised cost less impairment provision, if any. In this context, and for the audit of the MIV financial statements, the quality of the loan approval process, of the valuation process and loans impairment analysis at the level of the board of directors, and of the investment manager will determine the extent, nature and scope of the audit work to be performed on the valuation.

12 • GBM • October 2010

Equity investments are accounted for at fair value: The board of directors follows generally accepted valuation methods, such as those defined in the March 2005 International Private Equity and Venture Capital Valuation Guidelines issued by the European Private Equity and Venture Capital Association, the British Venture Capital Association and the Association Française des Investisseurs en Capital, or any subsequent update of such guidelines. The stabilisation of back office processes and controls: The external auditor will particularly focus on reviewing the processes and controls in place at the services providers, not only at the launch, but also throughout the first months of the MIV. The stabilisation of governance and pervasive controls: In view of the investor environment, sound controls and an effective governance structure are of high relevance. The governance structure is partly controlled by the board, the investment committee and other stakeholders, and includes elements such as the investment guidelines and limits, due diligence procedures, valuation and provisioning methodology and key contractual arrangements with service providers. The establishment of financial statements prepared in accordance with the selected accounting standard and investor reporting packs: The accounting standard selected by the promoter must be correctly embedded in the back office function from the MIV’s launch and continue to be correctly applied forward as the accounting standard evolves. The operational aspects of a MIV are complex. Considering certain aspects, such as the foreign exchange and credit risk, they are substantially more challenging than other asset classes. Further to the custodian and the central administrator, the right selection of the external auditor is of key importance to the MIV’s success. The differentiating factor of an external auditor consists in his understanding and experience in this unique business sector, the ability to focus on the key operational concerns of the MIV early in its life in order to deliver clear added-value within a timely and cost-effective audit. The microfinance sector plays a very important role in the Luxembourg financial industry. Against the background of an increasing global microfinance market and further attractions, such as the recent exemption from subscription tax for all MIVs, Luxembourg will certainly further attract MIVs and reinforce its leading position in this field of impact finance investments.

Advantages and expertise of the Luxembourg Financial Sector in the creation and registration of microfinance investment funds This contribution is a summary if a more detailed Memorandum on the same subject published by Jacques Elvinger, Marc Elvinger and Frédérique Lifrange, all partners at the Luxembourg law firm Elvinger, Hoss & Prussen, and which can be downloaded from the Legal Topics section of the firm’s website Everyone agrees nowadays, that Microfinance constitutes a powerful tool to achieve poverty alleviation and economic and social progress, above all in developing countries. As microfinance institutions based in developing countries mature and in their activities become more profitable, they are in need of supplementary financial resources, part of which are bound to originate from the financial sector of developed economies. Microfinance investment funds play an increasing role in channelling such supplementary financial resources to microfinance institutions. Generally speaking, Luxembourg offers an adequate legal, regulatory and fiscal framework for the incorporation of microfinance investment funds. The flexibility of the available legal vehicles, combined with a recognised regulatory framework and a favourable tax environment have shaped the Luxembourg financial sector’s attractiveness. On this basis a proportionally significant number of investment vehicles dedicated to microfinance have made their way to Luxembourg, having successfully passed the “test” of the Luxembourg regulator (“CSSF”) which, at the same time, has approved the investment managers specialised in microfinance. Luxembourg today offers a broad range of regulated investment vehicles that may be used by a promoter/ initiator wishing to set up a vehicle investing in microfinance. Those vehicles may take the form of (i) an undertaking for collective investment that may be marketed to the public with a European passport for distribution (“UCITS”), (ii) an undertaking for collective investment that may be marketed to the public without a European passport (“UCI”), (iii) a specialised investment fund (“SIF”) and, (iv) an investment company in risk capital (“SICAR”), the two last being reserved for “well-informed investors”. The choice of the most appropriate structure requires an analysis of the specific needs of the promoter/initiator and particularly the type of investors that the promoter/ initiator is targeting, the jurisdictions in which these investors are located, the kind of investments which the contemplated structure will make and which vehicle would be the most tax-efficient. All of the below described vehicles have been “tested” in the context of microfinance projects. • UCITS may only invest in listed securities and certain other liquid assets, must comply with specific diversification and concentration limits and must be openended for redemptions, meaning that investors. UCITS benefit from a so-called European “passport” allowing them easily to market their securities to the public throughout the European Economic Area. Due to the significant constraints as regards eligible assets (excluding unlisted securities and loans), investment diversification rules and liquidity features (requiring bi-monthly redemption rights for investors), it is not very frequent for microfinance funds to be set up as UCITS. • UCIs may invest in any type of assets, comprising

unlisted securities and loans or may grant guarantees for investment purposes and must operate under the principle of risk-spreading. UCIs, unlike UCITS, do not benefit from a European “passport” and can therefore in practice generally be sold outside of Luxembourg only on a private placement basis in accordance with the local private placement rules. In light of the general characteristics of microfinance investment funds, the UCI legislation is an appropriate legal framework. Especially if the vehicle is to be marketed to retail investors, a UCI would have to be opted for. • SIFs have significant flexibility with respect to the assets in which they may invest and the investment strategies they may pursue. SIFs are subject to less stringent diversification rules than UCIs and may be of the open-ended or closed-ended type. SIFs are reserved for well-informed investors meaning, institutional investors, professional investors and investors investing a minimum of 125,000 euro. Like UCIs, SIFs do not benefit from a European passport. The SIF regime has proved to be an appropriate legal framework for establishing a microfinance investment fund, if the fund is reserved for sophisticated investors. The SIF regime indeed allows for all the above-mentioned flexibilities available to UCIs and benefits from a more flexible corporate regime and, although subject to permanent supervision by the CSSF, from a somewhat lighter prudential regime. As a consequence, the SIF law also allows investment managers and entrepreneurs without substantial financial resources to create an investment vehicle for well-informed investors, without the sponsoring of a sizeable financial institution, in a somewhat less demanding legal and regulatory framework than that applicable to UCITS and UCIs. • SICARs are investment companies whose object is to invest their assets in securities representing risk capital, including any type of contribution of assets, be it in the form of capital, debt or other financing. A SICAR is not required to operate under the principle of risk-spreading. As for a SIF, the securities issued by a SICAR are reserved to well-informed investors. In a similar manner to UCIs and SIFs, a SICAR can generally only be sold in other jurisdictions under applicable private placement rules.

Elvinger, Hoss & Prussen Jacques Elvinger, Marc Elvinger, Frédérique Lifrange

Partners Tel: (00352) 44 66 44 0

The SICAR is an appropriate vehicle only if the proposed investments meet the definition of risk capital. It may be the most appropriate choice if the proposed investments are of such a nature that it is important for double tax avoidance treaties to be applicable of if it is considered to. The SICAR may also constitute the appropriate investment vehicle if it invests in or providing funds to a single or limited number of MFIs. The Luxembourg financial community is actively integrating its microfinance-related activities into its overall communication and diversification policy. In this respect, the creation of a label for microfinance investment funds by LuxFlag and the recent exemption of microfinance investment funds from the capital duty generally applicable to investment funds was particularly welcomed.

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Charles Denotte Citi Country Officer Luxembourg For more information please email or visit /

Charles Denotte Citi Country Officer Luxembourg

facilitating the fund’s flexible business approach. “Microfinance investment funds demand a tailor-made service, and that’s what we offered,” explains Charles Denotte, Luxembourg Chief Country Officer for Citi, and also a board member of PlaNet Finance, a non-profit organisation focused on development of microfinance. Citi has long supported microfinance, first philanthropically through the Citi Foundation, but since 2005 through the work of Citi Microfinance which along with other Citi businesses, works with over 100 microfinance institutions, funds and networks in 40 countries, as clients and partners.

Citi working with the European Fund for Southeast Europe

“A joint effort” The world’s biggest microfinance investment vehicle is complex, but its investors expect to be able to react to market developments quickly. Its service providers, like Citi, therefore need both the very best technical skills and flexible processes. In 2005, KfW Entwicklungsbank, the German Development Bank with strong support from the German Federal Ministry for Economic Cooperation and Development , hatched an ambitious plan – it would turn its existing portfolio of loans made to microfinance institutions in the Balkans into a standalone microfinance investment vehicle (MIV) for a select group of investors. Working with other development finance partners, like the World Bank and the European Bank for Reconstruction and Development (EBRD), KfW came up with the European Fund for Southeast Europe (EFSE), the first public-private partnership of its kind. Luxembourg was chosen as the home of the fund for several reasons: the Grand Duchy is one of the biggest players in cross-border fund distribution; it is well-regulated; and German and French, as well as English, are widely spoken there. It was the perfect place to be. (Indeed, the country is now home to more than two-thirds of the world’s MIVs.) The founding shareholders wanted a flexible and efficient investment vehicle, and they opted for an open-ended société d’investissement à capital variable (SICAV). EFSE needed, of course, an independent fund administrator to provide the essential support services: accounting, reporting, compliance, custody and administration, fiduciary, depositary banking and relationship management. The primary caveat, however, was that the provider could deal with many challenging issues quickly and had a good understanding of micro finance institutions. First, the fund used a complex pooling technique

to bring the underlying loans together. On top of this sat an equally complicated revenue waterfall structure, with different classes of share for different levels of risk. This fund would not be a simple one to administer. When it comes to accounting treatments and tax issues, a portfolio of loans held by a German bank and the balance sheet of a SICAV incorporated in Luxembourg are entirely different. This would make the migration particularly tricky. Furthermore, the existing performance measures had to be kept in place. The fund was preparing for growth – it would be making more and more loans in more and more countries. Operating across multiple jurisdictions also exposed EFSE to unexpected tax changes, and potential tax drag. The founding shareholders, who were subscribing millions of euros, had their own onerous administrative and compliance procedures to be followed. One size would not fit all. At the time EFSE was not a public fund, giving its shareholders the opportunity to move quickly as new market opportunities arose, without having to wait for circulars to be published and lengthy approval procedures to be followed. In turn, the fund’s administrator would also have to be just as dynamic. A joint effort EFSE approached several fund administrators, but the Luxembourg branch of Citi stood out for its experience in working with microfinance funds as well as the capacity to take over the administration services KfW had been performing without impacting EFSE’s business and

“We put together a team of people who would work just on EFSE account and make sure everything went smoothly. The sponsors of the fund were large, sophisticated players – they weren’t expecting any mistakes.” Work started in the summer of 2005 and the fund was incorporated in the December of that year. It was a joint effort between Citi, consultancy Innpact, asset manager Oppenheim of Luxembourg, and fund adviser Finance in Motion of Frankfurt, who is responsible for the due diligence on the microfinance institutions the fund lends to. As well as structuring and setting up the fund, the terms of an offering were agreed, a circular published, and shareholder authorisations collected. “We had a lot to sort out over that period,” says Dr. Klaus Glaubitt, Chairman of the Board of Directors of EFSE, “but everything came together successfully. And that’s due largely to the expertise, commitment and teamwork of our service providers.” Close collaboration Since its launch EFSE has grown rapidly. The fund was one of the first MIVs to be recognised by the independent Luxembourg Fund Labelling Agency(LuxFLAG), and today it is the world’s largest, with assets valued at nearly €800 million. EFSE’s structure has continued to change frequently with Citi adapting its processes and systems accordingly. “The client needs to know Citi have the resources to accommodate the expected growth in years ahead and we have given them that assurance,” says Bob Annibale, Global Head of Citi Microfinance. For example, in response to market trends and its own projections, Citi Microfinance has worked across Citi’s businesses to set up an alternative investment and private equity desk on the accounting side and hedging products for microfinance investment funds to enhance their local currency lending capacity. In today’s evermore demanding environment, a close and collaborative partnership between the service providers, the board of the fund and its shareholders has been vital. “We regularly meet to make sure no-one misses anything,” Denotte adds. “Every change has repercussions, and good communication and cooperation is needed to mitigate risk, while trust is embedded in all that we do together.” It is a joint effort.

October 2010 • GBM • 15

S:200 mm

Providing stability.

Securing the future.

For millions of people around the world, microfinance is a means of achieving their financial goals, economic self-sufficiency and reduced financial vulnerability.

That’s why Citi is committed to supporting microfinance institutions and funds around the world with a wide range of financial services, including agency and trust, fund administration, cash management and foreign exchange. A partnership with Citi means you can become better equipped to assist underserved communities in achieving their future success.

That’s why firms worldwide partner with Citi.

© 2010 Citigroup Inc. Citi and Citi with Arc Design are registered service marks of Citigroup Inc.

S:287 mm

Microfinance. Maximum impact.

Fund administration for microfinance funds - an interesting challenge! Microfinance has developed over the past two decades as a means by which low-income individuals or groups can overcome a lack of access to financial services. Ultimately, the goal of microfinance is to give those people an opportunity to become self-sufficient by providing a means of saving money, borrowing money and insurance.

FIDEOS Financial Services Robert Brimeyer Managing partner Tel: +352 27 031 522

Although providing only a minor portion of the total funding for microfinance institutions (MFIs), investment funds (IFs) constitute an important tool for fuelling the future development of microfinance. IFs are a handy way to raise financing from institutional and private investors to enable MFIs to grant microcredits to local microentrepreneurs. Recent years have shown a trend to setup regulated fund vehicles to collect funds for microfinancing. Although microfinance funds (MFFs) are often considered to be comparable to traditional IFs or alternative IFs, there are specific characteristics that make servicing these structures an interesting endeavour. MFFs invest their assets into local MFIs by either taking an equity stake or granting loans. These loans are often denominated in foreign currencies and create the need for currency hedging. Being specialised in servicing loans, including currency hedging, becomes a key aspect of service delivery for fund administrators. Services range from providing a simulation on loan maturities, currency exposure and how fluctuating rates impact the future cashflows and fund performance. Fund administrators need to implement specialised loan management modules to service these instruments efficiently. One of the key objectives of MFF managers is to implement cost efficient fund structures and avoid cost leakage. Although no fund wants to be seen as making profits off the poor, all stakeholders need to cover their operating costs and have a financial interest in servicing the fund. Fund administrators have to manage the trade-off between being profitable on servicing MFFs and contributing to cost efficiency of the vehicles. They may decide to charge their services at very attractive rates by considering their commercial effort as a contribution to the noble cause of a MMF. However, no service provider can afford to ‘sponsor’ a large number of MMFs in the long run  the key is ‘efficiency’. Fund administrators motivated to service MFFs in the long run need to adapt their service platforms to the specific needs of MFFs. Interactions with the manager and investors need to be streamlined to avoid any unnecessary workload. MMF managers have to understand that they hold the key in enabling fund administrators to be efficient. A key success factor in implementing an efficient working relationship between the fund and the service provider is the servicing team. Fund administrators need to raise the awareness of their teams, promote efficiency, involvement and motivation. Understanding

how microfinance funds make a difference will empower people to contribute to deliver cost efficient high quality services. Another key challenge that fund administrators experience is the selection of a depositary bank. Over the past 24 months, regulations around the role and responsibilities of depositary banks of IFs have become stricter. Depositaries have to manage their risks and ensure that they are equipped to perform the required duties on this specific type of funds. Given that MFFs, by nature, invest their money into locations where the financial sector is less developed, depositaries often face the challenge of having to implement additional control procedures to cover the specific risks linked to the target countries and counterparties. These create additional administrative burden and costs. This trade-off between risk management and profitability translates into a very limited number of depositary banks being motivated to service MFFs efficiently. Fund administrators face less risk with regards to the ‘exotic’ target investment locations, as they do not share the same responsibility as depositaries for ensuring ownership of assets or the correct execution of money transfer to target countries. Many fund administrators are therefore prepared to work with MFFs and share the challenge with the fund manager to identify a depositary bank able to adequately service the fund. The key success factor for fund administrators is to identify a reasonable mix between cost efficiency and profitability, achieved by promoting a culture of involvement of staff, optimising the working relationship with the fund manager and implementing a delivery infrastructure that provides of automated servicing of loans and similar instruments. The motivation of staff to deliver efficient service, coupled with an effective delivery infrastructure, will enable fund administrators to work with the MFF manager and be successful in reducing servicing costs to a reasonable level. FIDEOS, an owner-operated corporate trust and fund administration service provider, is ideally placed to service MFFs in Luxembourg. We dedicate a small team of highly skilled professionals to each client. They continuously service the same clients, structuring their service delivery to the specific needs and setup of the client. This highly customised servicing approach results in an efficient partnership with the fund managers. The implementation of a specialised loan management module that automates the management and monitoring of future cashflows on loans further increases operational efficiency. Both the owners and staff of FIDEOS are highly committed to contribute to the success of socially responsible funds and are prepared to go the extra mile for their clients.

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Microfinance vehicles - a very favorable tax environment Microfinance vehicles (MFVs) are funds that supply capital to institutions that specialise in providing micro-loans or microcredits to people that earn just barely enough to survive. These micro-loans allow such disadvantaged people to develop an activity to improve their living conditions, usually an agricultural or a trading activity, or any other micro-undertaking. Today, there are more than 20 MFVs in place in Luxembourg. The increase of the number of Luxembourg MFVs over recent years is due both to their flexibility (as any type of vehicle can be used in order to act as microfinance fund) and also a tax regime that has become more and more attractive over the years, as well as the Luxflag certification, which can be obtained if necessary.

ATOZ Tax Advisers Pierre-Régis Dukmedjian

ATOZ director Tel: +352.26.940.213,

Samantha Nonnenkamp

ATOZ director Tel: +352.26.940.235,

18 • GBM • October 2010

Luxembourg MFVs can generally be set up as regulated investment vehicles, for instance, as an undertaking for collective investments (UCIs) under the form of a Part II fund (as regulated by the Law of 20 December 2002 Law), a specialised investment funds (SIFs) or as a risk capital investment company (SICAR). They can, however, also be set up as an unregulated investment vehicle. Luxembourg, therefore, offers all types of vehicles to all types of investors. While a regulated investment vehicle will, in most cases, be more adapted to large size and longer-term investments due to its implementation costs, unregulated vehicles are often more adapted to smaller and/or shortterms investments. In effect, the related implementation costs are lower and the implementation process quicker. The tax treatment of the vehicle will obviously depend on the legal form chosen. Unregulated vehicles, such as securitisation vehicles, as well as SICARs are, in principle, fully taxable on their income; but they benefit from certain exemptions or tax deductions so that it can often be managed to keep the related tax cost at a low level. In case the preferred solution is to use an UCI (i.e. a Part II fund or a SIF), the vehicle will not suffer any tax, neither on its income nor on its net asset value. UCIs and SIFs are, in principle, subject to an annual subscription tax (taxe d’abonnement) at 0.05% on the value of the UCI’s net assets and at 0.01% for SIFs. Nevertheless, the 2010 budget law extended the subscription tax exemption already granted to certain other types of investment funds (funds of funds, money market funds, pension pooling vehicles as well as, in future, exchange

traded funds) to microfinance UCIs and microfinance SIFs, as well as to dedicated microfinance compartments of UCIs and SIFs. The extension of the subscription tax exemption to microfinance funds was welcomed by the Luxembourg investment fund industry and followed a recommendation by the Association of the Luxembourg Fund Industry (ALFI). It definitively shows the willingness of Luxembourg to attract microfinance and to promote in Luxembourg this type of industry. MFVs are now exempt from this tax, so the implementation of a regulated MFV has become more attractive and regulated MFVs might become the preferred alternative to set up a MFV in future. In order to choose the most appropriate investment vehicle, one must consider the investment strategy, the size of the investment and the length of the investment, and also the type of investor, as some do favour regulated towards unregulated vehicles (regulated vehicles being supervised and subject to stricter rules). ATOZ Tax Advisers (ATOZ) can help investors when considering the most suitable alternative for implementing a MFV in Luxembourg. ATOZ will review and assess the objectives of the investors and their investment strategy and will take into account all relevant factors (such as the lifetime of the investment, the typology of investments and the jurisdictions involved in the microfinance structure) in order to provide the investor with a tailor-made solution. Once the most suitable vehicle has been determined, and after having taken into account legal, regulatory, strategic and tax aspects, ATOZ will take care of the whole implementation process of the MFV (including the authorisation process where relevant) until it becomes operational. Finally, ATOZ will help investors in restructuring microfinance structures already in place, for example in situations where relevant factors have changed that make a change in the structure necessary.




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Brazil today The Economy Brazil has always been a well-known country, but only recently has it truly become visible and is increasingly becoming the object of major international interest. Brazil is one of the fastest rising global stars. More focus has been placed on its economic performance and its resilience throughout the international crisis, and the growth of its high profile on the international stage and the upcoming elections (to be held in October) have also received much attention. According to the International Monetary Fund (IMF), in 2009, Brazil was the world’s eighth economy in nominal terms and the ninth in purchasing power parity (PPP). By 2012, it could be the sixth largest in PPP terms. It is also the largest economy in South America, with a gross domestic product (GDP) accounting for more than 50% of the region. This is due to an accumulation of good practices over the past years, with effective public policies directed at strengthening the macroeconomic foundations of the economy. These are comprised of inflation targeting, primary fiscal surplus, floating exchange rate regime, expanding domestic demand, encouragement of investment and exports, increase in international reserves and attracting foreign direct investment (FDI). Brazil’s net public debt currently stands at around 41% of GDP ¬ well below the average for most of the developed countries affected by the international crisis  and real interest rates are at a record low at around 6%. These figures have contributed to significantly reducing the risk profile of the Brazilian government bonds. With a population of 192 million, Brazil has a large and fast growing consumer market. Over the past five years, mostly as a result of social programmes implemented by the Brazilian Government, over 24 million

20 • GBM • October 2010

of citizens moved out of poverty and another 27 million have been absorbed into the middle class. The average income of the Brazilian population has been increasing since 2004, while inequality in income distribution has been decreasing, reaching the mark of six percentage points since 2001. The stronger demand in the domestic consumer market has had a marked impact on the Brazilian economy. First, it was the vital force helping the country to essentially avert the 2008 economic crisis. Second, it has instigated investment in productivity: of the total imports in 2009, 46.8% were of raw material and intermediate goods, whereas only 23.3% were of consumer goods. This economic expansion trend is likely to continue, as recent data shows that Brazilian industrial capacity use has returned to its highest level since the beginning of the 2008/2009 recession, reaching 82.6% on a seasonally adjusted basis in the first semester of 2010. Brazil has been able to keep inflation at relatively low levels, which allowed it to rescale sovereign debt previously contracted under difficult conditions and extremely volatile interest rates. At the same time, since 2001, the trade balance surplus has allowed Brazil to build its international reserves reaching a level of US$250 billion in May 2010. It is worth mentioning that, at present, Brazil is the fourth largest owner of US Treasury Bonds. The external market has also played an important role in Brazil’s development and its strong macroeconomic stability. In the first semester of 2010, the trade flow registered a total of US$170.5 billion, a 35.3% increase in relation to the same period last year, when it registered US$126 billion. By the end of the semester, exports added up to US$89.2 billion and imports to US$81.3 billion. Compared to 2009, these numbers mean that exports have risen by 27.5%, whereas imports by 45.1%. Over the past years, Brazil has become an important supplier of agricultural products and commodities, as shown in the rankings below. Manufactures, on the other hand, account for around 55% of our total exports down from 75% ten years ago.

Embassy of Brazil Tel. 020 7399 9000

Brazil in the world - production and exports of selected products Products

Word production

World exports







Orange juice









Iron ore



Soy beans



Leather and fur









Soybean residue



Brazil attaches great importance to a successful conclusion of the Doha Development Round of the World Trade Organization (WTO). The country has made a huge effort during the negotiations to ensure a positive outcome for all WTO members. At the regional level, Brazil is working closely with its neighbours to create a peaceful and prosperous space in South America. Regional integration is the top priority of Brazil’s foreign policy. We are confident that South America is in the midst of a very positive trend and bound to play a growing role in economic, commercial and political spheres. In addition, FDI into Brazil has boomed since the second half of the 1990s. Services privatisation, along with a series of reforms restoring macroeconomic and financial stability, sent FDI inflows to $32.8 billion in 2000. In fact, in 2000 Brazil was the second largest FDI recipient among developing countries after China. Inflows between 1995 and 2004 were eight times the total of the previous 15 years. According to data from the Central Bank of Brazil, the flow of FDI into the country has continued to grow and reached its historical peak of US$45 billion in 2008. According to the Central Bank of Brazil’s forecasts, FDI in Brazil will be around US$38 billion in 2010. With the economic outlook improving, Brazil’s immense market remains the largest recipient of FDI in Latin America and one of the top ten FDI destinations in the world. In 2008, Brazil earned an investment grade status, according to the evaluation of rating agencies such as Standard & Poor’s, Moody’s and Fitch. After a significant drop in 2009, due to the international crisis, in March 2010 FDI started to return to Brazil on a regular basis, after an investment outflow of US$23 billion in the previous six months. Brazilian direct investment abroad is also growing significantly. From January to May 2010, Brazilian investments abroad reached US$11.2 billion. Brazil does not impose any restrictions on foreign capital repatriation and continues to be an attractive investment destination for both FDI and portfolio investment. Many challenges remain for Brazil. One of the most relevant is to expand infrastructure in order to maintain its economic development. The Brazilian Government recently announced a US$886-billion infrastructure investment plan, as part of its second phase of the Growth

Acceleration Programme (PAC 2) scheduled to last until 2014. The largest share was allotted to developing transportation and logistics, with a view to expanding and connecting Brazil’s highways, railways, waterways and airports, and also to secure and increase energy supply. The Brazilian Development Bank (BNDES) predicts that between 2010 and 2013, US$51 billion will be invested in electric power, US$37 billion in telecommunications, US$22 billion in sanitation, US$16 billion in railways, US$33 billion in roads and US$14 billion in ports. The capacity to innovate in science and technology has also enabled Brazil to lead the way in deep-sea oil exploration. In addition to exploring deposits in other parts of the world, the state-owned energy company Petrobras is now embarking on a new challenge closer to home: that of exploring potentially enormous underwater deposits in the ‘pre-salt’ layer beneath the seabed off the coast of southeast Brazil. This could double Brazil’s reserves and place it among the top five oil-producing nations in the world. The oil and gas sector alone is set to receive investment of around US$171 billion between 2010 and 2013. Tourism and sports events This brief overview of the state of the Brazilian economy would not be complete without mentioning tourism, one of its fast growing industries. A unique confluence of factors in Brazil creates an irresistible appeal for a variety of tourist categories worldwide: amazing natural beauty and superb climate, cultural diversity, biodiversity, world heritage sites, fabulous food and eponymous events combined with the added value of the much admired warmth and hospitality of Brazilian people. Brazil’s tourism infrastructure is ranked among the best in Latin America. Recently, 19 airports have benefitted from 25 major development projects, which included new runways and aircraft bays and passenger terminal upgrades. By the same token, the Brazilian tourism industry has recorded increased activity on various fronts. International airlines are increasing their scheduled flights and there is much development in the hotel, catering and other tourist service sectors. Tour operators have been expanding their business in Brazil as well as broadening their portfolios of destinations and holiday types in Brazil to cater for the swiftly growing tourist market. This trend is likely to expand further with the forthcoming 2014 World Cup and the 2016 Olympic and Paralympic Games. Many business opportunities are ensuing from the fact that Brazil will be hosting two of the most prestigious international sporting events: the 2014 World Cup and the 2016 Olympic and Paralympic Games. Both public and private investment in sports facilities, infrastructure and services have been growing significantly, which is expected to accelerate in the next few years leading to the World Cup and the Olympic Games. Brazilian and international industries and companies specialising in stadia development, communications and security systems, transportation and accommodation, marketing, insurance, relevant sports and hospitality services are set for huge expansion in demand for these major sporting events and, therefore, major gains. Further information on Brazil can be found on the following sites: (Ministry of External Relations); www. (Ministry of Development Industry & Commerce); www. (Investment and Export Promotion Agency); www. (Ministry of External Relations); (Central Bank of Brazil); (Brazilian Institute of Geography & Statistics); (Brazilian National Confederation of Industry); (Ministry of Finance); (Tourism); and, (Embassy of Brazil in London).

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PricewaterhouseCoopers Nelio Weiss Partner, international tax structuring Tel: +55 11 3674 3745

Gustavo Carmona Senior manager, international tax structuring Tel: +55 11 3674 3945

Brazil legal profile 2010 PwC is a leading professional services firm, established in Brazil since 1915. Our structure gives rise to a coordinated and business-oriented approach, with effective use of multidisciplinary teams that are joined in strategic segments. Our experience in the international tax services (ITS) group consists of helping multinational businesses achieve their business goals in a tax-efficient manner, both locally and globally. Our professionals, in Brazil and abroad, are focused on assisting Brazilian companies to (re) structure themselves internationally, designing feasible strategies so as to reduce and/or optimise the tax burden and outlining any possible risks of questioning by the tax authorities. The Brazilian legal system, apart from adopting civil law as opposed to common law, offers various different legislative mechanisms. The most significant difference lies in the frequent use of so-called ‘provisional measures’. These are measures, similar to decrees, issued by the president whenever its subject and object fulfil the requirements of urgency and relevance. Legislative approval comes after, within a certain legal timeframe. In recent years, Brazilian tax legislation has been mainly modified, with certain frequency, through the issuance of provisional measures, which the government frequently tries to apply as from the date of their publication. It was by means of a provisional measure that thin capitalisation rules were recently introduced in Brazil. According to these rules, in order to benefit from the deductibility of interest expenses paid/credited to related parties (or not in some instances), companies should cope with several requirements that may be applied differently depending on whether the beneficiary of the interest payments is resident in a tax haven jurisdiction/privileged tax regime or not. Additionally, specific deductibility rules were also enacted for amounts paid or credited under any title, directly or indirectly, to individuals or legal entities resident or domiciled in a tax haven or in a jurisdiction under the privileged tax regime. Other tax legislations in Brazil also differ from those generally adopted in other economically active jurisdictions. Brazilian transfer pricing rules, for example, although partly inspired by the OECD (Organisation for Economic Co-operation and Development) guidelines, does not adopt the arm’s length principle and has a broader concept of related parties. Additionally, current CFC (controlled foreign corporation) rules mean that any profit generated by foreign subsidiaries is added to the taxable income of the Brazilian entity, regardless of any effective distribution of profits or whether the subsidiary is active or passive, or

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whether it is located in a tax haven or not. Our work is therefore focused on assisting clients dealing with the challenging of complying with Brazilian tax legislation, reducing their impact to a reasonable level. We recently assisted a major client complying with recent thin capitalisation rules, which involved the application of combined solutions, including the application of certain Brazilian bilateral double taxation treaties, corporate restructuring and others. The publication of a revised tax-havens list by the Brazilian tax authorities, which also enumerates jurisdictions that are considered to have ‘privileged tax regimes’, has also brought new challenges to Brazilian residents, especially in view of the above-mentioned thin capitalisation and deductibility rules. Over the coming year, changes are expected in Brazilian transfer pricing legislation, which significantly differ from transfer pricing rules under the OECD Guidelines. Tax authorities have also been signalling their intention to revoke certain tax benefits currently in force, especially those that allow for tax amortisation of goodwill generated in M&A transactions. Moreover, taxpayers should be increasingly better prepared to deal with allegations of tax avoidance by Brazilian tax authorities based on general substance-over-form principles. Such allegations have frequently been made and used in recent years. Examples of this include the case of a manufacturer and the use of a related party trading company, established in a tax haven jurisdiction. The tax authorities considered the substance of the situation rather than the form, and given that the trading company did only in fact exist on paper, it was considered as a ‘re-invoicing centre’. The trading company was then disregarded. Another case involved the application of Brazilian CFC rules and the interposing of a holding company in a jurisdiction with which Brazil had signed a double tax treaty. A lookthrough approach was adopted by the tax authorities, and accepted by the administrative courts, so that the profits of the operating entity were subject to tax in Brazil (i.e., the CFC blocker was disregarded). The impact of the last financial crisis has been significantly less severe in Brazil than in other more developed countries. As a result, the local economy has weathered the effects reasonably well, seeing a relatively fast recovery. Brazil increasingly continues to present good opportunities for growth, however in light of the significant changes already in progress and more proposed for the coming years, it is crucial that companies be prepared for and able to meet these new challenges.

Primos e Primos Advocacia Luiz Guilherme Gomes Primos Partner Tel: +55-11-3107-0765

Founded in 1992, Primos e Primos Advocacia has been devoted to business law for almost 20 years, assisting and developing long-term relationships with renowned midsized to large companies. At Primos e Primos, our highly skilled and versatile professionals are able to understand our clients’ needs in Brazil and provide them with premium-quality and strategic legal services, from company setup to complex regulatory matters. Our boutique profile and our comprehensive practice enable us to render complete assistance (whether on advice or litigation) with ethics, customised attention and close monitoring of the services by the partners. Brazil, as with many European and Latin American countries, adopts the Civil Law system in which the main source of law is ‘enacted law’. In the area of business law, it is recommended that a foreign company be aware of some laws that may have a significant influence on its business. The Civil Code contains the basic legislation regarding corporate and business contracts (such as agency and distribution), and, for example, regulates limited partnerships, the main form of organisation used by foreign investors. For corporate law, the rules of the Civil Code are supplemented by the rules of the Corporations Act, which apply especially to public companies. The Consumer Protection Code, in force since 1990, introduced a revolutionary change in the provider-consumer relationship that helped to improve the standard of quality of Brazilian products. Finally, Law 8.884/90 is the most important act of anti-trust legislation. It establishes mechanisms to protect competition and besides defining offences against the economic order, requires that transactions that may damage free competition, or result in domination of markets, must be approved by the Anti-Trust Council (CADE) prior to completion. The parameters for submission (usually a reported year turnover of more than R$400m by any participant of the transaction or a resulting market share of 20% or more) are established in this act. Attention must also be drawn to the Currency Exchange Regulations, established by the Central Bank and Customs Regulation, which lay down the rules of foreign trade. Regulated sectors, such as oil, health care, energy and telecommunications (where most foreign investments are concentrated), have their specific laws supplemented by rules issued by regulatory agencies. Despite some bureaucracy and the complexity of its legislation, Brazil is very receptive to foreign investors. Our laws encourage investment on the production of goods and services, and the distribution of dividends is exempt from taxes, including income tax withholding. However, a foreign investor should pay close attention to labour and tax laws, critical issues for any company. These rules are complex in Brazil and relying on good advice in such matters is crucial.

Britânia Marcas e Patentes Rua Ásia, 167 - São Paulo/SP - Brazil Tel: 55 11 3082 3411 Fax: 55 11 3085 4481

Make the protection of your intellectual property in Brazil a practical reality Britania Marcas e Patentes Ltda (Britania Marcas) was formed on 26 March 1965, and for over 45 years has provided clients with legal services marked by excellence and the highest ethical values. It has a solid and prestigious reputation in an extremely specialised field – the provision of services regarding intellectual property. To be legally protected in Brazil, a brand from a foreign country must be registered, but that protection is valid only for the specified category of product. For example, a trademark could be registered for use on jeans even though it is already the trademarked name of a brand of cigarette. A local registration of a trademark not used in Brazil within five years can be cancelled and registered by a domestic company. Many Brazilian firms have therefore exploited this to take over internationally known trademarks (including Nike and Apple). To then operate in Brazil, the original owner of a brand is forced to buy it back at a considerable cost. Three kinds of trademarks are legally protected in Brazil: a mark of a product/service used to distinguish a product/service from another that is identical, similar or alike but of different origin; a mark of certification, used to verify the conformity of a product/service to determined norms or technical specifications (notably on quality, nature, material used and methodology employed); and a collective mark, used to identify products or services deriving from members of a determined entity. All three have a duration of ten years, which may be followed by a ten-year extension. Trademarks must be registered to obtain protection and for any licensing or transfer involving royalties; registration under the Paris Convention must be within six months of application in the country of origin. Trademark registration will lapse if not used in Brazil within five years of the concession date, or if its use is interrupted for five years. The owner or licensee must supply proof of use. Patents have the following durations: 20 years from date of filing application for inventions; 15 years for utility models; and, ten years for industrial-design rights, extendible for three five-year periods. Certificates of addition allow for the elaboration of patents. Inventions, utility models and industrial designs (provided that they are novel) can be patented provided that they are: capable of being produced or applied in an industrial process; not patented, widely disseminated or used in Brazil or abroad; and, are not obvious from a technical-development perspective. A company must file for a patent on an invention or utility model in Brazil within one year of its being granted abroad to safeguards its rights. Industrial-design patents must be filed within six months.

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Mesquita Barros Advogados Cassio Mesquita Barros Head Professor of Labour Law-USP ILO Expert -1990>2006 Chairman of the Board Nadia Demoliner Lacerda MD Labour Law-USP Head of International Affairs Ana Paula Paiva de Mesquita Barros PHD Labour Law-USP Senior Partner Carlos A Dariani MD Economy-PUC Executive Director,br The Brazilian labour system was legally formed in the 1940s. Changes in Europe, combined with important domestic factors (such as the government labour policy and the industrial upsurge), triggered the creation of the Consolidation of the Brazilian Labour Laws (CLT). Enacted in 1943, and fully endorsed in the 1988 Constitution, CLT is the primary legal system that rules employment relations. Brazil is currently growing at a fast pace and constantly challenged by the perception crisis emanating from outdated parts of this complex, highly codified legal system. To successfully operate in Brazil, a corporation needs to duly comply with the system and be assisted in detail by competent experts. Mesquita Barros Advogados provides technical excellence, a state-ofthe-art operational structure, tradition and up-to-date knowledge on employment and labour law. A firm with a global scope and expertise in labour law, its practice areas include: formal opinions, code of conducts, labour auditing, strategic planning on workforce compensation, employment contracts and compensation plans, collective bargaining, litigation, and pensions and social security. There is also an emphasis on corporate mobility, as noted in the 2010 Global Mobility Handbook of over 50 country experts in the five continents (with the support of the Brazilian Foreign Ministry). In Brazil, the rules on employee protection are rather protective and outdated, and there is pressure to change to a more performance-oriented, self-care basis. International labour agreements (for example, the International Labour Organization Conventions) and trade union agreements negotiated between unions and employers (or their economic representatives) can provide satisfying conclusions when supported by adequate legal advisers. Collective bargaining is only open to those unions that are legally registered with the Ministry of Labour. The courts interfere in collective bargaining by making rulings based on petitions from only one of the parties. Owing to the lack of effective arrangements for direct bargaining with company unions, there are an incredible number of pending court cases. Therefore, collective bargaining is in need of having its means of negotiation strengthened. Brazil is undergoing a process of transition in the legal framework associated with work-related accidents and diseases. However, the truly problematic situation in Brazil (as in many other developing countries) is its informal economy. The informal economy is considered to be the part of the national economy where the decent work deficit is most pronounced. In addition, it accounts for the bulk of the workforce. Brazil also reports that it is making efforts to extend the application of its occupational health and safety (OHS) legislation to the informal economy.

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Aronis Advogados Octávio José Aronis Partner Tel.: 5511 - 3053 3036 Fax: 5511 - 3053 3034

The law firm of Aronis Advogados (Aronis) follows a ‘tailor-made’, customised approach in relation to legal matters under the unique and noble idealism of professional ethics. Aronis is a member of the Brazilian Institute of Criminal Sciences as well as of the São Paulo Lawyers’ Association. Octavio Aronis graduated from the Faculdades Metropolitanas Unidas with post-graduate degree in the US at the University of California, Los Angeles, as well as specialist courses at the Getúlio Vargas Foundation College, GV Law. Currently, he is the legal director of the Jewish Federation of the State of São Paulo, director of the Brazilian Israelite Confederation and vice-chairman of Corpore-Brasil, as well as board member of the Albert Einstein Hospital. Aronis focuses on criminal and international law. In the criminal sector, Aronis acts for both the prosecution and the defence in Police inquiries and criminal actions, as well as the preparation of reports and compliance with requests by companies. Aronis is traditionally renowned for its performance, customised service and modernism, always staying in touch with the client. In the international sector, Aronis focuses on trade relations between Brazilian and foreign companies and has been operating in this area since 1986. Aronis provides intermediate solutions for conflicts on matters relating to the collection of export and import transactions concerning services or goods. Within the judicial or extrajudicial scope, Aronis acts as attorneys-in-fact of creditor clients in companies’ recovery proceedings, as well as acting on behalf of international insurance companies that subrogate in the right of recovering credits resulting from credit insurance. Aronis not only represents Brazilian companies with credits receivable from abroad, but also foreign companies with outstanding invoices originated by trade transactions of various kinds, including judicial collection or execution of extra-judicial settlements in Brazil or in other countries through partnerships. Aronis seeks to designate a corresponding firm abroad with the intermediation and monitoring of all of the proceedings for effective recovery of credits. To do this, Aronis has, through its owner, been participating in a number of congresses abroad with attorneys specialised in this segment of recovery of credit, and, on account of this important network, the possibility has opened for operations in more than 80 countries. Aronis is the official representative in Brazil of Global Credit Solutions Group, a company headquartered in Australia with offices in the most important cities and on all of the continents. Aronis is also affiliated to the following international associations: American Collection Association International, League International for Creditors, Commercial Law League of America, International Association of Commercial Collectors, Inc, and the Credit Services Association.

Law Office Carbone Tel: +55 21 2253-3464 Fax: +55 21 2253-0622

Formed in 1977, Law Office Carbone is a traditional and highly regarded Brazilian law firm specialising in shipping and trade, and based in Rio de Janeiro at the heart of Brazilian shipping activity. We act for ship-owners, charterers, importers, exporters, carriers, maritime agents, trading companies, logistics operators, terminals, companies engaged in the offshore oil and gas industry, underwriters, P&I (protection and indemnity insurance) clubs, shipyards, salvers and overseas law firms. We work with a network of correspondent lawyers at all the major Brazilian ports and trading centres, as well as independent experts and consultants in related fields. We have a permanent commitment to the highest quality and standards of service. Our firm offers a wide variety of services in both contentious and non-contentious issues, including in the following areas: logistics and transports; contracts; corporate; environmental law and pollution; economic and antitrust law; regulatory law; insurance; oil and gas; casualties; maritime tribunal; tax/customs; and, litigation. Partners at the firm Artur R Carbone is a lawyer and master mariner. On a number of occasions, he has been president of the Brazilian Maritime Law Association. He is also a titulary member of the Comité Maritime International-CMI. He can be contacted at: Maria Helena Carbone, a non-active partner, is a lawyer and economist. She is a specialist in marine insurance, energy and property. Luís Felipe Galante is a lawyer and a master in private law and a professor of civil procedure. On a number of occasions, he has been director of legal studies and arbitration of the Brazilian Maritime Law Association. He can be contacted at: Flávio Infante Vieira is a lawyer with an MBA in economics and corporate law and in environmental management. He is the head of the firm’s maritime tribunal, casualties and environmental law divisions. He can be contacted at: Cláudia Iabrudi is a lawyer with an MBA in civil law and civil procedure and also in advanced corporate law. She is responsible for the regulatory and offshore matters. She can be contacted at: claudia@ Luiz Fernando Yparraguirre is a lawyer with an MBA in civil law and civil procedure and is qualified as a professional commercial arbitrator. He specialises in P&I claims and is in the firm’s litigation division. He can be contacted at: Lawyers at the firm The office is also made up of the following lawyers: Guilherme Scorzelli; Cassia Correa; Flavia Guerra; Bruno Brito; Rodrigo Borges; Irapuã Santana; and, Carlos Carpes.

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Company Financial Projects Guilherme Bastos de Aguiar Diretor de relação com investidores Tel: (11)6464 9999

Company Financial Projects operates with Investment Funds With the world markets in turmoil, shrewd investors are taking advantage of careful planning and intensive due diligence procedures by specialist companies, in particular those involved in the emerging economies. Emerging from the worst of the recession, thanks to its pro-active government, Brazil currently stands as one of the strongest economic powers in the world, posting new stock market highs, a decreasing unemployment rate, strong GDP figures, along with all-time-low lending rates. This summer, Brazil lent $10 billion to the International Monetary Fund (IMF), whereas a few years ago it was borrowing from the IMF. Historically, Brazil also holds high US$ deposits, an abundance of newly discovered oil, and a strongly growing export industry. Brazil’s boom in the building sector, and the massive growth in residential condominium in big towns and cities, led Guilherme Bastos de Aguiar to focus on construction and real state companies. The private equity funds aim to invest in these companies, targeting receivables and securitisation. It is important to note that the real estate market in Brazil has tighter regulations for taking out loans than in the US. However, nowadays Brazil offers 30-year mortgages. As founder and director of Company Financial Projects, Guilherme Aguiar specialises in financial business investment projects and valuation, and gives consulting advice to companies looking for capital resources. He also acts as a partner for Brazilian and international investors, and the financial agencies and institutions, for example: Paramis Gestão Imobiliária, NSG Capital, DEG, FMO, IFC-World Bank Group and BNDES (the Brazilian Development Bank). Additionally, he is a column writer for the magazine Revista do Factoring (www., and a lecturer at private institutions. “A sign that Brazil is in the race, is the fact that medium-sized companies are now realising the importance of valuation, something that only started in the past three years, and something that every company should be doing,” says Guilherme Aguiar . “This is a very positive trend. As an adviser, I highlight the importance of a viability project when building a portfolio; they should know where and how their company stand, even if they never need resources.” Company Financial Projects is based in the state of São Paulo. Projects are built through analytic tools, market research and feasibility studies or business plans.

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Get Across Translations Ricardo Lay Founder and General Manager Tel: 55 11 2364 7730

Brazil – Language Translation Services Translation for the native speaker, by the native speaker. Obtaining a high-quality translation can be a tricky business. This is particularly true in Brazil when it comes to translations into/from English - by far the country’s most popular foreign language. It is precisely due to the language’s popularity that makes translating into/from Brazilian Portuguese so potentially risky. The use of English is so widespread in the Brazilian business world that its small intricacies are frequently discounted and ignored. Subtle cultural nuances often go undetected, and words or expressions with double meanings are easily misinterpreted. The result is a literal translation that seems unnatural to the native English speaker; or worse, entirely distorts the meaning of the original message. It is not uncommon to see translations containing comical, if not tragic, interpretations. One frightening example of this was a recent article that attempted to translate sobremesa (the Portuguese word for ‘dessert’) into English. By breaking down the word in Portuguese in two - sobre ‘over’ and mesa ‘table’ - the translator created a new word for dessert: ‘overtable’! The inappropriate use of tools such as Google Translator poses another threat to the quality of translation. While these tools are efficient in translating words, they rarely generate sentences that are constructed correctly. Millions of Brazilians learn English in highschool-level courses and are exposed to it through television programmes and movies, aired in English with Portuguese subtitles. Student international exchange programmes and international travel are on a steady rise in Brazil, even more so now that the Real (Brazilian currency) is relatively strong against the US Dollar, the Euro and the British Pound. This means that a significant number of Brazilians learn English at a merely superficial level and are unaware of how distant they may be in relation to what they are trying to say versus how it is being

expressed. According to Ricardo Lay, founder of Get Across Translations and a native English and Brazilian Portuguese speaker: “In the worst case (but not uncommon) scenarios, this exposure to the English language creates a false sense of comprehension and a general tendency to overestimate one’s own qualifications to practise English translation.” The continuing success of Get Across Translations is due in large part to its commitment to appoint only proficient writers and proofreaders who are native speakers of both English and Brazilian Portuguese - this approach ensures that translators work exclusively in their native tongue. It also allows Get Across Translations to narrow its focus and gather, exclusively, the most qualified translators of English (into/from Brazilian Portuguese).

Foreign businesses looking to invest in Brazil have to deal with the challenge of communicating efficiently across different languages.

Of course, it is not enough to merely speak the language. In order to write with proficiency, one must have intimate knowledge of the topic at hand. Certain technical terms that are applied in one field may sound unnatural when used in another. In the same way, layman’s terms applied in technical fields are likely to set off alarm bells and damage credibility. For this reason, Get Across Translations goes beyond the mere language barrier and appoints a variety of specialists who are experienced translators in their specific field of expertise. Foreign businesses looking to invest in Brazil have to deal with the challenge of communicating efficiently across different languages. It is not a stretch to say that a significant portion of their credibility relies on translation professionals who take on the responsibility of representing the values and ideas of the business. This nerve-wracking and potentially damaging experience can be made a lot easier (and risk-free) when you know these translation professionals are native speakers of the languages they are working in, as well as specialists in your field.

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Gemini Media Moacyr Lopes CEO Tel: +55.21.2496.3536 Fax: +55.21.2496.3628

Gemini Media was founded in 2000 by brother and sister team Moacyr Lopes and Sabrina Martinez to provide highend media production services to major TV networks and film distributors. A master of translation and journalist graduate from the University of Missouri at Columbia, Ms Martinez is recognised as one of the principal experts of audiovisual translation in the world. Mr Lopes, a production engineer from Cornell University and a natural entrepreneur, is currently the CEO of the company and the executive responsible for the sustained growth rate of 30% per year gross. With offices in Rio de Janeiro, Sao Paulo, Santa Catarina and California, Gemini Media is the leader in audiovisual translation (subtitling, dubbing and closed-captioning) in Brazil, with more than 20,000 hours of film and video translated into Portuguese and many other languages. Among its clients it counts giants such as TV Globo (the fourth largest TV network in the world), Fox Latin American Channels, McDonalds, Shell, Halliburton, Oracle and Merck. In 2007, Gemini Media partnered with Emmy award-winning director from TV Globo, Roberto Carminati, to create GI Films, its content production company. In May 2010, it released its first feature film ‘Segurança nacional’ (National security), with heavyweight co-producers Europa Filmes (Brazil’s biggest studio) and Globo Filmes (the film distribution arm of TV Globo). The Brazilian Armed Forces, the Ministry of Defence, the Brazilian Intelligence Agency (ABIN) and Petrobras were some of the movie sponsors. Brazilian tax-incentives law expert Erico Ginez joined GI Films in 2008. His expertise and close relationships with key public cultural promotion players (such as the film and TV industry regulator ANCINE, the Securities Commission (CVM) and the Brazilian Development Bank (BNDES)) has made it possible for GI Films and GM to seize all the opportunities offered by the government. GI Films is launching its first tax-incentive investment fund (FUNCINE) regulated by CVM of US$20m. Using tax-credit, investors can partake in a myriad of audiovisual projects, such as the production of feature films, TV series, purchase of story-rights,

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construction of movie-theatres and the purchase of production/ distribution companies’ stocks. GI Films intends to launch its second FUNCINE in 2011, with a total amount of US$100m. Current projects include a comedy entitled ‘Sim, claro, por que não?’ (Yes, sure, why not?), to be shot in Portuguese for Brazilian audiences with an estimated budget of US$3m. In partnership with the Brazilian Armed Forces, GI Films is also producing an action movie entitled ‘Jungle warrior’, to be shot in the Amazon Jungle in English for worldwide audiences, with a budget of US$7m. Gemini Media is currently working to expand its audiovisual translation operations to other languages and territories, such as North America and Europe. In partnership with BNDES, it has invested in the implementation of a proprietary enterprise resource planning system to control all the subtitling and dubbing workflows on a large scale. Gemini Media has also developed a revolutionary training system and a state-of-the-art desktop application for audiovisual translators worldwide. By mid-2011, Gemini Media plans to be the first media production company certified by ISO 9001.


Armijn van Dijk Personal realtor in southern Brazil Tel: (55) 48 8451-5957

Real estate in southern Brazil Over the past 15 years, Brazil has undergone an incredible growth in the construction industry. In 1995, the new currency had been recently introduced, people were still getting used to the reality of low inflation, and real estate prices were in US dollars. Since 2003, President Lula’s administration has steadied exchange rates and aided social stability, and today Brazil ranks as the 13th largest economy on the planet. Goldman Sachs has predicted that it will become the fifth largest by 2035, making it one of the most compelling equity investment cases in the world. There is a new middle class emerging in Brazil, the so-called ‘C’ class. For a long time, this part of the population didn’t have access to loans, but with lowered interest rates, money is more accessible and it is now the norm to get a mortgage on a new house instead of paying rent. As a result, construction companies are building low-cost housing with long payment terms (as many as 30 years) aimed at this new segment of the population. In Porto Alegre, new buildings are emerging all over; some built by relatively small local building companies, but a large share built by publically traded companies such as Cyrela and Gafisa. Until recently, these companies were only active in cities such as São Paulo and Rio de Janeiro, but they have grown and now build throughout most of the Brazilian territory. Most of these companies still have majority Brazilian shareholders, but the Bovespa is getting more accessible for foreign investors. The entire economy is starting to notice that this new group is reaching a new level of buying power. With the strong Real, Brazilian export companies are starting to notice the importance of a local market. With the new access to money, this becomes visible at all levels of society. Car manufactures, for example, are having record month after month. In Florianópolis, there is an explosive growth in expensive real estate aiming at the upper class. Entire neighbourhoods turn into luxurious condominiums with million dollar houses with high monthly costs; but they are all getting sold.

Razortec Celso Paulo Martins General director Tel: +55 (41) 3027-7227 Mobile: +55 (41) 9917- 9867

Brazil – property security services Curitiba, the capital of Paraná State, is located 450kms south of São Paulo, and is the most European among the Brazilian capitals. Characterised by the quality of life it provides its inhabitants, it is known as a demanding city, where new products are tested before they reach the national market. The infrastructure and highway connections to other regions of consumption, and its proximity to Paranagua (one of the busiest ports in the country) as well as to the Brazilian and Paraguayan commodity exportation corridor, makes it a strategic location for a hosting company. Its superb location and attractive tax incentives have attracted giants, such as Volkswagen/Audi, Volvo and Renault/Nissan, to set up their industrial complexes in the city, far from major centres and their logistical problems. It is within this commercial environment that Razortec was founded in 2002. The company focuses on the importation and distribution of razor wire barriers and mesh panels within Brazil, and, although a relatively new company, its director has 32 years of experience in this area having previously worked with the sale, installation, maintenance and representation of electronic security equipment. Razortec began by selling brands of concertinas, until it started importing from China, which provided quality and conditions at the most competitive level. In 2008, Razortec also began to import modular fences with electrostatic powder painting, a segment of the market that is on the rise in Brazil with but a few competitors. Razortec has the recognition and trust of its clients due to the sincerity and transparency of its business relations. Among its clients it counts construction companies for the electricity and sanitation sector, steel distributors, fencing corporations and resellers of equipment for security.

Also, with the football spirit up and knowing that Brazil will be playing at home next time, the entire country is preparing itself for a bright four years to come.

Expansion plans are underway to set up a production line to increase the availability of models for the products already in Razortec’s portfolio, and then to export to MERCOSUL countries where there are tariff exemptions to members. To increase its competitiveness and expand its business in partnership Razortec is looking for an investor with strategic vision who wishes to join the leader market in Latin America - a market that has an expected GDP growth of 7.4% for 2010, just below the Chinese and Indian economies.

Brazil is a very interesting country to invest in real estate over the next couple of years, either small scale (such as buying a property in Brazil or investing in the publically traded building companies on the Bovespa) or going even further and joining the boom and building in Brazil.

Although the tax system in Brazil is complex, its democracy is an evolving institution. It is common for state and local governments to donate land and give tax breaks to companies that settle in Brazil bringing capital, technology and employment.

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UAE Dubai demonstrates commercial commitment Dubai continues to dominate as one of the world’s most popular destinations for commerce and foreign direct investment (FDI), reinforcing its position as a global hub for business. With world-class infrastructure and highly attractive incentives, Dubai’s commercial offering remains compelling to international investors.

Government of Dubai confirms support of Dubai World debt restructuring Dubai has become an important international centre for investment, with a number of positive developments underway. Furthermore, the government of Dubai has confirmed it will be supporting Dubai World’s debt restructuring by investing up to $9.5 billion (approximately £6.38 billion) into the company. This move reinforces the government’s commitment to the long-term vision of Dubai, and will ensure work continues on major Nakheel projects. Of this, $8 billion (approximately £5.37 billion) will be invested into the real estate developer, and the remaining $1.5 billion (approximately £1 billion) into parent company Dubai World. And this move has been backed by Royal Bank of Scotland chief executive, Stephen Hester, who commented that: “As one of the lenders to Dubai World, we view the recent debt restructuring offer as a positive development… In the overall context of Dubai’s global credit standing, the move has sent out the right signals.”

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Government of Dubai Tel: 0044 20 7321 6110 Fax: 0044 20 73216111 GDP predicted to grow further in 2010 The global economic downturn has inevitably had an impact on the emirate, but Dubai’s economy is weathering the storm. There is optimism that the emirate will benefit from its first-mover advantage to reinforce its position as one of the world’s most trailblazing and competitive destinations. In fact, according to the Minister of Economy, the UAE is expected to record a GDP growth of 3.2 per cent in 2010, an increase from 1.3 per cent in 2009. Confidence is returning to the emirate as is demonstrated by recent figures from fDi Markets highlighting that the UAE continues to attract more than half of the FDI projects in the Gulf Co-operation Council region. At the end of last year there were 363 FDI projects underway, more than the total number of projects in 2007. And with this investment comes not only a significant financial resource, but also the knowledge inflow to the region brought by the incoming business. Dubai has been ranked top in the ‘Middle East Cities of the Future’ Dubai has been ranked top in the ‘Middle East Cities of the Future’ (source fDi magazine), scoring the highest points for economic potential, business friendliness, infrastructure and quality of life, making it the perfect environment for businesses setting up in the region. And, from a global perspective, it is clear that international investors are continuing to show confidence in Dubai, with the UAE ranking as the 11th top FDI destination in the world. The emirate’s new Federal Foreign Investment Law is expected to be implemented in 2010. This legislation is anticipated to attract further foreign investment into Dubai by offering incentives to businesses, paving the way for 100 per cent foreign ownership of companies. Attracting international investors is important for Dubai and one of the central areas of focus for Dubai’s government is to ensure that the emirate serves as a robust and business-friendly destination. Last year saw the opening of the Dubai Metro, and this is set to expand in 2010, enhancing access within the city. In addition to this, the world’s tallest building, the Burj Khalifa, opened at the start of 2010. With the phased opening of the cargo section in June at Al Maktoum International Airport (the world’s largest) this year, these all add to Dubai’s advanced infrastructure, continuing to make it an appealing destination for investors as a centre for trade and services and as an international commercial hub. Dubai features over 30 free zones with unique benefits to businesses locating to the region. These sector-specific clusters are treated as ‘offshore’, allowing for myriads of benefits to be offered to businesses located there, including 100 per cent foreign ownership, 100 per cent repatriation of capital and profit, and no corporate taxes. The concept of ‘convenience’ - with every facility under one umbrella - also allows for more efficient and cost-effective distribution. The government of Dubai’s Department of Tourism and Commerce Marketing (DTCM) spearheads the global promotion of Dubai’s commerce and tourism interests. Ian Scott, director UK and Ireland for the DTCM commented: “Dubai is the epitome of a world-class business destination. The government of Dubai is

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Dubai has been ranked top in the ‘Middle East Cities of the Future’ committed to ensuring that the emirate continues to thrive, with ambitious growth plans and a diversification strategy, making it a highly attractive option for both regional and international investors. Dubai’s progressive infrastructure, first-class facilities and appealing incentives means it is the perfect location for international commerce and reinforces its position on the world economic map”. The UK and Ireland office of the DTCM offers advice, contacts and support for small and medium enterprises looking to set up business in Dubai through various means including: ‘How to do Business in Dubai’ seminars around the country featuring networking opportunities and case studies from companies who have successfully set up in Dubai; fact finding trips to Dubai in conjunction with regional Chambers of Commerce and UK Trade & Investment (UKTI); attending trade shows, conferences and exhibitions; and, communication through an e-newsletter that regularly highlights the main news of commerce developments in Dubai on a bi-monthly basis. For more information about setting up in Dubai and to subscribe to the e-newsletter, please visit, email or call 020 7321 6110.


Simon Harvey Andrew Beatty Senior associate Partner Tel: +971 2 612 3700 tel +61 8922 5632 mob +61 417 215 396

The great strides made by the UAE in encouraging the development and adoption of renewable energy in the Middle East and North Africa region have been widely reported. Masdar City, a futuristic clean technology cluster being developed on the outskirts of Abu Dhabi, has captured the imagination and raised the hopes of many people around the world concerned by climate change and its consequences. The headquartering of the International Renewable Energy Agency (IRENA) in Abu Dhabi has further raised hopes and expectations. The UAE, however, has not yet established a carbon-trading scheme or imposed a mandatory renewable energy target. Instead, in order to address increases in its carbon footprint, the UAE has preferred to steer a course in favour of bespoke initiatives and projects, with a view to encouraging the development of a renewable energy and clean technology industry in the UAE, and Abu Dhabi in particular. Through these, exciting opportunities have arisen and will continue to arise for overseas companies willing to partner with the UAE through the agency of Masdar in the development of the clean-tech industry. The UAE has been experiencing high rates of population and economic growth. Population growth will continue to drive demand for electricity, including energy required for airconditioning/cooling and water desalination. The UAE has invested in heavy industries able to utilise the UAE’s energy resources to lower the cost of production, such as aluminium smelting and steel manufacture. Against the backdrop of rising energy demand, domestic energy and fuel costs are heavily subsidised for the benefit of the national population. This presents a challenge in the promotion of domestic energy production from renewable sources that, although gradually becoming cheaper, cannot compete with existing fossil fuel resources. Nuclear energy would also seem preferred from a policy standpoint. Perhaps as a result of the abovementioned pressures, the UAE has not introduced a

The UAE government’s approach to date has been to encourage the renewable energy and clean-tech segments through carefully calibrated initiatives

carbon tax or carbon-trading scheme or a renewables portfolio standard, nor enacted legislation implementing a feed-in tariff guaranteeing a minimum price and terms for electricity generated by renewable energy facilities. Whether any of these will be introduced and what form they may take, remains to be seen. So far the UAE has encouraged the development of the renewable energy and clean-tech industry by way of careful and targeted initiatives. The Masdar initiative, administered by the Abu Dhabi Future Energy Company, is the best known and the largest single investor in renewable energy and other alternatives to fossil fuels in the MENA region. Significant Masdar initiatives, in addition to Masdar City, include the Shams 1 concentrating solar power project, a hydrogen power generation and desalination project and a carbon capture and storage project. In relation to building standards, Abu Dhabi has established the Estidama initiative for sustainable urbanisation. Estidama introduces a new non-mandatory building rating system for Gulf States, giving government entities putting a development project out to tender the flexibility to specify particular energy efficiency building standards in the tender specifications. Dubai has also introduced laws relating to green building standards. The UAE is not an Annex I party under the United Nations Framework Convention on Climate Change (UNFCCC) and has no binding target under the Kyoto Protocol to reduce its emissions of Kyoto Protocol greenhouse gases (including CO2). As a non-Annex I party, the UAE may host clean development mechanism (CDM) projects under the Kyoto Protocol. The CDM allows countries with an emissions reduction target (Annex I parties) to implement greenhouse gas reduction or removal projects in non-Annex I jurisdictions in order to

generate certified emission reductions (CERs). CERs may be used by Annex I parties to meet their Kyoto targets and may also be traded on the international carbon markets. To qualify as a CDM project, it must be shown that the project will reduce GHG emissions as compared to a baseline, and that it is financially and environmentally ‘additional’ to the businesses as usual scenario. The national regulator for UAE CDM projects is the Environment Agency  Abu Dhabi as chair/head of the executive committee of the Designated National Authority established for that purpose (EC-DNA). The UAE host country approval process is two-stage process: first, recognition of a project idea note and secondly, final approval of the project. For a project to be approved by the UAE EC-DNA, it must satisfy the sustainable development criteria, which includes a requirement that the project contributes to the economic growth of the UAE and the diversification of its economy. So far, approximately a dozen CDM projects have been approved in the UAE with an aggregate CO2 reduction of around two million tonnes. We see further opportunities for investors in projects resulting in emissions reductions in the oil and gas industry, and in relation to district cooling and similar projects. When and if CCS is included as an accepted methodology under the CDM, there will be significant opportunities to generate tradable carbon credits. The UAE government’s approach to date has been to encourage the renewable energy and clean-tech segments through carefully calibrated initiatives with the dual purpose of encouraging changing behaviours and diversifying the economy by establishing the UAE as an incubator and the centre of the clean-tech industry in the MENA region.

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International Advocate Legal Services Diana Hamade Founder Tel: 0097142844733 Fax: 0097142844663

The International Advocate (IAL) is a boutique law firm set up by Diana Hamade’ AlGhurair, a UAE national lawyer with right of audience before all UAE courts. The firm’s practice focuses on local and cross-border corporate, civil, commercial and family law matters for national and international clients. With its international focus, and by operating in Dubai, the firm has built a unique multicultural team, diverse in experience and rank, with the common goal of providing clients with high quality legal work. The firm offers consultancy and litigation services in the UAE, together with partnerships with associated firms worldwide, delivering cost-efficient and result-oriented legal services in crossborder disputes. The dispute resolution practice covers all of the UAE courts, rental committees and arbitration centres. The firm’s consultancy and advocacy services cover property and real estate, corporate/commercial, consumer protection, corporate governance, agency and franchise, and family law. The firm brings its extensive experience and formidable skills to the courtrooms, and within the arena of public opinion, where clients are effectively and efficiently represented. Dispute resolution in the UAE Litigation The UAE is formed of seven emirates, each with four types of courts - civil, commercial, criminal, where the codified provisions of the relevant emirate’s laws apply in addition to Sharia court. In the absence of any specific legislation, Islamic Sharia will be applied. The UAE has a codified system of law. The core codes (dealing with most international trade, shipping and commercial disputes) are the Maritime Code, Commercial Code, Civil Code, Civil Procedures Code (CPC), Law of Evidence and Criminal Code. Litigation is governed by the CPC and the Law of Evidence. Arbitration In the UAE, domestic arbitration proceedings are governed by articles 203-218 of the CPC and also regulations concerning arbitration and disputes arising out of contracts to which the Dubai government (or any of its subsidiary departments) is a party (Law No.6 of 1997). The UAE is also a party to the International Convention for the Settlement of Investment Disputes (ICSID).There is a new draft Arbitration Law that will hopefully be published soon. The UAE is not among the countries in the region to have adopted the Model Law of the United Nations Commission on International Trade Law for Arbitration (UNCITRAL Model Law) until now, but a review of the English copy of the said draft law leads us to believe that the drafters of the UAE Arbitration Law looked to the UNCITRAL Model Law for some guidance in their drafting. The UAE became a party to the New York Convention on the recognition of Foreign Arbitral Awards on 16 November 2006.

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Sachin Kerur Partner Head of UAE Office Pinsent Masons LLP DDI: +971 (0) 4 373 9600

A legal guide to the UAE The UAE is comprised of a federation of seven Emirates (Abu Dhabi, Dubai, Sharjah, Ras Al Khaimah, Um Al Quwain, Fujairah and Ajman), each ruled individually on local issues with some matters reserved by the UAE constitution for determination by federal law. The UAE legal system is based on both civil code principles and Islamic Shari’ah. For civil matters the laws are the Constitution, federal laws and regulations, local Emirate laws and regulations, Islamic Shari’ah and custom and practice. For commercial matters, federal laws and the local laws and regulations of each of the Emirates are the main sources of law. Under the Constitution, certain legislative and executive authorities are reserved exclusively to the Federal Union. Outside of these, the Constitution specifically gives all matters to the individual Emirate’s sovereignty within their respective territorial borders. Of particular importance is the qualification that the natural resources and wealth of each individual Emirate remain that Emirate’s sole property. The exercise of legislative authority at a Federal level is determined by the by-laws and governing procedures established under the Constitution. The exercise of legislative power at an Emirate level is not so constrained; the framework reflects the character, style and relationship between the individual Ruler and citizens of that Emirate. The UAE civil law system relies heavily on codified laws rather than precedents set through previous legal decisions, similar to that of continental Europe rather than the UK or US. The primary source of reference for civil and commercial matters is the Civil Code, based closely on the Egyptian Civil Code, governing all such matters to the extent they are not otherwise specifically addressed by other codes. The Constitution provides that: “Islam is the official religion of the Union. The Islamic Shari’ah shall be the main source of legislation in the Union.” The Islamic Shari’ah is the divine set of rules and regulations regarding life as conveyed to man through the holy Prophet Mohammed (peace be upon him). It is a collection of legal tenets, laws and regulations that are intended as a way of life for Muslims. There are two sources of these laws: the direct word of God, the holy Quran, as spoken through the holy Prophet Mohammed (pbuh); and, the indirect word of God, the Sunnah, based on the sayings and examples of the holy Prophet Mohammed (pbuh). The Shari’ah is extremely important in relation to matters of a personal nature, such as marriage, domestic relations, inheritance and lineage. In relation to commercial matters, Shari’ah is less important, although it can have a significant bearing in relation to financial services and real estate transactions where specific provisions may need to be included.

Maria Farrukh Irfan Khan Partner United Trademark & Patent Services Dubai office Tel: 00971 4343 7544 Fax: 00971 4343 7546

Sharjah Office Tel: 00971 6572 2748 Fax: 00971 6572 2741

IP enforcement in the UAE Piracy and counterfeiting have seeped into the roots of developing economies due to high profit margins and low prosecution risks. Through the passage of time, it has become one of the leading industries influenced and controlled by extremely organised and sophisticated syndicates controlling the channels of manufacturing, distribution and sale of counterfeits and pirated goods. In order to limit counterfeiting and violations of intellectual property rights, and to enable developing countries to tread on the path of economic, social and cultural growth and development, effective enforcement of intellectual property (IP) rights through enhanced cooperation and coordination, intelligence sharing, improved legislation, easy and cost effective implementation and increased public and political awareness is required. The UAE, among other Middle Eastern countries, is the foremost in its resolve to combat the menace of counterfeiting and piracy, and is effectively implementing the TRIPS Agreement, which is regarded as one of the three pillars of the World Trade Organization. Through amendments in existing legislation, border measures and effective anti-counterfeiting procedures, the UAE has made tremendous improvement in the past years. The new global environment has led to a significant change in the role of conventional stakeholders. New partnerships have emerged and developed between government authorities, businesses, IP organisations and IP attorneys. United Trademark & Patent Services (UTPS), a stakeholder representing over 100 of the Fortune 500 companies (among other blue chip clients), has always been at the forefront proposing viable solutions and assisting in the implementation of anti-counterfeiting procedures. Over the past 60 years, UTPS has protected clients’ IP rights in the Middle East and South Asia with seamless and efficient services and unwavering focus on client satisfaction. The quality of service is the prime reason why over 100 of the Fortune 500 companies, local and regional trademark offices and implementing authorities demonstrate trust in UTPS. The firm has been continuously voted as the number one firm for patent, trademark and copyright practice; in addition, its partners and senior attorneys are frequently nominated as the best regional attorneys and have been awarded with client choice awards. A few of the prominent cases handled by UTPS in the recent past include: Seizure of Middle East’s largest consignment of counterfeit medicines; hundreds of anti-counterfeiting actions, seizures and destruction of counterfeits worth millions of dollars; franchising and licensing in multi-million dollar projects; clearance and due-diligence of some of the most prominent trademarks of the recent times; and, registration and enforcement of patents from all fields of technology.

KBH Kaanuun Kaashif Basit Managing Partner Tel: + 971 4 709 6700 Fax: + 971 4 709 6711

KBH Kaanuun (KBH) is a boutique corporate/ commercial law firm based in the Dubai International Financial Centre (DIFC) in the UAE and registered with the Dubai Financial Services Authority (DFSA). KBH provides a diverse portfolio of legal services, including corporate/commercial transactions, real estate, maritime, media and entertainment, education, aviation, construction and engineering, investment funds, offshore structuring, employment/immigration, insolvency/restructuring and commercial dispute resolution (including advocacy before the DIFC Courts and Arbitral Tribunals, in DFSA investigations and before regulatory tribunals). The firm has particular expertise and experience in respect of matters involving the DFSA and, uniquely, DIFC, offering both in-house advocacy and case management skills and unparalleled experience of strategic knowhow regarding the Rules of the DIFC Court. KBH also manages cases through local advocates before the Dubai, UAE Federal and Kuwaiti Courts. KBH’s experience encompasses international commercial arbitration, DIFC and English Commercial Court litigation, mergers and acquisitions, structuring of investments, including trust/nominee structures, employment, insolvency and regulatory advice. The firm is among the pioneers in commercial litigation before the DIFC Courts, including representing the appellant in the first ever appeal before the DIFC Court of Appeal arising from a worldwide freezing injunction and disclosure order and also two of the earliest DIFCLCIA (London Court of Arbitration) Arbitration Centre cases. KBH is currently representing the claimants in the highest value claim before the DIFC Court involving the mis-selling of structured financial products and a damages claim of US$225m. KBH is also acting on behalf of the claimant in one of the first cases to come before the Special Dubai World Tribunal, which seeks recognition and enforcement by the Tribunal of a DIAC (Dubai International Arbitration Center) arbitral award against one of Dubai World’s subsidiaries. KBH is involved in advising on regulatory matters, including regulatory investigations before the DFSA, as well as restructuring of regulated and non-regulated entities in DIFC, and has been retained by DIFC to exercise the powers of the director of employment standards under DIFC Employment Law. On the non-contentious side, KBH advises on cross-border corporate transactions (including joint ventures), acquisitions and investments abroad, as well as foreign companies doing business in the GCC, particularly the UAE, Kuwait and Bahrain. KBH’s clients include quasi Dubai government companies, leading national and multinational corporations, education institutions, blue-chip financial institutions, investment fund managers and private equity firms, insurance companies, real estate investment and development companies, start-up businesses and high-networth individuals, as well as a number of European and Far Eastern banks, trust companies and investment houses. KBH is also the correspondent of choice for several UK/US international law firms and accountancy practices for the provision of UAE, Dubai, DIFC, Kuwaiti, Bahraini and English law advice.

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International Agencies Company Limited (INTERCOL) Sudhir Pereira Business Manager Tel: +9714-3676956 Fax: +9714-3672991

UAE – Information Technology Services Established in 1957 in Bahrain, Intercol continues to grow and diversify at a fast pace by building on its rich experience. Built on firm foundations, good customer relations, constant attention to detail and the professionalism of its well-trained and qualified workforce, Intercol continues to ensure it keeps abreast of the needs and demands of its customers through the introduction of new products, processes and advanced technologies. To enhance the confidence of principals and customers alike, Intercol attained ISO 9001:2000 certification company-wide and ISO 14001:1996 accreditation in recognition of its adherence to environmental, health and safety standards. Intercol remains dynamic and forward-looking - its ongoing diversification has led to the expansion of the business outside Bahrain into regional markets including: Dubai Internet City, UAE; Doha, Qatar; and, Kuwait. The Dubai Internet City office focuses on technology-intensive solutions in the ERP, Quality Management and Technology Consulting sectors. It aims to be seen as a highly competent provider of implementation and support services in the information technology arena throughout the GCC. The Internet City Free Zone offered a unique technology environment for easily setting up a new office and building a skilled technical team to meet our growing regional information technology business. Our goal is managing the customer across the spectrum of its operations, identifying critical business needs and offering seamless solutions using a cross section of best-of-breed partners, including the following: Epicor software is a global leader delivering business software solutions to the manufacturing and distribution, retail, hospitality and services industries, providing integrated enterprise resource planning, customer relationship management, supply chain management and enterprise retail software solutions that enable companies to drive increased efficiency and improve profitability. Minitab Inc is the leading global provider of software and services for quality improvement and statistics education. Minitab® Statistical Software is used by premier software organisations when analysing business data to improve the quality of their goods and services. Northwest Analytical is the leading provider of statistical process control software tools that enable intelligent, information-based decisions necessary to effectively manage and improve plant processes in manufacturing enterprises and supply chains, enabling manufacturers to trim costs, boost performance and increase profits. SoftExpert is a solutions development company dedicated to helping organisations become more efficient and effective by streamlining their work processes, simplifying tasks and managing data. From our UAE office, our specialised team comes from various technical backgrounds with specific industry knowledge for our partner applications. We ensure that our team is fully trained and certified by our partners with the aim of ensuring high-value local implementation and support services for our customers. Our technical team primary focus areas include: full life-cycle software project implementation; project management; system integration and consultancy services; and, training and support services.

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UK Watson, Farley & Williams Charles Walford Partner Tel:+44(0)2078148013

Businesses be warned - ignore new anticorruption legislation at your peril Businesses throughout the UK and across the globe should take note of the new anti-corruption legislation that will come into force in the UK in April 2011. The Bribery Act 2010 (BA) represents a strict new approach to corruption and will have a wider scope than the US Foreign Corrupt Practices Act of 1977 (FCPA). The BA will prevent the payment or receipt of bribes throughout the world by British citizens and individuals ordinarily resident, or entities formed, in the UK. In addition, it will introduce a corporate offence of ‘failing to prevent bribery’, which will apply to organisations formed in the UK and any foreign operation conducting business in the UK, no matter where in the world the bribe was made or whether it was made in connection with the UK-part of the business. An organisation will only have a defence if it can show that it had adequate procedures in place designed to prevent bribery. Consequently, organisations must pay great attention to their anti-corruption procedures and policies in order to avoid future liability. Heeding the provisions of the US legislation is no longer enough; it is time for all businesses to take note of the FCPA’s younger and stricter UK counterpart. The BA creates four offences: giving, offering or promising a bribe; requesting, accepting or receiving a bribe; bribing a foreign public official; and, failure by a commercial organisation to prevent bribery by its ‘associates’ (third parties performing services for or on behalf of the organisation). The BA goes further than the US regime, which, up until now, has been the most prominent piece of anti-corruption legislation that businesses have had to consider. The FCPA covers actions within the US as well as actions carried out by certain people outside US territory. The BA extends its application beyond UK borders, but has much wider effect because of the way that nonUK businesses fall within its scope by virtue of having some business activity in the UK. The BA also broadens its coverage into the private sector. It prohibits giving and receiving bribes with the intention that some function or activity will be performed improperly. This will include not only functions of a public nature, but also activities connected with a business or with a person’s employment. In contrast, the FCPA applies only to the bribery of foreign officials (the FCPA’s accounting provisions are beyond the scope of this article). Under the BA’s strict liability offence of ‘failing to prevent bribery’, an organisation could face liability as a result of the unsanctioned actions of third parties. Liability for third parties is more restricted under the FCPA. Although the FCPA prohibits corrupt payments from being made to foreign officials

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through intermediaries, to commit an offence the organisation would have to know (including conscious disregard and deliberate ignorance) that all or part of the payment would be, or is likely to be, used corruptly. The BA creates a much more onerous burden for organisations, requiring them to demonstrate their genuine efforts to prevent corruption in order to avail themselves of the ‘adequate procedures’ defence. Government guidance will be published in early 2011 in relation to these ‘adequate procedures’, but no prescriptive standards will be provided. In contrast to the FCPA, the BA contains no requirement that the person paying a bribe to a foreign public official is motivated by corrupt or improper intent. This should be noted particularly in the context of the provision of hospitality. The BA also contains no equivalent of the FCPA’s facilitating or ‘grease payment’ exception, which allows payments to be made to facilitate or expedite ‘routine government actions’. Organisations making these legal payments under the US legislation will soon be committing an offence if they fall within the jurisdiction of the BA. Under the FCPA, entities may defend their promotional expenses if they can show that a payment was made as a reasonable and bona fide business expense directly related to the promotion, demonstration or explanation of products or services. There is no similar defence in the BA, and the position relating to corporate hospitality has been left unclear. However, it is thought that most routine and inexpensive corporate hospitality is unlikely to break the law because there would be no reasonable expectation of improper conduct. Lavish or unusual hospitality will be more risky. The penalties under the BA are also stricter than under the FCPA. The FCPA provides that corporations could be liable for a fine of up to $2,000,000 per violation and individuals may be subject to up to five years imprisonment as well as fined up to $250,000 per violation. Under the BA, companies face an unlimited fine and individuals a maximum of ten years imprisonment. The BA reflects an updated zero-tolerance approach to bribery. We have yet to see how the prosecutorial approach of the regulating authorities may temper the strictest provisions of the legislation, but there is no avoiding the changes to practices, policies and the conduct of business that organisations must promptly implement.

Paris as a place for arbitration Arbitration is expanding. In 2009, commercial arbitration institutions that publish statistics, such as the ICC Court of Arbitration (ICC) and the London Court of International Arbitration (LCIA), registered a significant jump in the number of registered arbitrations. One source of this growth is easy to identify. In the wake of the autumn 2008 economic crisis, there has been an increase in litigation generally; arbitration has enjoyed its fair share. What this growth shows is that the inclusion of arbitration agreements in contracts with an international dimension has become widely recognised as best commercial practice. When asked to bolster the arguments in a commercial negotiation over a dispute resolution clause, the most persuasive ammunition focuses on the ease of enforcement of arbitral awards in the 144 signatory states to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Likewise, an arbitration agreement more readily avoids the significant and costly risk of parallel proceedings in different national courts that may arise from other jurisdictional choices. The final and binding character of an arbitral award distinguishes arbitration from other forms of alternative dispute resolution, such as conciliation and mediation. These arguments often win the day. Other reasons cited in favour of arbitration include neutrality, privacy and procedural flexibility. However, frustration is also voiced in conferences and corporate corridors over how arbitration has become slow, cumbersome and obsessed with due process at the expense of an efficient and clear vindication of the parties’ legal rights.

FRANCE Bredin Prat Tim Portwood Avocat à la Cour/Barrister of England and Wales Partner Tel: + 33 1 44 35 35 35 Fax: + 33 1 42 89 10 73

International arbitration is clearly big business and as such is a buyer’s market. Transacting parties are embarrassed by the choice of different arbitration rules and places of arbitration. Competition between the major providers of international dispute resolution services - namely the ICC, the International Centre for Dispute Resolution (ICDR - part of the American Arbitration association (AAA)), the LCIA and the Special Immigration Appeals Commission (SIAC) - is rife as it is with regional arbitration institutions, chambers of commerce and ad hoc forms of arbitration (whether under the UNCITRAL rules of arbitration or otherwise). Paris has long been recognised as a major centre for international arbitration, partly due to the ICC and the ICC Court of Arbitration having their headquarters there. Another more fundamental reason lies in the pioneering position of the French courts in their support of arbitration and the recognition and enforcement of arbitral awards. The French legislature is taking the same path in its reform of the 30-year-old law on arbitration with a new decree expected at the beginning of

2011. Paris is, and no doubt will remain, a cradle for international institutional arbitration, even if the identity of the incumbent institution were to change. The depth of experience that the Parisian legal market embraces in international arbitration goes well beyond the four walls of ICC arbitration. Paris-based litigators and arbitrators frequently find themselves acting under the rules of other arbitral institutions that are headquartered outside France and for clients who have no specific French link. Litigating in an international arbitration frequently calls for an ability to work across cultural and linguistic barriers  the ability to shed the trappings of one legal background and don those of another is often a key to successful and effective advocacy before an arbitral tribunal. Indeed, knowing how to address an arbitral tribunal composed of civil law, common law and Islamic law backgrounds is a skill that only seasoned international arbitration practitioners can profess to have. Paris-based teams of lawyers manning international arbitration departments of firms renowned for their arbitration practices comprise proficient litigators with wide experience in two or more legal cultures who are multilingual and just as at home in an inquisitorial proceeding as in an adversarial one. A party’s choice of counsel is therefore an extremely important one and should not necessarily follow the conventional wisdom of choosing legal representation from the same legal background as the law of the contract or place of arbitration. Considerations (such as the likely composition of the arbitral tribunal, the background of the adversary, the importance to the dispute of witness evidence or documentary evidence and the need for technical expertise) should take a more determinative role in the choice of counsel. It is obvious that the choice of the arbitral tribunal is the most important phase of any arbitration. Experienced arbitration practitioners have a wealth of unwritten knowledge about the quality of arbitrators and their past arbitral experience. It would be unwise for a party to embark upon an arbitration without being able to tap into this information. The market for international arbitration in Paris is thriving and is likely to remain so, although it may be on the brink of a number of possible changes. Criticisms as to the trend for lengthy and cumbersome procedures have been heard by the various bodies and institutions active in the sector. It is, however, incumbent on arbitral practitioners to take heed of this criticism and to use the flexibility for which arbitration is renowned to ensure that an efficient and positive answer is given.

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INDIA Bharucha & Partners MP Bharucha Tel: +92 (22) 2289 9300 Fax: +92 (22) 2282 3900 Vivek A Vashi Tel: +92 (22) 2289 9300 Fax: +92 (22) 2282 3900

With its natural resources and huge consumer base, and with the slowdown impacting the western economies, India continues to witness a large influx of foreign investments. India’s common law background and its established judicial and regulatory systems are substantial contributory factors to its continuing economic growth. The Indian courts do respect foreign judgments; however, recognition is subject to certain statutory exceptions. The exceptions are few and they are broadly consistent with the conflicts of law principles, namely: judgment procured by fraud; judgment procured without following due process; judgment obtained from a court that had no jurisdiction; default judgments; or, judgments opposed to Indian law. India also has reciprocal agreements with several nations, and judgments rendered by competent courts in reciprocating countries are enforceable in India as though they were judgments of the Indian courts themselves. India is a signatory to the Geneva Protocol and Convention, and also to the New York Convention of 1958. Arbitration, as a means of alternate dispute resolution (ADR) is deeply entrenched within the Indian system. The government, and also the courts, continue with concerted efforts to promote

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ADR. A number of mediation training centres have been established and the procedural law dictates that courts hearing civil disputes must, before proceeding to trial, offer parties the choice of ADR in appropriate cases, particularly commercial disputes. The Arbitration and Conciliation Act 1996 is based on the UNCITRAL (United Nations Commission on International Trade Law) Model Arbitration Law and enables enforcement of foreign awards covered by the New York Convention and also by the Geneva Convention. Indian courts will enforce such foreign awards as ‘decrees’ of the Indian courts and the burden to prove that such an award is not enforceable on one of the grounds listed in Article V of the New York Convention (or Article II of the Geneva Convention, as the case may be) is on the party resisting enforcement. Indian courts enforcing a foreign award cannot reopen the award to consider the Arbitral Tribunal’s findings; the court’s role is limited to considering whether any defences under the convention(s) exist. On the regulatory front, the Securities and Exchange Board of India (SEBI) is a proactive securities market regulator and often exercises its sweeping powers to protect investor interests. Courts are statutorily prevented from interfering with SEBI’s decisions. A dedicated appellate authority, the Securities Appellate Tribunal, has exclusive appellate jurisdiction over SEBI. SEBI is particularly active in regulating takeovers. The Competition Commission of India (CCI) has replaced the previous competition regulator. The CCI regulates mergers exceeding prescribed thresholds and also anti-competitive practices. The Appellate Tribunal has exclusive appellate jurisdiction over the CCI. The Competition Act broadly follows the EU directives, but the CCI has no power to grant block exemptions. The government, however, has reserved powers to grant exemptions where public interest so demands.

Bharucha & Partners provides a full range of legal services in the corporate and commercial fields. M P Bharucha, senior partner, has consistently been ranked as one of India’s leading litigators. While MP is now more engaged in arbitrations, domestic as well as international, Vivek A Vashi is focused on litigation in the High Court as also the Supreme Court of India. The transactional practice is headed by Alka Bharucha, long ranked as one of India’s leading M&A and transactional lawyers. The transactional practice includes M&A, foreign collaboration, banking, structured finance and capital markets.

Our firm includes engineers and lawyers with vast experience in the industry and the industrial property field. Novopatent International Service is a boutique law firm dedicated to the practice of industrial property (IP) law for the worldwide protection of ideas and innovations that drive business around the world. Our practice includes all aspects of patent, trademark, copyright and plant breeder’s rights law, including counseling, prosecution, licensing and litigation. For our esteemed clients, we also provide professional services in corporate law, foreign investments and resulting contentious causes. What distinguishes the firm in its jurisdiction is that we specialise in IP matters alone, providing more personalised attention and resources devoted to our clients’ businesses. Our clients’ economy really matters to us and we implement policies that look to keep our clients’ expenses and disbursements to a minimum. Rarely, extra charges may be charged for rush/emergency handling. Our firm aims to be an eco-friendly enterprise and our clients’ support will foster a growing movement and effort directed to create consciousness about our role in preserving and caring for our environment.


Novopatent International Service, Hugo Rodriguez Tel. +52 777 310-6590 Fax. +52 777 310-6591

Our firm includes engineers and lawyers with vast experience in the industry and the industrial property field. We seek to always provide an excellent service both to our direct clients and foreign associates so as to obtain and enforce the strongest possible protection for their new inventions, trademarks, designs and artistic works, either in Mexico or abroad. Mexico is a civil law country, significantly different to a common law system in respect of the importance of judgments and the role of international treaties. IP in Mexico is governed (among others) by the IP law, the copyright law, the law on vegetal varieties, the civil procedure code and penal code, and by extra-national agreements including: the Paris Convention for the Protection of Industrial Property; the Patent Cooperation Treaty and its regulations; the Lisbon Agreement for Denominations of Origin; the International Convention for the Protection of Vegetal Varieties; the Berne Convention for the Protection of Literary and Artistic Works; and, the North America Free Trade Agreement. The types of protection available in Mexico include: patents (duration: 20 years from the filing date); utility models (duration: ten years from the filing date); industrial designs (duration: 15 years from the filing date); trademarks, either individual or collective marks, trade names and slogans

(duration: ten years from the filing date, renewable indefinitely); denominations of origin (duration: open); trade and industrial secrets (duration: while measures to keep restricted access to secret information are in full force); and, plant breeder’s rights (duration: 18 years for vines, forest trees, fruit trees and ornamental trees, including (in each case) their rootstocks, and 15 years for species not included above). In Mexico, the enforcement of IP rights may either be made through administrative proceedings or by trial, and this can be both time consuming and expensive. Sanctions are almost exclusively available under criminal law, and damages can only be obtained through a separate civil trial. Administrative violations may be sanctioned with a fine of up to 20,000 times the daily minimum wage prevailing in the Federal District, temporary or permanent closure of the infringer’s premises or administrative arrest for up to 36 hours. Violations include: manufacturing goods covered by a patent without the consent of the owner or without the appropriate licence; offering for sale or bringing into circulation goods covered by a patent in the knowledge that they have been manufactured without the consent of the owner of the patent or without the appropriate licence; using patented processes without the consent of the owner of the patent or without the appropriate licence; offering for sale or bringing into circulation goods that are the result of the use of patented processes in the knowledge that they have been used without the consent of the owner of the patent or of the person who holds an exploitation licence; and, reproducing or imitating industrial designs protected by registration without the consent of the owner or without the appropriate licence. Article 221 of the IP law permits civil actions to obtain damages from persons committing actions punishable by law. Some remedies based on the Civil Code are also available, but in certain cases they can be more theoretical than practical. Under the IP Law, the person that suffers the harm can initiate a civil action for damages. The damages must not be less than 40% of the market price of the product or the cost of realisation of any service that is in violation of the IP Law. Under the IP Law, criminal offences include repeat administrative violations (as outlined above), and as provided for in Article 213, once the first administrative sanction imposed on that account has been enforced. Criminal offences are punishable by up to two years in prison or a fine equal to 100 to 10,000 times the daily minimum wage. In addition, the public prosecutor can close the infringer’s establishment.

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USA Law Offices of Adam Green Paul Herzog Attorney Tel: 1-323-852-6135 Fax: 1-323-966-4980

Want to create a business in the USA? There may be a visa for you. Despite a difficult recession, the US remains an attractive place for investors and entrepreneurs, particularly from Europe. The weak dollar, low interest rates and competitive prices for expenses mean that the Euro and Pound Sterling go further than before. Tax rates are favourable by European standards and labour laws are more advantageous to employers.

above what the investor would need to support their personal needs. The E-2 visa is given to individuals who have either invested in an enterprise and are coming to direct or manage the investment or have essential skills that are required by the enterprise.

For Europeans interested in starting a business in the US, US immigration law provides several visa options.

The L-1 ‘multi-national transferee’ visa is granted to individuals employed in an executive, managerial or specialised capacity by a company abroad (that is the branch, subsidiary, parent or affiliate of a US employer) and is being transferred to the US to work in a managerial, executive or specialised knowledge capacity. The L-1 visa is available to employees of business both large and small, also for foreign companies setting up a new US operation. Under such circumstances, the visa is granted for an initial period of one year. To qualify, the employee must have been employed for one full year prior to the filing of the application.

The ‘visa waiver’ programme Under the ‘visa waiver’ programme, citizens from nearly all western European countries as well as Australia, Japan, Singapore and South Korea may visit the US for up to 90 days without a visa. During this period, visitors may not engage in paid employment. However, various activities that are a prelude to active investment (such as hiring staff) are allowed. In addition, if an individual has a clear need to stay longer to prepare the investment, they may obtain a B-1 visa from a US consulate in Europe permitting stays of up to six months at a time. The applicant must be prepared to document a need for a longer-term stay. Citizens of countries that do not qualify for the visa waiver programme may apply directly for the B-1 visa. Non-immigrant visas There are three specific non-immigrant visas for investors. Two of these (the E-1 and E-2 visas) are available to citizens of countries with which the US has a treaty, including the UK, most western European countries, Australia, Canada, Japan and Mexico. The third (the L-1 visa) is available to any person meeting the requirements, regardless of nationality. The E-1 ‘treaty trader’ visa is for investors whose business engages in a substantial level of trade between the US and their home country. For example, an Italian maker of espresso machines might establish a US sales office to market and distribute its products in the US  its employees would qualify for the E-1 visa. The applicant must show that they are coming to the US to carry out substantial international trade principally between the US and their home country. They must also show that the company is at least 50% owned by persons from the treaty jurisdiction. The E-2 ‘treaty investor’ visa is for those investing in a US business, including purchasing an existing business or establishing a new business. There is no explicit minimum investment (generally US$100,000.00 is considered a threshold amount), but the amount must be substantial enough to enable the business to be successful. In addition, the investment must be more than marginal  the goal of the investment must be to generate profit over and

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The main difference between the L-1 and the E-visas is that (unlike the E-visas) the L-1 is available to persons from all countries that meet the requirements stated above. Also, there is a time limit on how long a person can stay in the US in L-1 status. The initial period is usually granted for three years. For managers and executives, the L-1 may be granted for a maximum period of seven years, while for specialised knowledge workers the maximum period is five years. Like the E-visa, spouses of L-1 visa holders are eligible to apply for a work permit. Generally, applicants must apply for the E-visa at a US Consulate. Once submitted, it can take anywhere from four to eight weeks for a decision. If approved, the visa is generally valid for two years and can then be extended indefinitely as long as the business is operational. Spouses (but not children) of E-visa holders are allowed to apply for work permits enabling them to obtain social security cards and perform any kind of legitimate work. Children are not allowed to work, but are allowed to attend public schools on the same basis as US citizens. The procedure for L-1 visas is different. The US company must first file a petition with the US Citizenship and Immigration Service (CIS). Only when the CIS has approved the petition may the visa be issued by a US Consulate. There is an exception for Canadian citizens, who may apply directly at the port-of-entry. There is no quota for E- or L-visas, unlike other work visa categories.

Leoni Siqueira Advogados is a boutique law firm that renders highly sophisticated and specialised legal counseling in the Brazilian carbon market

Brazil is one of the world leaders in generating certified emission reductions (CERs) from projects of clean development mechanisms (CDM) under the Kyoto Protocol. As a NonAnnex I party to the Kyoto Protocol, Brazil currently has no obligation to reduce its emissions of greenhouse gases under such scheme. Nevertheless, in December 2009, Brazil enacted a statute to implement a National Policy for Climate Change (NPCC), which provides for general principals and objectives in connection with minimising the causes and effects of climate change in Brazil. The statute provides for a voluntary target to reduce between 36.1% and 38.9% of Brazil’s estimated emissions of greenhouse gases for the year 2020. Alongside general credit facilities provisions, the statute provides for the use of the financial mechanisms foreseen in the Kyoto Protocol as a mean to implement the NPCC. Also, the statute authorises the creation of the Brazilian Market for Emission Reductions (BMER), which should be implemented through exchange or over-thecounter markets for the negotiation of securities representing certified greenhouse gases reductions. As of today, no exchange or over-the-counter market has been created in Brazil for implementing the BMER, even though there has been some discussion among market players in this regard. In addition, Brazil does not have any relevant voluntary cap and trade scheme in place.


Leoni Siqueira Advogados Flavio Leoni Siqueira Partner Rio de Janeiro offices T. +55 21 3138-6060 São Paulo offices T. +55 11 4063-6080

The main problem faced by market players in Brazil is that a strong legal/regulatory framework in connection with the carbon market still does not exist. For that reason, a considerable level of uncertainty for negotiating CERs in Brazil remains. For instance, the Central Government Tax Authority has yet to issue an official understanding on how transactions carried out in the Brazilian carbon market, both in the primary market (generation of CERs from CDM projects) and the secondary market (negotiation of CERs), should be registered by the parties involved and how they should be taxed in Brazil. The lack of a definition regarding the legal nature of CERs in Brazil also raises discussions as to which government agency has jurisdiction for regulating the trading of CERs  the Brazilian Securities and Exchange Commission (the CVM or Comissão de Valores Mobiliários) or the Brazilian Central Bank (the BACEN or Banco Central do Brasil). The CVM has decided that it does not have such jurisdiction per se because CERs are not to be considered securities under Brazilian Law. Nevertheless, CVM acknowledges that it may have jurisdiction over the trading of financial instruments based on CERs (for example, derivatives, future instruments, etc). Also, CVM may have jurisdiction over the markets (exchange

or over-the-counter markets) in which the CERs are publicly traded in Brazil. BACEN has not issued any official understanding regarding the jurisdiction issue. To a certain point, the uncertainty regarding which government agency must regulate the trading of CERs in Brazil is due to the fact that no exchange or over-the-counter market has been implemented in Brazil so far. As mentioned above, this may change in the near future and it is possible that this issue will be resolved as soon as interested parties officially request a position from the BACEN and/ or the CVM regarding the implementation of such trading market. Despite the uncertainty over certain important aspects of generating and trading CERs in Brazil, we believe that current legislation and regulation already provides for a vast array of options for interested parties to participate in the carbon market. For instance, there are different ways in which investment funds in Brazil can participate in this market. The CVM has already authorised hedge funds to trade with CERs and its futures instruments. They can trade such assets abroad, subject to certain limitations of Brazilian regulation, or in Brazil, once an exchange or overthe-counter market is in place. They can also trade with derivatives, such as swap based on carbon indexes. Hedge funds can also invest in projectbased financing of CDM projects in Brazil. Brazilian private equity funds or real state investment funds can be setup to finance CDM projects in Brazil. Investment funds for trading credit rights can also participate in securitisation transactions involving receivables from CERs’ future instruments. Transactions for selling CERs are also carried out by private parties in Brazil. BACEN allows for the remittance of funds from abroad to Brazil as compensation for trading CERs. Most of the private acquirers are in fact foreigners located in Annex-I countries. Future CERs are also privately transacted in Brazil, usually through the execution of emission reduction purchase agreements. These few examples illustrate the many opportunities that the Brazilian carbon market currently offers to investors. In fact, regardless of the shortfalls indicated above, when compared to its main competitors in developing CDM projects, Brazil offers a consolidated democracy and a stronger institutional and legal framework for developing lower risk CDM projects. Leoni Siqueira Advogados is a boutique law firm that renders highly sophisticated and specialised legal counseling in the Brazilian carbon market, helping Brazilian and foreign market players in developing and implementing different structures to take advantage of the many opportunities the Brazilian market has to offer.

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LuxuryBrandSeries Hotels & Resorts 2010 We all deserve a bit of elegance and luxury every now and again. There is nothing quite like being pampered or having your every need catered for. So when it comes to choosing the right hotel or resort in which to indulge yourself, you want only the best.

Whether it is business or pleasure, you deserve the most opulent and indulgent stay you can find. But where do you look for these exclusive resorts and hotels that dedicate themselves to you and your needs? In this guide we have selected some of the finest hotels and resorts from across the globe and give you an insight into some of the beauty and features that they boast. These resorts really cater for your every need so if it is total relaxation you crave, or want to be in the center of a bustling city our guide has it all. The guide has some of the most exclusive hotels and resorts that ooze of class and elegance in

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every aspect. Whether your needs are business or pleasure all the hotels we have featured have the very best of what the hospitality industry has to offer. When money is no object but luxury and elegance is a must, look no further than the hotels here to see what a really exclusive hotel and resort is all about. From the 5 star restaurants to the spectacular views, no one will be disappointed. So no matter what your purpose for leaving home, be it a business trip or a holiday of a lifetime, take the time to find the perfect hotel for you. Read on and see if some of these exclusive spots could tempt you into taking that well deserved break.

Hotel: Tivoli Ecoresort Praia do Forte Location: Bahia, Brazil

More than just a resort, a paradise sculpted by nature.

Nestled in the heart of an ecological reserve, Tivoli Ecoresort Praia do Forte offers guests a unique experience to connect with nature in a luxurious and privileged environment. Warm waters, surrounded by natural Atlantic forests, coral reefs, lush tropical gardens, coconut groves and quiet beaches - where sea turtles lay their eggs - provide the ideal setting from which to enjoy an unforgettable holiday in Brazil. Tivoli Ecoresort Praia do Forte is just 45 minutes away from the International Airport of Salvador and is located in Bahia, one of the most exclusive areas of the Brazilian coast, next to the charming fishing village of Praia do Forte.

use all their creativity to entertain kids of 4 to 11 years of age. Even those who are younger have their special corner: the toy room. And at the baby pantry, moms will find everything they need to prepare their babies’ meals.

The 292 apartments are divided in to 18 small units which are scattered over 30 hectares of tropical gardens. Each of the rooms is decorated to reflect the essence of Bahian style and culture, and from the comfortable verandas guests can admire the truly enchanting sea views. The beautiful natural fibers used in the contemporary decor create an elegant, cozy environment.

The Ecoresort is also home to the largest Thalasso Spa in Brazil, with 25 cabins, a heated swimming pools and a large relaxation area with an open garden. Thalassotherapy and relaxing baths, combined with massages, aromatherapy, and other techniques will provide you with truly special moments of pure pleasure and well-being.

Visiting families are also looked after at Tivoli Ecoresort Praia do Forte. There are thirty choices of activities, from yoga lessons at the seaside to a 7-kilometer hike to the ruins of historical Garcia D’Ávila Castle. And children are not left out. At our children’s club, CaretaCareta, well-trained monitors

At Tivoli Ecoresort Praia do Forte, our restaurants are a true feast for the senses. Breakfast alone offers more than 100 items, which compose a festival of colors, aromas and flavors. In addition to regional fruits, breads, cakes, cold cuts, cereals and other items, you can also try Bahian delicacies, such as tapioca, beiju, and cuscuz. Our kitchen offers both local and international dishes.

The hotel offers the opportunity to integrate both pleasure and work in a single, inspiring place. All our meeting rooms are equipped with complete facilities and state-of-the-art technology, offering ideal conditions to host conventions, meetings and incentive events. Attentive to detail, the Ecoresort is renowned for its staff.

Mr. João Eça Pinheiro Managing Director – Tivoli Ecoresort Praia Forte T: +55 71 3676 4000

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Hotel: The Chedi Muscat Location: Muscat, Oman LUXURY BRAND SERIES – HOTELS & RESORTS 2010


The luxurious 5 star resort The Chedi Muscat, set in 21 acres of immaculate landscaped gardens, occupies a prime beachfront location and is yet only a 15 minute drive from the airport and short distance from the city’s business district and main tourist attractions.The Chedi Muscat offers understated elegance and a perfect mix of Omani architecture and a profound Asian Zen-style, ideal for business and leisure travelers alike. The clean, minimalist lines of the low-rise white buildings, accommodating 156 luxurious and trendy rooms and suites are accentuated by gardens of symmetrical simplicity, with lines of manicured hedges and ordered pools of water. All of the rooms and suites combine cool designer sensibilities with plush furnishings and the latest audio visual gadgets such as a BOSE Wave Sound System, an IPod, flat screen TV, complimentary wireless Internet and a private espresso machine. The suites have a private terrace with unrivalled views across the gardens and ponds, HajarMountains and the Arabian Sea.

The Chedi Muscat Tel.No. + 968 24524401 Fax No. + 968 2449 3485

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season as well as indoor dining options inclusive of a large selection of private dining rooms. The flavors of the world are brought to Oman at The Restaurant where food lovers are spoilt for choice with a splendid á la carte menu to suit every taste. Flavors from different corners of the world are brought together in the four display kitchens at The Restaurant featuring Asian, Arabic, Indian and Contemporary cuisine. With unrivalled views of the gardens and the ocean, the charm of The Restaurant lies in its magnificent ambience. Guests can take delight in the spectacle of dinner being prepared in any of the four open display kitchens. The RestaurantBar boasts an impressive floor-toceiling wine collection with an extensive collection of prestige Cuvee Champagnes and fine wines, one of the largest cellars in Muscat. The Lobby Lounge offers evening cocktails, refreshing beverages and snacks throughout the day.

Overlooking the Gulf of Oman located on the beachfront, The Beach Restaurant offers an eclectic seafood á la carte menu influenced As well as a private beach, The by European and Far Eastern Chedi Muscat offers leisure guests a cuisines. With its muted lighting choice of two pools: the adults-only infinity Chedi Pool, surrounded by and mix of Arabian architecture cabanas and wide couches; and the and Asian contemporary interior, this exclusive seafood restaurant Serai Pool, with its black mosaic suggests an exquisite dining tiles and elegant canopy. experience for the sophisticated The resorts offers two floodlit gourmet traveler. tennis courts and a gym featuring the latest Technogym equipmentfor Nestled between lush green the guests that wish to keep up gardens and the turquoise waters with their exercise regime. of The Gulf of Oman and adjacent to the adult-only Chedi Pool, is Tucked away in a secluded The Chedi Poolside Cabana which courtyard, The Spa is a true sanctuary. There are seven spacious offers a range of refreshments and superbly appointed treatment alongside light luncheons. A casual rooms, inclusive of three Spa dining experience if offered during Suites that are the epitome of the season. Adjacent to the darkunderstated elegance. The Spa tiled Serai pool is the Serai Poolside specializes in Balinese therapies, Cabana which is the perfect venue but also offers an extensive variety for lunch, dinner or evening of beauty rituals based on the holistic principles of aromatherapy, cocktails. Ayurveda and herbalism.

Hotel: ATivoli Ecoresort Praia do Forte stay at The Chedi Muscat is sure Location: Bahia, to please the eye as well as the Brazil

Embark on an irresistible voyage of dining and entertainment pleasure with a choice of five restaurants that offer al fresco dining in the

palette and will leave you relaxed and wishing for nothing more than to come back.

Stefan Noll General Manager Phone: 62 361 975685 Fax: 62 361 975686 G.A Devi Maharani Director of Sales t +62-361730622 f +62-361730623

Hotel: The Chedi Club Location: Tanah Gajah, Ubud, Bali

The Chedi Club at Tanah Gajah, Ubud, Bali, resting within an exclusive private estate in a breathtaking rural setting officially opened on 1st July 2004. The accommodation comprises twenty selfcontained suites and villas, leisurely spread throughout a substantial five hectares of magical gardens, encompassed by an infinite vista of rice fields unbroken by borders or fences. Three splendid One-Bedroom Spa Villas and nine OneBedroom Pool Villas, in addition to the stunning Two-Bedroom Estate Villa and seven OneBedroom Suites. The interiors are cleverly blend contemporary sophisticated elegance with the traditions, romance and ambience of Bali. Each is thoughtfully decorated and furnished with artistic flair, graceful furniture and local artefacts from the Hadiprana collection. Located only three kilometres from the centre of Ubud, the estate, known as Tanah Gajah, takes its name from the nearby Goa Gajah elephant temple and is located on the fertile stretch of land between the Petanu and Pakrisan rivers. It was designed and created in the early 1980s by Mr. HendraHadiprana, one of Indonesia’s most prominent architects and interior designers, as a secluded hideaway and weekend retreat for his family and friends. After more than two decades of nurturing and love, there is a powerful energy running through the beautiful gardens, which are dotted with mature trees, lotus ponds and an ornamental lake. The Hadiprana family has now decided to hand over the management of the estate to the GHM, who successfully run The Legian and The Club at The Legian, Bali. The concept of The Chedi Club at Tanah Gajah is similar to its sister property, The Club at The Legian, with its famous personal ‘Club Service’.

With such distinctly different styles set in such contrasting locations, the two GHM resorts will be the perfect choice for a unique two-centre holiday. A traveling personal butler will be assigned to look after every need of his or her guests throughout the duration of their stay at both of the resorts and all accommodation, including the One-Bedroom Suites, will be offering this private butler service. Guests looking for an unsurpassed pampering experience can opt to stay in one of the private Spa Villas featuring private massage suite, sauna, cold plunge, semi outdoor rainforest shower and bathtub. Alternatively the Pool Villas each feature a private 10-metre pool with a sundeck, together with a diningbalé that melts into the walled tropical garden. Serenaded by bird song and the breezes that whisper through its columns, The Bird Lounge is a tranquil pavilion next to an aviary. The nearby Club Lounge and Restaurant appears to almost float on the gently swaying fields of rice against a backdrop of lush coconut palms and the mighty volcano, GunungAgung. The menu at The Restaurant is offering a harmonious balance of delectable Western and Indonesian cuisine utilizing the best and freshest ingredients harvested from the resort’s own herb and vegetable gardens. Meanwhile, guests at the dedicated Spa are able to enjoy the magnificent panoramic view while undergoing a wide range of soothing therapies and body treatments or practicing yoga in the meditation studio. Other facilities include the 35-metre main pool, a stateof-the-art gym, a tennis court and an open air amphitheatre showcasing cultural performances of Hindu dance epics.

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Hotel: The Bauer Hotels Location: Venice, Italy LUXURY BRAND SERIES – HOTELS & RESORTS 2010

BAUERs IL PALAZZO The BAUERs Il Palazzo, a striking boutique property overlooking the Grand Canal, has a Gothic façade, bright red awningd and arched lancet windows. Owner Francesca Bortolotto Possati has a background in European art and antiques, and it shows in the skilfully designed interiors, with restored stucco, trompe l’oeil ceilings, crafted woodwork, silk wall coverings and traditional fabrics from Venice’s acclaimed Rubelli and Bevilacqua houses. Ms. Possati has worked with local artisans to recreate 18thcentury splendour as well as give a personal touch to this hotel. Just steps from Piazza San Marco, it excels at customizing itineraries for its guests. There’s a private dock for transfers, and guests can take advantage of the spa at sister hotel Palladio, on nearby Giudecca island. BAUERs L’Hotel When hotelier Francesca Bortolotto Possati took over Venice’s legendary Bauer, brought to international renown by her grandfather in the 1940s, she decided to turn it into two distinctive properties. L’Hotel and Il Palazzo. Housed in a restored, 18th-century palace, the BAUERs L’Hotel is the more contemporary of the two, with art deco-inspired interiors and The Bauers - Palladio di notte am urban vibe.

The Bauers - Bauer Il Palazzo Royal Suite Bed Room

The craftsmanship behind the striking design is unmistakably Venetian, as are such touches as Rubelli and Bevilacqua fabrics and original works of art by local artists. La Serenissima also takes center-stage at De Pisis, the acclaimed restaurant from which diners can be match the gondolas gliding down the Grand Canal. In the heart of Venice, the property is within walking distance to the makor monuments and cultural highlights. BAUERs Palladio Hotel & SPA Housed in a historic palace originally designed by renowned Renaissance architect Andrea Palladio, this boutique hotel reopened in 2006 after a complete and doting restoration undertaken by its owning family. Set on Venice’s Giudecca island (historically Venice’s garden place), the retreat is is complemented by an all-natural organic spa with holistic treatments and rituals for couples and friends. The rooms and suites are decorated with floral tapestries in pastel palettes and adorned with terraces overlooking either the gardens or the lagoon. Best of all is the experience upon arriving via the hotel’s solar-powered boat: the atmosphere and sounds of the garden immediately propel guests into an oasis of serenity.

The Bauers - Bauer Il Palazzo Front

The Bauers

Mrs. Francesca Bortolotto Possati. President & CEO Tel: +39 041 520 7022 Fax: +39 041 520 7557

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The Bauers - Hall

Hotel: Serena Hotels Location: Africa

Nairobi Serena Hotel

Kirawira Luxury Tented Camp

Justly famed for its exceptional standards of efficiency, service and five-star hospitality, the elegantly sophisticated Nairobi Serena Hotel is a member of the Leading Hotels of the World group and is consistently voted ‘Best Hotel in Nairobi’ by airlines and international travel magazines alike. Despite its pivotal central location, the Nairobi Serena Hotel remains true to its title and offers an oasis of serenity amidst the bustle of one of Africa’s most vibrant capital cities. The interior décor reflects an entirely panAfrican theme featuring art and inspiration from Ethiopia, the Maghreb, West Africa and East Africa. Offering a range of dining experiences, the hotel is renowned for its ‘Mandhari’ fine-dining restaurant, which is rated as one of Kenya’s finest. The Nairobi Serena also offers world-class conference facilities, and the exclusive ‘Maisha’ Health Club and Spa.

One of our most exclusive safari venues, and a member of the Small Luxury Hotels of the World, Kirawira Luxury Tented Camp offers the epitome of classic ‘Out of Africa’ safari camp luxury. Styled to replicate the elegant hunting camps of such legendary ‘white hunters’ as Denys Finch Hatton and Baron Bror Blixen, it is located adjacent to the famous western corridor of the Serengeti National Park - arena of the ‘Greatest Wildlife Show on Earth’, the annual migration of over one million wildebeest. Designed in Edwardian style, it features an elegantly tented lounge evocatively furnished with a tasteful selection of safari antiques, a stained-glass and mahogany bar, twin mess tents, and a stone flagged terrace looking out over the Serengeti’s western corridor.

Kampala Serena Hotel Serena’s Uganda flagship, the Kampala Serena Hotel is an inspirational blend of 5-star polish, pan-African panache, social style and business reliability. Ideally located at the very heart of Kampala, the hotel stands amidst 72 acres of landscaped grounds and water gardens. An oasis of cool and green, encircled by the seven hills of Kampala, this 152-room world-class hotel is the focal point of national, regional, business, political and social life.

Zanzibar Serena Inn Idyllically situated on the sea-front of ancient Stone Town, and flanked by an exotic mix of sultan’s palaces, Portuguese forts, ancient dhow harbours, and bright bazaars, the Zanzibar Serena Inn is a haven of tranquility and opulence amongst the bustle of one of Africa’s most ancient and most enchanting towns. A member of the prestigious Small Luxury Hotels of the World, the inn has been styled to represent the epitome of Swahili style, ethnic elegance and Arabic opulence. The enchanted ‘spice isle’, meanwhile, is encircled by some of the most beautiful beaches in the world.

Serena Hotels Tel: +254202842000

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Hotel: BanyanTree Mayakoba Location: Mayakoba, Mexico

A harmonious blend of nature and luxury, Banyan Tree Mayakoba takes the Caribbean lifestyle to new heights on Mexico’s famous Riviera Maya coast. Opened in March 2009 to award-winning acclaim, welcome to your preferred new private pool villa escape. Situated within the private gated integrated resort development of Mayakoba, Banyan Tree enchants with the romance of travel, fused with a unique sense of tranquil and private space, and complemented by touches of our signature Asian hospitality and warmth. The secure compound is accessible only to guests of the Mayakoba development, providing additional peace of mind when traveling to the Riviera Maya. 107 luxuriously appointed private all-pool villas and townhouses, surrounded by lush tropical vegetation, lagoons, mangroves and the pristine waters of the Caribbean Sea. Feel at home in a unique pool villa tastefully decorated with handcrafted Mayan furnishings, yet retaining its modern comforts. Each freestanding villa curls around its own individual garden area, creating a private yet spacious outdoor area, in a unique layout drawn from courtyard houses of the Far East. Every guest has their own private swimming pool, loungers and enclosed compound in which to soak under the Caribbean sunshine. This is your refined space for living, relaxing and rejuvenating the senses. Combined with superb Asian-style service, modern Mayan architecture, award-winning spa, and sophisticated dining experiences, this is the perfect sanctuary you have been waiting for.

Enjoy our gourmet restaurants with a strong reputation for dining excellence, the culinary team at Banyan Tree Mayakoba has succeeded in creating restaurants that leave an indelible memory. From authentic Thai and Asian favorites at Saffron, to the healthy, hearty eclectic cuisine at Tamarind, each signature restaurant caters to your taste buds and cravings. Step into the “Sanctuary for the Senses” at Banyan Tree Spa Mayakoba - a place for physical, mental and spiritual renewal. Banyan Tree Spa brings its award-winning blend of Asian therapies, featuring massages and body treatments inspired by traditional Asian healing disciplines, to the Americas for the very first time. As a spa innovator, Banyan Tree Spa introduces “The Rainforest”, adding a new dimension to holistic rejuvenation. Enjoy the Rainforest’s hydrothermal circuit, comprising alternating hot and cold thermal cabins, designed for guests to embark on a trail of wellness treats. Take the plunge into the world’s second largest coral reef in eco-haven Mayakoba or Tee off at a Greg Norman 18-hole championship golf course which hosts the world’s first PGA tour outside of Canada and USA. Banyan Tree Mayakoba provides world class amenities and unparalleled services. The property’s attention to detail has set it apart as a luxurious retreat and a place where pampering is never overlooked.

Banyan Tree Mayakoba – Mexico Maximilian Lennkh Vice President / Area General Manager Tel: +52 984 877 36 88 ext.7001

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Hotel: The Saxon Boutique Hotel, Villas & Spa Location: Johannesburg, South Africa

The Saxon Boutique Hotel, Villas and Spa, voted the best Boutique Hotel in the World since 2001, is one of the “Leading Small Hotels of the World”. Set upon a hill in ten acres of lush, landscaped garden, the Saxon has been designed to complement and enhance the exquisite natural environment with the impressive buildings creating a tree-framed vista taking in terrace, pool and lawn. From the tree-lined avenue that leads up to the hotel’s iconic front doors, to the dramatic staircase that welcomes visitors at reception, the Saxon prides itself on combining the ultimate in South Africa hospitality with world-class facilities and service. The Saxon Boutique Hotel boasts 24 suites in total, each complete with king-size bed, the world’s finest linens, elegantly appointed bathrooms and the attention at all times of a butler. The Saxon has a fully enabled IP environment, with iPod docking stations and state-of-the-art communications equipment. The award-winning restaurant is open for breakfast, lunch and dinner and is famous for its interpretation of local and international dishes alike. The recently created “Chef’s Table” in the heart of the kitchen offers guests a six-course, wined-paired experience complete with bone china and silver service. A favourite of both in-house guests and local residents alike, the Saxon Spa and Studio is

designed to meet the individual needs of each guest. Offering a boutique of therapies, treatments and massage protocols as well as innovative Signature Therapies as well as traditional spa treatments, the Saxon is the ultimate spa destination. With 6 treatment rooms, a number of hydrotherapy and other facilities as well as a cafe for drinks, snacks and light meals, the Saxon Spa and Hair Studio is the perfect location to get away. The Saxon Villas are the latest additions to the property and offer guests a more discrete and private experience. Providing the hotel with an additional 29 suites in total, each of the three villas consist of private kitchen and dining room, bar and lounge area and plunge pool and are perfect for those who want five-star hotel service with the privacy and freedom of staying in their own space. A raised deck skywalk leading to the main hotel entrance offers intriguing treetop views over the manicured gardens. Each villa has a private lift to transfer you to and from the underground parking garage. Each villa also has its own underground lift to transfer guests from the newly constructed 200-vehicle capacity parking lot which allows guests to check in en-suite without the inconvenience of going to the Hotel. For dignitaries, celebrities, heads of state, and other VIPS, both local and international, the Saxon is the only destination when in Johannesburg.

The Saxon Boutique Hotel, Villas and Spa George Cohen Managing Director Tel +27 11 292 6000

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Hotel Name: Rembrandt Hotel & Towers Location: Bangkok, Thailand LUXURY BRAND SERIES – HOTELS & RESORTS 2010

The Rembrandt Hotel & Towers is regarded as one of the finest hotels in Bangkok. This 4 star property is located down a quiet side street offering a safe and secluded sanctuary in the “New Bangkok” district of Sukhumvit. Sky train as well as metro stations lie a short walking distance away offering access to all the main business, commercial, and tourist districts. Designed for the discerning traveler, this Warwick International affiliate features 407 luxurious guest rooms and suites. Fully renovated in 2010, each room at the Rembrandt Hotel & Towers offers a magnificent view of the Bangkok metropolis with comforts such as 24 hour room service, LCD flat screen TV with International channels, broadband wireless Internet access, and everything else to pamper guests to their heart’s content. As an added service, when staying on the Executive Floors located on the 22nd through 25th floor, guests are entitled to a separate express check-in and check-out at the exclusive Executive Lounge. Here, guest have a 24-hour butler service, complimentary breakfast buffet, snacks through the day, complimentary pre-dinner cocktails, and much more giving travelers the most value for their money. Along with superbly appointed rooms, the Rembrandt Hotel & Towers also offers a great variety of delicious specialties at any of its 5 restaurants. Rang Mahal, the rooftop Indian restaurant is the winner of Thailand Tattler’s prestigious Best Restaurant of the Year award 7 times running and is the best Indian Restaurant in Thailand. In addition to fine Indian dining, Rembrandt also offers a festive alternative in Señor Pico’s Mexican Restaurant. Also a recipient of this year’s Best Restaurant Award, Señor Pico’s offers a festive party atmosphere with live kitchen, fully stocked bar, and live Latin music

Eric Hallin General Manager +66 0 2261 7100

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throughout the night. The Rembrandt also features fine Italian dining at the da Vinci restaurant, while simultaneously offering up the finest home cooked Thai specialties at Red Pepper Thai Restaurant. Guest may also enjoy pampered luxury at our newly opened Spa @ Rembrandt with soothing and relaxing treatments. A large swimming pool lies on the 4th floor allowing guests to relax in the warm Bangkok sun, while simultaneously taking in a glimpse of the beautiful skyline with a light appetizer or delicious snack at the pool bar. Along with a fully serviced pool, guests also have access to our newly renovated Fitness Centre including everything from running machines to steam and sauna room.


Hotel Name: The Cadogan Hotel Location: London, UK

The Cadogan Hotel is one of London’s prestigious Knightsbridge hotels. This quintessentially British hotel, which is part of Franklyn Hotels and Resorts, is regularly frequented by A-list celebrities. Built in 1887-88 by William Willett, all areas of this beautiful townhouse have been sympathetically designed to create an exceptional standard of luxury. The hotel was once the home of Lillie Langtry, the famous actress and close friend of King Edward VII. After she sold the house, Lillie still used to stay in her old bedroom (109) by then part of the hotel. However, The Cadogan is perhaps best known for its association with Oscar Wilde who was arrested for gross indecency in room 118 in 1895. Throughout 2010, The Cadogan has been commemorating the 115th Anniversary by offering guests the chance to experience the “Green Carnation Package”, an Oscar Wilde favourite dish or tipple in the Drawing Room, and an Oscar Wilde inspired exhibition collaborating with Master BYAM students from Central Saint Martins. The Cadogan Hotel’s interior decor combines 21st Century chic with historical and ornate features. Throughout the guestrooms, muted and warm colour tones have been used to accentuate the decadent velvets and luxurious textured materials of the furniture, all adding to the inviting and timeless ambience of the hotel. The Cadogan’s Bar and Drawing Room feature

original stained glass windows and oak wood panelling. The Drawing Room is a charming venue to enjoy Afternoon Tea, which is a time honoured English tradition, popular with both guests and local residents. Langtry’s restaurant serves modern British dishes created by Head Chef, Oliver Lesnik. Featuring high sculptured ceilings, a magnificent marble fireplace, oversize mirrors and chandeliers, Langtry’s offers a stylish and romantic setting. The Cadogan has two inter-connecting banqueting rooms that have been furnished in rich chocolate brown, gold and cream fabrics. Both rooms have been totally refurbished and are fully equipped with the latest technology, making them perfect for business meetings, private dinners, cocktail parties and celebrations. The hotel also holds a civil wedding license. Situated between Knightsbridge and Sloane Square, The Cadogan Hotel has an enviable address. On the doorstep of some of the world’s most famed fashion boutiques including Fendi, Gucci and Prada, The Cadogan is also a short walk from Harvey Nichols and Harrods. Guests have complimentary access to the beautiful CadoganGardens directly opposite the hotel, as well as its two tennis courts. In 2010, The Cadogan Hotel was named as one of the ten best historic hotels in Europe and the United States by Trivago, for providing first class service and historical charm.

The Cadogan Hotel Fabio Gallo (General Manager) 75 Sloane Street T: 020 7235 7141

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EU MERGER CONTROL Corporate restructuring through mergers and acquisitions is a fact of business life and, despite the current economic crisis, mergers in the EU are still being made, albeit at a slower pace than in previous years. However, the process requires expert guidance through each stage in order to ensure a successful and, ultimately, legal merger. Controlling mergers and acquisitions is one of the key aspects of European Union competition law, which has seen continual development. Merger control is where mergers and acquisitions are reviewed under antitrust or competition laws. When companies combine via a merger, for example, this generally has a positive impact on markets. However, mergers which create or strengthen a dominant market position are prohibited in order to prevent abuse of this position.

in market concentration. The primary competition concern over these mergers is that the structural changes they create will lead to prices higher than would have prevailed but for the merger.

The distinguishing feature of horizontal mergers – mergers between competing companies – is that they reduce the number of firms active on the relevant market, with a consequent increase

This feature reviews major cases and provides information on current policy and procedural issues, as well as exploring the implications of horizontal mergers and damages.

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In practice, most merger control regimes are based on very similar underlying principles. The creation of a dominant position would usually result in a substantial lessening of or significant impediment to effective competition.

Borislav Boyanov & Co Peter Petrov



Bulgarian merger control regulation significantly follows that of the EU. The main differences relate to local merger control thresholds, above which a transaction becomes notifiable in Bulgaria. The two alternative general thresholds relating to local turnover are: The Bulgarian turnover of each of at least two of the participating entities’ economic groups must exceed BGN3m in the latest complete financial year, and the combined turnover in Bulgaria of all participants in the merger and their groups must exceed BGN25m - mostly relevant to legal mergers or cases of joint acquisition of control, for example. The Bulgarian turnover of the acquired undertaking (or part of an undertaking), and the target group, must exceed BGN3m in the latest complete financial year and the combined Bulgarian turnover of all participants in the merger and their groups must exceed BGN25m in that financial year - relevant mostly to acquisitions. A separate set of rules applies to banks and financial institutions, as well as to insurance companies. The parties are required to notify after they enter into the arrangement that would bring about the concentration, but before the transaction is consummated. In certain cases, a transaction can be notified on the basis of a non-binding document, provided the parties can demonstrate a good faith intention to complete it. The parties are not allowed to finalise the transaction until a clearance

Kinstellar Lukáš Ševcík Managing partner Kinstellar Prague Tel: +420 221 622 144 Fax: +420 221 622 199

The core rules of Czech competition law, including merger control, are set out in Act No 143/2001 Coll, on the Protection of Economic Competition. Following the accession of the Czech Republic to the EU, Czech merger control rules were largely harmonised with Council Regulation No 139/2004 (EUMR). The authority in charge of regulating competition law is the Czech Authority for the Protection of Economic Competition (Competition Authority). A transaction must be notified to the Competition Authority if the following three conditions are satisfied: the transaction constitutes a concentration; at least one of the turnover thresholds is met; and, the transaction is not subject to notification to the Commission under the EUMR. The approval proceedings commence once the Competition Authority receives a completed standard notification of concentration or, where applicable, a simplified notification of concentration. There is no deadline set for submission of the notification. It can be submitted before or after signing the documents establishing the concentration. Standard proceedings: There are two possible stages regarding the proceedings. The first stage can take up to 30 days, while the second stage, if opened, can take up to five months as of the filing of the complete notification. Simplified proceedings: The purpose of the simplified notification is to reduce the amount of information required in the event that the

decision is issued. No individual exceptions to the standstill obligation can be granted. A general exception is provided only for public bids for listed securities, provided the Bulgarian competition authority has been informed in advance and the voting rights on the acquired securities are not exercised before a clearance decision is issued. The timing of merger control is divided into two phases. Phase 1 proceedings normally complete within 25 working days. In problematic cases, the authority can allow an additional ten working days to present a remedy offer, and a further ten working days to review and negotiate the remedies. If still in doubt, the authority may start a Phase 2 investigation, which should complete within four months of the investigation start date. This period may also be extended due to complexity or negotiating remedies. The four-month period ends either with a decision to clear the transaction, or with a statement of objections to which the parties have 14 days to respond. The final decision will be rendered not earlier than 14 days after the response deadline and only after the parties have been heard before the competition authority. The transaction will be cleared if it does not create or strengthen dominance or a monopoly as a result of which effective competition would be significantly impeded, or if its overall positive effects outweigh any negative effects it may have on competition in Bulgaria.


concentration appears not to raise any major competition issues. When a simplified notification is made, within 20 days the Competition Authority either approves the concentration by means of a simplified positive decision or finds that it needs additional information in order to assess the concentration and issues a request that the parties to the proceedings submit a standard notification. Implementation of the transaction: Until the Competition Authority approves the transaction, the concentrating undertakings are prohibited from implementing the transaction. In particular, the concentrating undertakings must avoid determining or influencing each other’s competitive conduct. If the Competition Authority discovers that the concentrating undertakings implemented the transaction without filing the notification or prior to its approval, in addition to imposing the fines described below, it is authorised to order the undertakings to ‘demerge’. Thus far, the Czech Authority has ordered parties to demerge in only one case. The Competition Authority may impose severe fines for breaching merger control regulations. These fines may be up to CZK10m (approximately €400,000) or up to 10% of the net turnover achieved during the last financial year. The Competition Authority may, in addition to fines, impose remedial measures to be taken by the undertakings and may set reasonable deadlines for their implementation.

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Pirola Pennuto Zei & Associati Avv. Luciano Maria Vasques Of Counsel Tel: +39 06 570281 Fax: +39 06 570282739 Italy enacted its antitrust law L 287/90 (AL) creating the Autorità Garante della Concorrenza e del Mercato (IAA), an independent public body charged with merger control and the application of the AL, as well as of the other EU and Italian antitrust provisions (direct application of articles 101 and 102 of the Treaty on the Functioning of the European Union TFEU). All transactions giving rise to the acquisition of control of an undertaking or part of an undertaking fall under the AL. Control occurs where there is a merger of two or more undertakings or the acquisition of control of the whole or a part of another undertaking. The AL requires mandatory pre-merger notification where the combined aggregate turnover in Italy of all undertakings involved (e.g. purchaser plus target) exceeds €472m or the aggregate Italian turnover of the target exceeds €47m. For foreign-to-foreign transactions, if the first threshold is surpassed, a filing is required if the target generates, or will generate, a turnover in Italy after the concentration. Although subject to a de-merger risk, once notified, the transaction may be completed. Fines of up to 1% of the turnover in the last financial year may be levied on undertakings that fail to comply with the prior notification requirements. Once the parties have notified the IAA, it has 30 days to institute any

investigations (15 days for public bids notified to CONSOB (the Commissione Nazionale per le Società e la Borsa), 60 days for concentrations concerning the insurance business). If additional information is needed, the IAA may formally request it from the parties, whereupon a new 30-day period will begin when the information is received. By law, the IAA must issue a decision within 45 days of the start of a formal investigation (phase 2), which can be extended by another 30 days if the parties fail to supply the necessary information. Third parties are allowed by the IAA to participate in phase 2 investigation proceedings. Sixty working days are provided for phase 1 and phase 2 investigations concerning the banking industry. IAA may block a transaction that gives rise to the creation or strengthening of a dominant position in a certain market. The IAA may also impose commitments (normally proposed by the parties during the proceedings) aimed at avoiding antitrust concerns. A failure to comply with the commitments will be fined up to 10% of the notifying party’s turnover generated in the markets affected by the concentration. Normally, the IAA prefers structural commitments rather than behavioural ones. IAA decisions on concentrations can be appealed to the administrative tribunal. Recently, the IAA has concentrated its investigations on telecommunications, electricity, energy gas distribution and banking.

Advokatfirman Lindahl KB Eva-Maj Mühlenbock Tel: 0046 08 527 70861 Erik Brändt Tel: 0046852770871 Fax: 004686677380


The relevant rules on merger control in Sweden are found in the Swedish Competition Act 2008:579. The regulatory authority is the Swedish Competition Authority (SCA) and mergers have to be notified subject to certain criteria.

A merger can be prohibited if it is liable to significantly impede the existence or development of effective competition in the country as a whole (or a substantial part thereof), and if a prohibition can be issued without significantly setting aside national security or essential supply interests.

Within ten days of notification, the SCA must decide if the notification is complete. This procedure has been voluntarily performed by the SCA in order to increase the parties’ ability to anticipate when the merger can proceed. The SCA has recently indicated that this service will be removed, the implications of which remain to be seen. The notion among practitioners is that it will result in a considerably less foreseeable process.

If it is sufficient to eliminate the adverse effects of a concentration, a party to a merger may instead choose to divest an undertaking (or a part of an undertaking) or undertake other measures having a positive effect on competition, thereby avoiding the merger being prohibited.

From the date when a notification is complete, the SCA has 25 working days (phase I) to either make a decision that there are no grounds for action or that it shall undertake a special, in-depth, investigation. That period is extended to 35 working days if a notifying party offers commitments. During the 25/35-day period, no action may be taken by the parties to put the merger into effect. After a decision to carry out a special investigation (phase II), the SCA has the benefit of three additional months within which to take legal action before the Stockholm District Court in order to stop the proposed merger. The three month period may be extended by the Court provided the notifying parties agree to such an extension or there are particular reasons.

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Undertakings may also voluntarily make commitments to the SCA that may be made subject to the penalty of a fine. Phase II investigations have been reasonably common in the past. However, the actual stopping of a merger in the Stockholm District Court does not normally occur. That may be a result of the extensive practice of parties offering to make commitments or to divest parts of their businesses in order to get clearance from the SCA. The SCA encourages parties to contact them before submitting the notification - pre-notification contacts. These are confidential and may start before the merger is made public. The parties can submit a draft notification and/or make an oral presentation of the case.

Advokatfirman Glimstedt Michael Lettius Tel . +46 (0)42 26 99 50 Fax. +46 (0)42 13 60 15

Merger control in Sweden is regulated by the Competition Act (2008:579) (the Act) and enforced by the Swedish Competition Authority (Konkurrensverket). Swedish legislation is complemented by EU competition and case law, and the European Commission’s consoli¬dated jurisdictional notice applies. Glimstedt is one of Sweden’s largest firms with ten offices in Sweden, each of the Baltic capitals and in Minsk. The competition team works out of the Helsingborg office and has ex¬tensive experience in all areas of competition advice and litigation, as well as the notification of mergers to Konkurrensverket, notifications in other countries and/or to the European Commission. A merger will be prohi¬bited if it ‘fails’ the SIEC-test (significant impediment of effec¬tive competition). Full-function joint ventures and the acquisition of minority shareholdings will also be prohibited in certain cases. The thresholds in Sweden are: the combined aggregate turnover in Sweden of all undertakings concerned exceeding SEK one billion (approximately €100 million); and, each of at least two undertakings concerned has a turnover in Sweden exceeding SEK 200 million (approximately €20 million) in the proceeding financial year. Public takeover bids are regulated by the Act and by guidelines from Konkurrensverket. Glimstedt has recently advised and aided with a public takeover notification. Konkurrensverket is required to finalise its ini¬tial


investigation within 25 working days (phase 1) of receiving a complete notification. If Konkurrensverket initiates an extended investigation, the decision to pursue the matter further (phase 2) or to allow the merger must be made within three months. Finally, if Konkurrensverket still finds the merger to be significantly impeding effective competition, the merger can, upon application from Konkurrensverket (phase 3), be stopped if the court rules against this within six months of the application. At present, Konkurrensverket must inform the parties whether a notification is consi¬dered complete within ten working days of receipt. Konkurrensverket has, in spite of immense criticism, sug¬gested that this obligation be removed later this year. The parties may not implement the merger during phase 1. During phase 2, the court can order the parties to respect a ‘stand still period’. They are obliged to leave extensive information and addresses about customers and competitors, and Konkurrensverket often contacts these in the review process. If the thresholds are exceeded, a merger should be notified as soon as either party can show ‘the intention’ to form a concentration (e.g. by submitting draft agreements, letter of intent or documentation that a public bid will be presented). It is possible to negotiate remedies (such as divestment) that will often be combined with a significant penalty if breached. A clearance decision will cover ancillary restrictions and cannot be appealed by any party.

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Employee Share Plans Employee share plans have steadily increased in popularity as companies, both listed and non-listed, choose to extend their employee share plans internationally, either on a discretionary basis to senior executives or under ‘all-employee’ plans. But whatever the arrangement, companies need to consider various issues before expanding their employee share plans. A key starting point is the employment terms and the local laws and liabilities surrounding them; consultations or authorisations might be required by law. Also, securities law requirements might arise in connection with the grant, vesting or exercise of a longterm incentive award or on the eventual sale of the shares by the executive and will need to be addressed. It is also important to clarify who is responsible for paying the tax and social security liabilities and how the monies will be collected (for the employee and the employer). And what is the position of your internationally mobile employees? If they are no longer resident in your country at the time of exercise/ vesting, what are the income tax consequences in that case? It is vital to research the reporting and withholding requirements

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too, as there may be tax rulings related to the long-term incentive awards. Are there any exchange control issues that would prevent an employee from remitting monies abroad to purchase shares or repatriating monies from the sale of shares? Are there any data protection issues which may arise should the employer wish to outsource the administration of the long-term incentive award to a third party? A common oversight is translation, if there are language restrictions within your country you may need to get the plan documentation translated for the employee. Here, we aim to explain the key areas of employee share plans and discuss the benefits and drawbacks with global providers in the field.


Employee share schemes in the UK In the UK, there are four main types of taxadvantaged share schemes: company share option plans (CSOPs), savings-related share option plans (often known as ‘save-as-you-earn plans’ or SAYEs), share incentive plans (SIPs) and enterprise management incentive plans (EMIs). A CSOP is a plan that can be used to grant share options to employees, letting them buy shares in their employer (or possibly another company in the group) at a specified price after the expiry of a certain period of time. Normally, when an employee is granted an option to buy shares in their employer, they will be taxed on the gain they make when they exercise the option (i.e. on the difference between the total price payable on exercise, and the value of the shares received on exercise). However, under a CSOP, providing that certain criteria are met and the plan is given and maintains approval from the UK tax authority (HMRC), when the employee exercises the share option, they won’t be liable to pay income tax on their gain at that time. SAYEs also operate by employees being given an option to buy a certain number of shares in their employer at a fixed price. However, these shares can only be bought at a specified time, using amounts put aside in a ‘save-as-you-earn’ savings contract, with employees making contributions into the contract out of net income over a fixed number of years. At the end of the fixed period, the SAYE contract pays back the contributions and a bonus, out of which the shares can be purchased. If employees do not exercise their option to buy shares, they will still receive the proceeds of their SAYE contract, including the bonus. Tax benefits of SAYE plans include no income tax being chargeable on the bonus paid under the SAYE contract, and, as with CSOPs, no income tax will be payable upon the gain realised upon exercise of the option, if the scheme retains HMRC approval at that time.

Watson, Farley & Williams Liz Buchan Partner Tel: +44(0)20 7814 8065

A SIP provides for shares to be granted directly to employees through a trust. The trust rules have to comply with certain requirements, and a SIP must also obtain approval from the tax authorities. Shares under a SIP (depending on the scheme’s provisions, and subject to certain limits) can be purchased by employees out of gross salary, be awarded either free or by the employer matching employees’ purchases of shares, and/or awarded out of dividends on any shares already held under the SIP. Favourable tax treatment may apply both to the award/purchase of shares under a SIP, and also on

the sale of those shares, subject to specified criteria being complied with (for example, there is a length of service requirement for an employee to obtain favourable tax treatment on the sale of SIP shares) EMIs are share options that can be granted by an employer, providing it meets several requirements relating to factors such as the type of business it undertakes, its value and independence. An employer that satisfies the requirements can operate a share option scheme, which, if the scheme itself also satisfies specified criteria, can attract very favourable tax treatment on exercise of the options. However, the requirements that a company has to satisfy to be able to grant EMIs are quite restrictive, meaning that they will be unsuitable for many employers. While they do offer many advantages, HMRCapproved schemes often won’t be suitable to achieve an employer’s goals. Watson Farley & Williams was recently asked to create a share incentive scheme for a client who wanted to incentivise the employees of a company that he had bought out of receivership. The client had three aims: to gift shares in that company to its employees without the employees being exposed to an initial tax liability on that gift; for the gifted shares to further incentivise employees by letting them benefit in the future from increases in the value of the company’s shares, albeit with restrictions imposed until an ‘exit’; and, for future gains to be taxed under the UK’s capital gains tax regime (as he was) to more closely align the employees’ interests with his own. No HMRC ‘approved’ structure is readily capable of achieving these goals, and we therefore created a bespoke restricted share scheme, including the payment of a bonus payment to each employee, with that bonus (after deduction of income tax) being sufficient to satisfy the initial tax liability on the gift of the shares. By gifting shares to the employees in this manner, and the employees making a special statutory tax election, any gain subsequently realised by the employees on the sale of the shares was brought into capital gains tax, rather than being taxable through income tax. While this structure did not attract tax advantages in the same way as using an HMRC-approved structure, the client preferred to incentivise his employees in this way, feeling that linking their gains to those of the company (and himself) would be the best way to encourage employee performance.

October 2010 • GBM • 59



Pillsbury Winthrop Shaw Pittman LLP Susan P. Serota Partner Tel: 001 212 858 1125

Global share plans and US securities laws Many multi-nationals offer company share plans to their worldwide workforce. These plans can take the form of stock options, stock appreciation rights, stock bonus and stock purchase plans. Where a non-US company offers shares to its US employees, the issuer must comply with US Federal securities laws and with the securities laws of the various states (blue-sky laws) in which the US employees are located. All share offerings to US employees must be registered under the US Securities Act of 1933 (1933 Act) or comply with an applicable exemption. Most foreign companies are not registered under the 1933 Act and do not report under section 13 or 15(d) of the US Securities Act of 1934 (1934 Act), but may use Rule 701, a special exemption from registration under the 1933 Act. Rule 701 is specifically designed for use by companies that offer shares to employees, directors and consultants pursuant to a written compensatory benefit plan. Securities sold pursuant to Rule 701 must not exceed, in any consecutive 12-month period, the greater of: US$1m; 15% of the issuer’s total assets; or 15% of the outstanding securities of that class. When calculating the limit, options are treated as sales. The amount of ‘sales’ is generally measured by the fair market value of the securities at the time of the sale (or grant in the case of an option). No filing is required with the US Securities Exchange Commission (SEC). As long as the amount of any securities sold within any 12-month period does not exceed US$5m, the only disclosure required to be given to participants is a copy of the plan document. However, if that amount is exceeded, companies must provide participants with additional disclosure materials including: a summary of the material terms of the plan; information about the risks associated with investment in the securities sold pursuant to the plan; and, the issuer’s financial statements in compliance with US GAAP (generally accepted accounting principles) or IFRS (International Financial Reporting Standards) dated no more than 180 days before the sale of securities. The SEC interprets this 180-day rule as an ongoing requirement to deliver these statements on a quarterly basis. Companies that do not issue quarterly financial statements will be limited to the US$5m cap. The SEC allows companies to use Rule 701 where an employee

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benefit trust is being used as the alter ego of the company. However, companies that use such trusts may need to address whether the trust will be considered an investment company under the US Investment Company Act of 1940. In addition to the 1933 Act, foreign companies must fit within an exemption from the 1934 Act’s reporting requirements. Most non-US issuers should be able to rely on the exemption provided by Rule 12g32(b) from filing company information with the SEC, provided the company electronically publishes its disclosure documents in English on its website, maintains a listing on one more exchanges in its primary trading non-US market and the issuer is not an SEC reporting company. Foreign companies must also address how participants can resell their shares. Shares sold pursuant to Rule 701 are ‘restricted shares’ and should bear a legend stating that the shares may not be freely sold in the US. However, Regulation S under the 1933 Act permits the sale of these shares on the home-market exchange. Rule 701 is not the only exemption from registration available to foreign companies offering shares to their US employees, but it is the one most widely used. Many of the state blue-sky laws now provide an exemption from reporting and filing requirements if the foreign company is relying on Rule 701. However, some states still require information filings, fees to be paid and specific exemptions that must be met. Foreign companies, therefore, should ensure that they have reviewed and met all compliance rules related to US federal securities laws and state blue-sky laws before making a share plan available to its US employees. Susan P Serota is a partner in the New York office of Pillsbury Winthrop Shaw Pittman LLP and leads its international practice on executive compensation and benefits.


Marval, O’Farrell & Mairal Enrique M. Stile Tel. (54.11) 4310.0100 Fax (54.11) 4310.0200

Share plans in Argentina Several companies have adopted share compensation programmes for their employees in Argentina, such as stock option, phantom stock or other deferred equity-based plans, and these benefits have worked as a very appreciated incentive by the executives.

Furthermore, lack of specific regulations in this area has encouraged employers to move forward with these initiatives, with the only limitation of complying with minimum requirements under Argentine labour and social security laws (which are mandatory). With the aim of providing a cross-border and practical introduction, we outline below the most relevant aspects that employers need to consider when implementing share plans in Argentina. Reporting requirements: One of the most relevant advantages is that neither the employer nor the employee are required to make any report or to provide any information to any governmental authority, trade union or otherwise in connection with the development, implementation or participation in these types of plan. Therefore, the employer has full flexibility to structure the plan internally, as long as labour and social security thresholds and guidelines are observed. Additionally, typical share plans have been considered not to constitute a ‘public offering’, and therefore no reporting is required in that regard. No discrimination: In order to be in a safe harbour during the life of the plan, the employer should bear in mind, when designing the plan and defining the universe of eligible employees, that Argentine labour law requires equal treatment to all employees that work under similar circumstances. Distinctions based on certain objective factors, however, such as efficiency or productivity of an employee, are allowed. Therefore, differentiation based on objective parameters should be reasonably accepted. Remunerative nature of the benefit: Economic benefits that Argentinabased employees collect for being employed are considered remuneration. Thus, the economic benefit derived from share plans must be registered in the Argentine labour documentation, as otherwise severe penalties contained in Argentine law may be triggered. The impact on severance or other remunerative items, if any, will depend on the frequency under which benefits are received by eligible employees. As any other remuneration, these benefits may be considered an acquired right and therefore not subject to adverse

modification or elimination. Social security and income tax treatment: Benefits under these plans must be considered for social security purposes, which amount to a 17% withholding to the employee (calculated on the first AR$10,119.05 of his/her monthly salary) and a 23/27% contribution by the employer. The employer’s obligation to pay such a contribution has no cap and is a separate and individual obligation; therefore, it is not allowed to transfer such cost to the employee. However, this impact may still be taken into account when quantifying new grants. Income tax ranges from 9% to 35%, depending on the employee’s level of income and tax status; it is also applicable to benefits under share plans and it is withheld by the employer. Timing of labour, social security and tax obligations: Registration and taxing described above are triggered when the employee actually receives the economic benefit inherent to the share plan. On the other hand, provisional allocations, grant of yet-not-exercised options or restricted shares that are still not disposable by the employee should not trigger registration or withholding obligations. Similarly, the subsequent disposal of such shares by the employee (for instance, after registration and taxing at the time of exercise or release) would be beyond the labour relationship and associated obligations. Translation issues: It is widely advisable to provide employees with a hard copy of the pertinent plan documents in local language. The rationale behind this statement is that, in the event of a conflict where such documents needed to be presented, they would be required to be translated by an official translator (because no foreign language documents are accepted by Argentine authorities or courts) and any mistranslation would be interpreted in favour of the employee by operation of law. In light of the above, in our experience, share plans are very motivating benefits and it is still of key importance to carefully design and review them in order to adapt them to Argentine law and verify their impact on future grants.

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INTERNATIONAL TAX Chancellor of the Exchequer George Osborne recently described the UK corporate tax rate of 28% as “less and less competitive” and despite promises of four annual reductions, the conclusion of which would be the lowest tax rate this country has ever seen at just 24%, many businesses (and individuals) continue to look abroad to side-step paying a quarter of their income to Her Majesty’s Revenue and Customs. Corporation tax is calculated based on each accounting period for a business and is charged based on any profits gained by companies of any size, although the percentage is lowered to 21% in the UK for companies earning less than £300,000.

Internationally however, corporation tax can often be a lot more complexly structured but frequently a lot lower than the EU average. The current average rate of corporate taxation for countries within the OECD (Organisation for Economic Cooperation and Development) is approximately 26% with Japan having the unwanted title of highest corporate tax rates at over 40% but with new Prime Minister Naoto Kan declaring his intention to cut that by up to 15%, the United States could soon take that title of their hands with a current corporate tax rate of 39.2% when combining both state and federal taxes. However, there are many territories with significantly lower taxes which are often referred to as tax “havens” and their use by the worlds rich and powerful has been much-publicised and in recent times, much criticised. One of the most recently newsworthy examples of this exploitation of lower tax rates is by the universal search engine company Google UK Ltd who avoided over £100million in taxes despite annual revenues of over £1.25billion within the UK alone. By having 90% advertising revenue paid directly to their Ireland based company (predictably named Google Ireland Limited) they paid the Ireland corporation tax rate of just 12.5%, less than half the UK’s current 28%. Officially, the OECD has stated that there are three main boxes to be ticked in order to class a country as a tax haven and there list of current tax havens is quite extensive. The first part of this criteria is the most obvious in that they charge nominal

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or no taxes either corporation tax and/or personal income tax. Alongside this they must actively promote themselves as being a place where the high-taxes of OECD members, can be avoided. The second of the three main requirements is that the country concerned has a strict set of laws in place which protects the privacy of citizens and businesses against scrutiny by international tax authorities. Finally, and closely connected with the previous point, is a lack of transparency when it comes the legislative, legal or administrative provisions. The OECD believes that laws should be applied openly and consistently and information should be made available to foreign authorities when necessary. The very points that the OECD looks for in order to identify a tax haven are the reasons why so many international corporations have actively pursued opportunities to relocate or open subsidiaries within this areas. Whilst the privacy protection legislation in place has its advantages, the obvious and in most case primary selling point is the low taxes which save many corporations around the world billions each year in tax payments. Indeed a US study by the Government Accountability Office (GAO) states that 83 of the 100 largest publicly traded companies in America have a subsidiary in one or more of these low tax or tax-free jurisdictions. This same study shows that international financial conglomerate Citigroup has a total of 427 such subsidiaries saving them hundreds of millions in tax each year. Closer to home, a statement was released in September 2010 stating that Wolsely the major building supplies company based in the UK has decided to relocate to Switzerland in favour of the lower tax rates of the famously neutral nation, threatening a repeat of the 2008 exodus of businesses from the UK to tax shelters such as Switzerland. Wolsely stated that they planning on keeping as few as four people permanently located there but could expect to save around £23million. Several years before, Ineo, the UK’s largest private company, relocated to Switzerland costing the the crown approximately £390million in lost tax revenue over the space of four years. Whilst there is nothing illegal about the use of tax havens, governments around the world are becoming increasingly vocal in their opposition. Most notably, US President Barack Obama and the UK’s newly formed Liberal Democrat-Conservative government both of whom recently declared their new, hard line stance on tax avoidance via low-tax territories and their intention to establish information sharing agreements with as many of these nations as possible - some of which (Isle of Man, Guernsey and Jersey) remain crown dependencies. The benefits of the use of tax havens whilst shrouded in controversy, are unequivocally legal and undeniably rewarding. But it’s not all private jets and billion pound bank balances, the relocation to a tax haven does have its disadvantages. Inevitably, the larger OECD members are beginning to clamp down on taxavoidance, amongst other ways, through the attribution of income from a corporation based in a tax haven, to a taxpayer living within their borders. Several countries including the UK and US implemented the Controlled Foreign Corporate (CFC) legislation, the complex content of which varies from country to country. The basis of these rules is that a domestic member of a CFC under the control of domestic members should incorporate in such person’s income, said persons share of the CFC’s subject income. The exact rules of this legislation can be very convoluted and each country differs in their understanding. Another example of the larger member nations attempting to minimise lost tax revenue is the use of the European Union withholding tax although the name of this legislation is somewhat misleading as the EU itself has no taxation powers. The intention behind the withholding tax is to prevent tax evasion and involves the deduction of tax from interest earned by EU residents on their investments made in other member states. The

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burden of tax collection falls on the territory in which the funds are held (usually the low-tax territory) which is then returned to the EU country that the individual resides in (usually a high-tax rate OECD member). The potential saving of moving a company offshore shouldn’t be overlooked and with between 6-8% of global investments (between $5-7trillion) currently held in tax havens such as the British Virgin Islands and the Cayman Islands, there is no doubt that this a major part of the global economy. But it shouldn’t be taken lightly, with the complex laws and varying tax systems in the various low-tax jurisdictions getting the right assistance is of the utmost importance. Each territory has different legislation and different tax rates - both personal and corporate - and with the right advice from an experienced accountant, offshore provinces offer a frequently much-needed relief from the high taxes and lax privacy rules associated with the larger OECD nations. Similarly, individuals continue to explore offshore options in order to limit tax liability and take advantage of the stringent privacy rules in various territories around the world. From a personal perspective, Monaco has long been the billionaires playground with some of the richest individuals in the world residing in the southern France state including the likes of Topshop owner Sir Phillip Green and Leeds United FC chairman Ken Bates. The small principality levies no income tax on individuals, so the fact that their own natives account for just 16% of the total population comes as no surprise. The increasing pressure on smaller territories has lead to a decreasing level of privacy and independence amongst the tax havens. It is likely that the co-operation between the nations will continue to develop which may affect the number of private individuals who relocate to ensure privacy of asset-ownership however with the huge tax savings for both corporate and private clients, tax havens will remain an important part of the global economy.


Cross-Border Deal Making

If your business is looking to expand through acquisition then, in the present turbulent economic climate, you may already be looking at new client bases abroad. Cross-border deal making is a rising trend that is being employed by increasing numbers of companies around the globe, but before you take the leap, it is vital to seek specialist advice to ensure you avoid or at least minimise the potential pitfalls. According to many reports, Asia Pacific will be the driving force behind cross-border deal making in the next 18 months, as corporate buyers intensify their hunt for deals in unknown territories. It might seem a brave move, but many companies today have more confidence than they had 18 months ago and the conditions that foster successful cross-border deal making

are continuing to improve. However, it should not be underestimated that research and support in this area is vital in order to make any cross-border venture a lasting success. While firms are actively looking to expand their operations, they face a host of potential difficulties, from understanding local labour laws and legislative requirements to assessing the background, reputation and integrity of the target business and its intangible assets. Particular areas to consider relate to tax laws in the target country – not least the general cultural and ethical issues that are central to any international deal. Having previously been cautious about the risk involved, companies are now more aware of the benefits of certain jurisdictions, such as tax purposes, that they can take advantage of to help them deal their way to greater profits and a stronger business. Here, we seek to unravel the complexities of cross-border deal making and its related strategies, in terms of what it encompasses and the advisers who can assist on such matters globally.

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William & Case Associates Amos William Omolo Executive partner International business, corporate & financial law Tel:+254 20 2249261 Fax:+254 20 2240526 Mobile:+254733500464



TAIWAN Deep & Far Attorneys-at-Law C. F. Tsai Tel: 886-2-25856688 Fax: 886-2-25989900

William & Case Associates is a legal and management consulting firm founded in 1997 by Amos William Omolo. It is a private partnership with corporate headquarters in Nairobi Kenya. Integrating the full range of consulting and legal practice capabilities, William & Case Associates is the one firm that helps clients solve their toughest problems, working by their side to help them achieve their mission. A legal practice, and also a consulting firm on strategy and transformation, William & Case Associatesare committed to delivering results that endure. Our functional expertise includes:international business; corporate law; financial law; contracts; strategy and leadership; organisation and change management; innovation; risk management; operations; corporate governance and reputation; and, venture capital and private equity. We serve our clients in both private and public markets. Increasingly, we are helping our clients solve complex problems that neither corporate nor government leaders can address alone in areas such as healthcare, transportation, enterprise resilience, contract management, financial services and outsourcing advisory services. In east and central Africa, Kenya is a leader as an investment destination for global business and deal making because of its well-educatedlabour force, superior infrastructure, the port of Mombasa

Deep & Far attorneys-at-law were established in 1992 and have earned outstanding achievements in respect of IP matters since then. Deep & Far is a full service law firm with a focus on all aspects of intellectual property (IP) rights including: patents, trademarks, copyright, trade secrets, unfair competition, licensing, counseling, litigation and transactions. Every department in the firm retains its own features to perform in its respective fields. Nevertheless, it is hard for us to find a real local competitor in providing competent services in the IP field. The patent attorneys and engineers at Deep & Far hold advanced degrees and have generally graduated from the top five universities in the country. Our staff are dedicated to providing the best quality service in IP rights. About half of top-100 incorporations in Taiwan have sought to patent their techniques, but more than one fifth have used the services of this firm. Hi-tech companies in the Hsin Chu science-based industrial park have played a most important role in booming Taiwan’s economy; around half have sought to patented their techniques, out of which more than 60% have ever entrusted their IP rights work to this firm. We also represent international giants, for example, InterDigital, Samsung SDI, Infineon, LCD Advanced, Carl Zeiss, Samsung, MPS, NovaLED, Schott Glas, Genelabs, Toyo Ink, Siemens and Motorola. It is our philosophy to provide competent legal

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and a functional judiciary and government. It has become very important for global firms to invest in Africa because of the general decline of economic growth rates in Europe and North America. Companies that neglect Africa are likely to be left behind in the future of global business because Africa is rising. As a jurisdiction for global business in Africa, Kenya can be rated third after South Africa and Egypt. The main legislation governing investments in Kenya is the Investment Promotion Act 2004 (IPA), which is an act of parliament to promote and facilitate investments by assisting investors in obtaining the licences necessary to invest, and providing other assistance and incentives for related purposes.A minimum of US$100,000 is required for a foreigner to invest in Kenya (Section 4(1)(b) IPA). The major pitfall an investor may face is corruption within the government and a slow and subservient judiciary in determining disputes. However, with the passage of the new constitution in Kenya in August 2010, and with the requirement that parliament passes 49 pieces of legislation to implement the new constitution, Kenya is set to improve as a jurisdiction for global business. Kenya is now set to receive more foreign direct investment, especially from the US after the announcement of the new constitution in August.

services that other firms cannot comparably provide. We do so by selecting, edifying and nurturing staff with expertise that are moral, earnest, sincere and strictly disciplined  properties that are key factors for proper and competent comportment. With the Economic Cooperation Framework Agreement (ECFA) signed between Taiwan and Mainland China, Taiwan is a wonderful base for entering into the Mainland Chinese market. Those businesses/investors making investment, establishing a business or seeking to protect IP rights in Taiwan shall be considered by all as having the intention of a commercial relationship with Taiwan and/or Mainland China. Since Taiwan is an extremely important manufacturing base of 3C products, a local patent protection normally means there is a potential licensing opportunity for a specific invention. There are no pitfalls or obstacles as Taiwan is a pro-patent country, and there are proposed amended patent, trademark and copyright laws brewing. Also, as long as there is anything related to the public policy, we have lenient cross border M&A laws and regulations. In the M&A field, if there are potential pitfalls or obstacles, they relate to significant impacts on public policy and/or national interests. In the M&A field, there is no new legislation.


Masawara Plc - admission to AIM

On 19 August 2010, Masawara PLC (AIM symbol: MASA) announced dealings in its ordinary shares of US$0.01 on the AIM of the London Stock Exchange, following the issue of 30,957,863 million shares at 50 pence per ordinary share via a successful placing by Cenkos Securities plc (nominated adviser and broker to the company). With initial market capitalisation of US$80m at the placing price and US$25m new funds raised, the Company intends to pursue high quality new investment opportunities in Zimbabwe, adding to an existing portfolio of Zimbabwean assets, to participate in the recovery of Zimbabwe’s economy. The directors believe that the growth of Zimbabwe’s economy over the medium term will accelerate as the momentum of the political stability gathers pace. Masawara intends to invest the net proceeds of the placing within 18 months of admission.

Masawara Plc admission to trading on AIM Nominated advisor and broker


English legal counsel to the company

Reporting accountants

Mauritian legal counsel

Jersey legal counsel

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The initial portfolio comprises an effective 40% interest in Joina City, the single largest commercial and retail building in Harare, and a 30% interest in TA Holdings Limited, a diversified investment company that holds stakes in insurance, agro-chemical and hospitality businesses across sub-Saharan Africa and is listed on the Zimbabwe Stock Exchange Masawara’s investment adviser is FMI Zimbabwe, a wholly owned subsidiary of the Company, which will be responsible for identifying opportunities and managing investments in Zimbabwe and the wider Africa. FMI Zimbabwe is led by Shingai Mutasa and fellow principal Julian Vezey, who have numerous relationships in Zimbabwe and surrounding territories. Both Mutasa and Vezey will hold non-executive director positions on the board of Masawara and have previous experience in investing in Zimbabwe Commenting on the Admission, Shingai Mutasa said: “We have a great opportunity to lead the pack in bringing much needed investment capital to Zimbabwe and help the country rebuild following its recent economic difficulties. Masawara offers investors a high quality portfolio of new and existing investment opportunities, which we are confident will deliver significant value.” Masawara was incorporated in Jersey on 28 June 2010 for the purpose of acquiring interests primarily in Zimbabwe-based companies and projects in sectors such as agriculture, mining, telecommunications and real estate, which the directors believe represent investments that will generate attractive shareholder returns. The directors believe that opportunities exist to provide capital and management expertise to existing businesses in Zimbabwe. Given the shortage of capital in the country and concerns over the regulatory framework in Zimbabwe (specifically on the part of foreign investors as a result of the Indigenisation and Economic Empowerment Act (IEE Act) and Regulations), the directors believe that there are a limited number of investors active in Zimbabwe at present and, as a result, Masawara should be able to source investments at attractive valuations.

The Company qualifies as an indigenous Zimbabwean for the purposes of the IEE Act and is not currently restricted from acquiring majority control of any Zimbabwean company or business. Whilst the directors believe that the indigenisation legislation is unlikely to be sustainable in the medium to long-term and will be modified to attract investment to Zimbabwe, foreign investors are currently limited in their ability to capitalise on the investment opportunities in Zimbabwe. Assad Abdullatiff and Reaz Noormamode at Axis Fiduciary Ltd co-ordinated the process of getting Masawara Plc to establish a place of business and to register as a foreign company in Mauritius in order to become tax resident in Mauritius as the company had received advice that for commercial, legal and practical reasons, it should do so. “This involved co-coordinating with the lawyers to draft and collate the necessary documents, lodging the application with the Mauritius Registrar of Companies, liaising with the authorities, responding to their queries and obtaining the successful registration of Masawara Plc as a foreign branch. Additionally, acting as the local agents to Masawara Plc to ensure compliance with the local laws. We also provided the necessary assistance to the Mauritian directors to call and organise Board meetings in Mauritius,” said Assad Abdullatiff. Axis is a specialist service provider with expertise in offshore companies, trusts, asset management and fund administration offering custom-tailored services to help individuals and corporations accomplish their goals and optimise their benefits. Rajiv Gujadhur at BLC Chambers said: “We advised on and oversaw the incorporation of Masawara (Mauritius) Ltd (the Company), a wholly owned subsidiary of Masawara PLC, and advised on the documentation to be entered into by the Company in connection with the acquisition of the entire issued share capital of FMI Zimbabwe (PVT) Ltd.” BLC lawyers are global business-oriented with expansive industry knowledge and have provided assistance on diverse cross-border transactions originating from various parts of the world involving Mauritius. “Our advice related to the Mauritius corporate and regulatory aspects in connection to the placing of ordinary shares of Masawara plc and the admission of the entire issued and to be issued share capital of Masawara Plc to trading on AIM”, said Rajiv Gujadhur. Fazil Hossenkhan led the deal at the firm. SJ Berwin were English legal counsel, Atherstone & Cook- were Zimbabwean legal counsel, Carey Olsen were Jersey legal counsel, Ernst & Young were the reporting accountants and auditors, and Travers Smith the legal adviser to the nominated adviser and broker.

Asia Ceramics Holdings plc - admission to trading on AIM

On 30 June 2010, Sovereign Mines of Africa Plc announced that its application for admission to PLUS quoted market had been approved and that its entire issued ordinary share capital had been admitted to trading on the PLUS quoted market. On 6 September 2010, Asia Ceramics (AIM symbol: ACHP), the China-focused retailer of ceramic tiles and sanitary ware products, announced its admission to trading on the AIM market of the London Stock Exchange. At an admission price of 66p, Asia Ceramics market capitalisation was approximately £6.8m. Richard Metcalfe, partner at Mazars LLP the reporting accountants, said: “The IPO of Asia Ceramics is very significant as it will tap into the rapid expansion in quality home and commercial property projects across Asia. It is also important as it is likely to spark a new wave of Chinese companies raising capital on AIM.

City, the principal activity of CCH is exporting ceramic tiles and sanitary ware products to some 100 customers in 110 countries under the ‘Louis Valentino’ and ‘Bally’ brand names. CCH has also made limited sales of ceramic tiles to wholesalers in the domestic market. Dr Dingxin Pu has built up extensive contacts and relationships with tile and sanitary ware manufacturers, government authorities and industry associations. His vision is to create a similar model, under a new company, to capture the growth opportunities in the retail domestic ceramic tile and sanitary ware market in China. The Group was established for this purpose.

The Group (the Company and its subsidiaries) was established in July 2010 to distribute and sell ceramic wall and floor tiles, sanitary ware products and other home improvement products into the domestic market in China. The strategy is to establish its own retail stores together with a chain of franchise outlets initially in first tier and major Chinese cities within two years from admission. Its first two retail outlets were recently opened in Foshan and Hong Kong on 18 and 20 July 2010 respectively. On 2 August 2010, the Group completed a private fundraising and raised £1.20m gross of expenses, and on 18 August 2010 Dr Dingxin Pu, Group CEO, provided a loan of £500,000 to the Company. The Group’s head office is in Foshan City, Guangdong Province, China  the 11th largest city in China in terms of gross domestic product with a long history in the home furniture and ceramics products trades.

The Group is an early stage business. It will focus on distributing and selling ceramic wall and floor tiles and sanitary ware products, such as taps and baths, to the domestic retail market. The Company intends to develop its business in three major geographical regions for growth, namely key southern cities (Guangzhou, Dongguan, Shenzhen, Foshan and Hong Kong), first tier cities and major cities (including Beijing, Shanghai, Tianjian, Wuhan and Chongqing) and some second tier cities (including Haikou, Xiamen and Xi’an). The Board believes that there is a considerable potential for growth in these three major geographical regions. The intended routes to market for the products will initially be through Group-owned retail outlets and, in due course, franchise outlets. Where possible, sales will also be made directly to other end-users such as project developers. While the Group may consider manufacturing products in due course, the initial intention is to source products from original equipment manufacturers (OEM) in China and, where necessary, from the stock inventories of wholesalers. The Group’s strategy is to establish a number of its own retail outlets, followed by franchise outlets initially in certain major and first tier cities with the franchise phase of development intended to commence by late 2011.

“We are very pleased to have commenced trading on AIM. The admission to AIM will assist the Company in its expansion strategy and we look forward to implementing the strategy of building the business initially through opening additional group owned retail outlets and in due course franchised stores,” said Dr Dingxin Pu. Operating from Foshan

The Board believes this operating model should provide the Group with the flexibility to offer a broad range of products, in terms of design and sizes, to its customers, and that the key to capturing market share in the domestic ceramics market is to offer a range of low and mid-priced product lines.

In addition, the Company was assisted by the following: WH Ireland as nominated adviser and also joint broker with Alexander David Securities, Abridge Capital as corporate finance adviser, HBJ Gateley Waring as English legal counsel, Carey Olsen as Jersey legal counsel and Pinsent Mason as legal advisers to the nominated adviser and brokers.

Asia Ceramics Holdings Plc admission to trading on AIM

Nominated advisor & broker to the company

Reporting accountants to the company

English legal counsel to the company

Jersey legal counsel to the company

In order to avoid any conflict of interest between the activities of the Company and those of CCH, both companies have entered into a non-compete agreement preventing CCH from competing with the Group in the domestic ceramics market. The Group will, however, also use the brand names ‘Louis Valentino’, ‘Bally’ and ‘Baitao’ for marketing its products under exclusive licences in respect of distributing and selling ceramic tiles domestically in the PRC and Hong Kong.

The Chinese economy has grown at 8.7% or above per year for the past five years. The directors believe this trend is likely to continue with the effect of increasing domestic demand for goods and materials used in the home improvement sector including ceramic tiles, sanitary ware and related materials such as taps and wooden floor products.

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Scancell Holdings Plc - admission to AIM

On 30 July 2010, Scancell Holdings plc (“Scancell” or the “Company”), a developer of therapeutic cancer vaccines, was admitted to trading on AIM having raised £2.54 million for working capital purposes earlier in the year.

Scancell Holdings Plc withdrawal from Plus and admission to AIM

Nominated advisor and joint broker to the company

Reporting accountants to the company

Solicitors to the company

Scancell was originally admitted to trading on the PLUS stock market in September 2008. However, with the Company further strengthening its financial position and progressing the development of its lead melanoma vaccine, SCIB1, the directors believed that it would be in the best interests of the Company and its shareholders for the ordinary shares to be admitted to trading on the AIM market. The directors believe that the potential benefits of an AIM listing will include an increased public profile for the Company.

based on the clinical data that is expected to be generated.

Tom Rowley, a director at Zeus Capital, the Company’s nominated adviser and broker, who led the deal with Ross Andrews, commented: “The fundraising conducted in March 2010 was well supported by existing shareholders and has provided Scancell with a stronger working capital position as it progresses the Phase I/IIa clinical trials of its leading melanoma vaccine, SCIB1, towards completion. The move from PLUS to AIM represents a natural transition for the Company”. Zeus Capital has advised Scancell since July 2009.

The directors also intend to license the Company’s ImmunoBody® technology on a target-by-target basis to companies working in the protein and DNA vaccine field. The manipulation and enhancement of patients’ immune systems is also relevant to the treatment of other diseases such as chronic infectious disease and inflammation. Although Scancell does not intend to venture outside the oncology arena itself, it intends to license its ImmunoBody® technology to companies working in other therapeutic areas.

Laytons were legal adviser to the Company, with Richard Kennett (partner) leading the transaction, and the reporting accountants were Champion Accountants LLP, with Mike Jackson (partner) leading the deal. Scancell is a biopharmaceutical company focused on the cancer therapeutics market and is developing a pipeline of DNA vaccines for the treatment of cancer based on its patented ImmunoBody® platform, which has the potential to overcome many of the limitations of conventional approaches to the development of cancer vaccines. Scancell’s lead ImmunoBody® product, SCIB1, is a melanoma vaccine that has repeatedly shown good antitumor effects in animal studies. With the funds raised earlier this year, the Board is confident that the Company will be able to bring SCIB1 through its initial clinical phases and thereby create value for shareholders

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A Phase I/IIa clinical trial of Scancell’s SCIB1 vaccine in advanced melanoma patients commenced in June 2010 and is expected to be completed in 2012. The directors believe that a positive outcome would enable the Company to position itself for a trade sale to one of the leading pharmaceutical or biotechnology companies operating in the oncology market.

Scancell was originally spun out from the University of Nottingham in 1996. It was co-founded by Professor Lindy Durrant, PhD (the CEO of the Company). Since its inception, Scancell has consistently focused its attention on harnessing the power of the immune system to treat or prevent disease. Research activity in the early days included the use of antibodies to screen maternal blood for markers of Down’s Syndrome, although in recent years Scancell has directed its attention exclusively at the cancer therapeutics market. In December 2006, Scancell decided to divest its preclinical pipeline of cell killing monoclonal antibodies to Arana Therapeutics (then known as Peptech UK Limited) in a deal worth up to £4.85m, in order to concentrate on the further development of its proprietary ImmunoBody® vaccine technology.

Ford Eagle Group Limited – admission to the PLUS-quoted

On 2 August 2010, Ford Eagle Group Limited (FEGL) announced the entire issued share capital of 3,000,000 ordinary shares of £0.10 each had been admitted to trading on PLUS-quoted. Assisting in the admission were Axiom Capital Ltd’s (corporate adviser) Kobus Huisamen, Alexander David Securities Limited’s (broker) David Scott, Adler Shine (accountants & auditors), Cairn Financial Advisers Limited’s Simon Sacerdoti, and Edwin & Co’s (English legal counsel) Russel Shear. Richard Fear led the deal at Conyers Dill & Pearman, London Office, providing Cayman Islands legal advice in connection with the establishment of FEGL and the admission. “The client successfully achieved its objective of being admitted to PLUS-quoted, which is an important step in developing its business strategy of identifying and assisting other private companies to become publicly traded. Also it was the first Cayman Islands company to be admitted to trading on PLUS-quoted.” FEGL (incorporated in the Cayman Islands on 18 September 2009, with representation in China, Hong Kong, the UK, USA and Japan) is a specialised advisory and investment firm providing advice to private companies on restructuring, mergers and acquisitions, as well as structuring and coordinating initial public offerings and listings in major international equity markets. FEGL’s directors and its senior management have on average over 20 years experience in most areas of corporate finance, asset management and other financial advisory work and have, in addition, held senior management positions in a range of companies. FEGL intends to operate two distinct, but related divisions: advisory and investments. Initially, the Company will operate its advisory division and the investment division will only start when sufficient funds have been raised. The advisory services will be conducted initially in Hong Kong and in Shenzhen, Guangdong Province, PRC and later in other cities in PRC. The Company aims to offer a comprehensive advisory service for companies in China wishing to expand or enhance their presence overseas and for overseas companies wishing to do the same in China. The directors have identified a number of companies they view as appropriate for an overseas listing, which, in the directors’ opinions, will raise not just their financial profile

Ford Eagle Group admission to Plus Quoted

Corporate advisor to the company

but also their commercial profile and thus their ability to expand more aggressively into overseas markets. Through its advisory division, FEGL will be able to assist the client company through the process of raising pre-IPO funding all the way through to its eventual listing on a suitable stock exchange. Financial advisory services will be unregulated and any regulated advice will be referred to a company authorised and regulated by the FSA, for advisory services in the UK and the appropriate regulating authorities in other countries for advisory services outside the UK. In respect of its investment policy, the directors believe that FEGL is quite different from the majority of venture capital or private equity companies currently in China. FEGL will only invest in companies to which it acts as an adviser. In parallel with its advisory activity, FEGL will cover up to 50% of the client companies’ listing costs in exchange for shares in these companies at a significant discount to their listing price. The targeted return on the investment side of the business is three to five times the initial investment. FEGL currently has sufficient working capital to sustain its advisory business alone but aims to raise approximately £2m. Approximately £750,000 of this is expected to be sufficient for the Company to achieve its target for investing in three companies in the first 12 months of activity. Moreover, through careful selection of small- to medium-sized enterprises, FEGL is providing, as a quoted company itself, access to investors to a spread of high growth entrepreneurial companies that otherwise would remain unknown to investors. FEGL is not focusing on any specific industry sectors, but its first four contracted advisory assignments are in the fields of telematics, RFID devices and organic food as well as a loyalty card programme. The directors believe that these companies have experienced and good management as well as the opportunity to become one of the market leaders in the PRC and elsewhere in their particular commercial sector. The Company currently has representative offices in Newcastle, UK, Hong Kong and Shenzhen, China. It has direct representatives

Accountants & Auditors to the company

English legal counsel to the company

Cayman Islands legal counsel to the company

in New York and Tokyo. FEGL will draw on both its own international network and that of the directors to encourage overseas companies to establish or expand an existing presence in China. It will do this through making such companies aware of opportunities available, particularly in southern China, including any grants, tax and other incentives available. The directors believe attractive opportunities exist in many sectors, including alternative energy, high technology, research and development, natural resources, general manufacturing, leisure including hotels, restaurants, theme parks, pharmaceuticals and healthcare and financial services. FEGL is developing a springboard from its bases in southern China and Hong Kong. It intends to focus on enabling companies from China to expand overseas and to attract overseas companies that wish to establish a base and expand in southern China.

October 2010 • GBM • 71


Managed Support Services plc (MSS) acquisition of Environmental Control Services Limited On 28 September 2010, Managed Support Services plc (MSS) announced that it had exchanged contracts to acquire Environmental Control Services Limited (ECS), a Londonbased technical building services provider, for a net consideration of £3.2m, adjusted for surplus cash.

Managed Support Services acquires Environmental Control Services (ECS)

Legal advisors to the acquirer

Legal advisor to the vendor

The consideration will be satisfied by £2.975m in cash and 312,500 new ordinary MSS shares (as at completion), and a further £0.2m in cash payable in September 2011. The total consideration receivable by the vendors will be £5.35m to reflect £2.15m of surplus cash balances currently held within ECS (as at completion) and working capital balances. In addition, it was agreed that ECS is to be acquired with a further, agreed net cash balance of £0.5m at completion to be available for the enlarged Group’s general working capital purposes. This amount is not reflected in the consideration. ECS has no indebtedness. The Sellers were advised by law firm Sherrards Solicitors LLP, with corporate partner Leigh Head leading a team of corporate, employment and commercial property specialists. “Sherrards has acted for ECS for several years and this was a great opportunity for the founders of the company to realise their exit plans. We are pleased to have seen through this acquisition by a group with ambitious expansion plans that will help build on everything ECS has achieved so far,” he commented. ECS is a long established provider of specialist mechanical and engineering services for corporate and commercial buildings, primarily within the M25 region. The business was founded by two of the vendors, one of whom will be leaving as at completion and the other taking a senior Group engineering role within the enlarged MSS. The current managing director of ECS is also taking a senior role in the enlarged Group. ECS reported turnover of £8.8m for the year ended May 2010, with an adjusted operating profit of approximately £0.4m, before noncontinuing vendor costs. The reported operating profit was £0.2m. In the year to May 2009, ECS reported audited turnover of £9.0m and an adjusted operating profit, before vendor costs, of approximately £0.9m. The reduction in profitability encountered during the year ended May 2010 arose primarily due to one substantial

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installation contract, which has now been completed. ECS will no longer be competing for similar work. Reported net assets of ECS at 30 May 2010 were £3.0m. ECS has a large and diverse customer base, currently generating contracted maintenance revenues of approximately £3.2m (as at completion). This contracted revenue base has grown materially in recent years. The MSS board believes this growth reflects the high levels of customer service and engineering skills delivered by ECS. MSS has a particularly high regard for the quality of the engineering workforce at ECS and will continue to deploy the same teams in order to preserve continuity and service levels for customers. ECS is a successful and profitable operator in the same markets as MSS, as such the acquisition will bring improved scale to the Group. In addition, through the acquisition of ECS, MSS will enjoy additional market share, as well as commercial and operational synergies. The board of MSS believes that increased scale and working capital will allow the Group to tender successfully for larger maintenance and services contracts. The transaction is expected to be materially earnings enhancing. To finance the acquisition, MSS has raised £3.1m gross from a placing and vendor placing (together ‘the placing’) of an aggregate of 44,285,715 new ordinary shares at a placing price of 7p per share. The placing was undertaken by Cenkos Securities plc and Merchant Securities. Application was made for a total of 44,598,215 new ordinary shares, including 312,500 of consideration shares, to be admitted to trading on AIM. Following the admission of the 44,598,215 ordinary shares, MSS’ total issued share capital will be 209,802,191 ordinary shares of 1p each. This figure (209,802,191 ordinary shares) can be used by shareholders as the denominator for the calculations by which to determine whether they are required to notify their interest in, or a change to their interest in, MSS under the Disclosure and Transparency Rules. The acquisition of ECS materially increases the scale of the Group’s building services operations, as well as enhancing the Group’s revenue mix as a result of further growth in the Group’s contracted revenue base. The MSS board believes that the increased financial resources and operating scale will enable the Group to compete effectively for strategic outsourcing contracts within the building services markets and continues to anticipate growth in the contracted revenue base.

Stanley Gibbons - acquisition of the trade and assets of Benham

On 21 September 2010, the Stanley Gibbons Group plc (Stanley Gibbons) announced that, on 20 September 2010, it had acquired the trade and assets of the Benham first day cover and collectibles business from Flying Brands Limited. Benham, which trades in Jersey and the UK, is the leading publisher of high-quality first day covers. Its other activities include that of mail order collectibles retailer and distributor of new issue stamps. Mike Hall, chief executive of Stanley Gibbons said: “The Benham name is as synonymous with quality first day covers as the Stanley Gibbons name is with philately. Benham is a low risk bolt-on acquisition providing a strong return on capital, high level of continuity revenue, good cash flows and diversification of revenue streams. It will provide opportunities for Stanley Gibbons to diversify into other collectibles markets and add specialist skills in volume mail order, collector club management and in-house design. “There are a number of synergies between the two databases of collectors and the products we sell, with the potential to develop the Benham website and cross-sell products online. There are considerable opportunities to expand the combined mail order activities of Stanley Gibbons and Benham from Jersey. Following our recent research into the Chinese collectibles market, we see substantial opportunities to promote and distribute specific China-related Benham products there.” Jonathan Bale at VerrasLaw provided the Jersey legal advice in relation to the deal. Verraslaw were instructed by Stanley Gibbons, which are an existing client of VerrasLaw. Jonathan Bale commented: “Benham’s activities make it an attractive fit for Stanley Gibbons, and its strong revenue flows should provide opportunities for Stanley Gibbons to expand its existing customer base and grow into additional markets while minimising the impact on its overall margins.” Also involved in the transaction were Dickson Minto as UK legal counsel to Stanley Gibbons,

Smith & Williamson as tax adviser to Stanley Gibbons (Alison Balmer leading) and Osborne Clarke as legal adviser to the vendor. Matt Hatcher led the deal at National Westminster Bank Plc, which provided the acquisition finance for Benham first day covers. Matt commented: “The move into the first day covers market will provide Stanley Gibbons with a solid platform to diversify into other collectibles markets, such as the Far East, as well as marketing their respective product offerings to a much wider audience through the online portals and extensive client databases.” Veale Wasbrough Vizards in Bristol (David Emanuel) were the solicitors representing National Westminster Bank Plc.

The Stanley Gibbons Group Plc acquisition of the trade and assets of Benham

English legal counsel to the acquirer

Jersey legal counsel to the acquirer

Acquisition finance

The total consideration for the acquisition was £1.5m in cash, of which half was paid on completion with the balance to be paid 12 months later. The consideration is financed by a bank loan and the Stanley Gibbons’ existing cash reserves. Benham’s full year contribution to the results of the Flying Brands Group in the period ended 1 January 2010 was a revenue of £2.96m and a profit before tax of £0.41m.

Tax advisor to the acquirer:

Mike Hall also commented that: “Commemorative collectible products linked to the London Olympics 2012 are expected to deliver some substantial one-off revenues to the business.” Stanley Gibbons is incorporated in Jersey and listed on the AIM of the London Stock Exchange. Its principle activities are those of dealing in stamps, autographs, rare records and related memorabilia, the development and operation of collectible websites, philatelic publishing, auctioneering, mail order, retailing, and the manufacture of philatelic accessories.

October 2010 • GBM • 73


Straight PLC - acquisition of Dyro Holdings Limited

On 16 August 2010, Straight plc (AIM: STT), the environmental products and services group, announced that it had acquired Dyro Holdings Limited (Dyro), its leading injection-moulding partner, for a consideration of £2.9m.

Straight Plc acquire Dyro Holdings

Dyro (which trades as Powell Plastics) is based at a factory in Hull and operates more than 20 injection-moulding machines. During the year ended 31 December 2009, Dyro’s turnover was £10m and profit before tax was £1.12m. £7.1m of this turnover was attributable to the Group in the same period. Straight acquired the entire share capital of Dyro in a vertical integration move that will strengthen the Group’s position in its core markets and also will form a platform for the Group’s future development. Straight plc is the UK’s leading supplier of specialist kerbside recycling containers as well as a key supplier of a broad range of waste and recycling container solutions. Founded in 1993 by the current chief executive, Jonathan Straight, the business has since supplied more than 12 million kerbside recycling boxes to local authorities across the UK, securing its position as the industry leader. In 2005, Straight acquired Blackwall Limited, the UK’s largest supplier of home composters and water butts. Through the Blackwall brand, Straight has delivered more than 3.5 million compost bins and water butts. The business operates through two divisions. The core trade business supplies products in bulk to local authorities, utilities, the waste industry, retailers and other businesses and the retail business supplies a range of proprietary environmentally-friendly consumer products directly to the public, often in partnership with a local authority or a utility.

Legal advisor to the acquirer

In February 2009, Straight added to its portfolio with the acquisition of Harcostar Garden Products, a long established premium brand consisting of water butts, compost bins, watering cans and accessories. This has gained new distribution channels for the business in the UK and in Europe. Straight plc has established diverse overseas sales channels and is now producing and selling water butts in Australia and North America.

Financial advisor to the vendor

Welcoming the news, Jonathan Straight said: “The evolution of Straight’s business model into direct production further strengthens its position in its core market place and will act as a springboard for further vertical integration as well as future acquisitions. Our team has considerable experience in running manufacturing businesses at both Board and management levels and this will aid the speedy integration of Dyro into the Group. The Board has plans to further develop its new Hull site inline with the strategic goals of the Group.” The Board believes that the addition of Dyro’s manufacturing capability will allow the Group to enhance overall profitability and fully exploit

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its market leading position. Dyro’s location in east Hull, with its good road links and easy access to UK ports, will also provide the Group with a new UK distribution hub and an excellent base for its growing exports business. The consideration of £2.9m consisted of an initial cash payment of £0.97m with two further cash payments of £0.97m on each of the first and second anniversaries of completion. The initial payment was funded through a loan of £1.5m from the Group’s lending bank, Lloyds TSB. The deferred element of the consideration will be funded from cash generated as a consequence of the acquisition. The balance of the loan is being used to fund Dyro’s working capital requirements. Prior to completion of the acquisition, Dyro entered into a sale and leaseback agreement with the vendors on Dyro’s property with an annual rent of £145,000. Dyro has been a supplier to the Group for a number of years. Over the past six months, trading with Dyro has increased considerably further to its hosting of the wheeled bin production equipment acquired by the Group from Helesi in March 2010. In addition to the products it manufactures for the Group, Dyro also has a proprietary injectionmoulding business, which supplies shelving and storage products to the DIY sector. These products are complementary to the Group’s garden and hardware business and cost saving and cross-selling synergies are expected. The Board also reported that good progress has been made by the Group towards the operational integration of the assets acquired from Helesi. A number of customers have already been supplied with wheeled bins made by the Group in Dyro’s factory. The Group has also made good progress towards re-establishing the market share it enjoyed in wheeled bins prior to the closure of Helesi’s UK factory in September 2009. Having acted for Dyro for many years, Anthony R Bullock led the deal at Dutton Moore, providing advice, tax planning and negotiation of the final sale price on behalf of the shareholders of Dyro Holdings Ltd. “The deal enabled my clients to realise their investment in the company while protecting the future of the business and jobs of the employees,” he said. Also involved was Debbie Jackson (partner), assisted by Janet Davey and Harry Singh, from the corporate department of Walker Morris, who led the transaction and advised Straight on the purchase and the transaction. Graham & Rosen Solicitors were legal adviser to the vendor led by Richard Palmer (partner)





Global Business Magazine - October / November 2010  

The October / November issue of the Global Business Magazine.