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Managing a cross-border finance transaction can be a very time-consuming and costly affair. You can, however, save time by instructing a good legal project management team to determine the risks and processes upfront and plan accordingly.
If you are unfamiliar with the regulatory environment or practical aspects of doing a deal in a certain jurisdiction, it may be best to get a preliminary view from local lawyers at the structuring stage. In a trade finance context, doing a sale and repurchase (repo) versus a borrowing base facility, for example, may have different legal (and therefore timing) implications. You may need to establish a local branch, obtain an import licence or get regulatory approval if you elect to buy and sell a commodity to provide finance using the repo structure. On the other hand, providing finance through a borrowing base facility and taking security over local assets may trigger requirements for central bank approval, stamp duty, registration fees and other perfection requirements. Once you know the legal effects of your structure, it will be easier to manage the borrower’s expectations and costs with the help of local counsel.
Needless to say, having the right local counsel on board, is extremely important. If you’re new to cross-border deals, having the right lead or legal management counsel running your deals is even more important. Experienced lead counsel or cross-border specialists would have worked with a number of lawyers from the same jurisdiction and across many countries. They should know the level of expertise, responsiveness and preferred methods of communication of local lawyers. Because local counsel will be responsible for getting most things done on the ground, it is important for lead counsel to understand which questions to ask upfront, how local counsel operates and what to do to expedite things and help local counsel get the job done timeously. For example, some local lawyers are generalists and not specialists in the field for which you may have appointed them. They may be dealing with litigation matters and therefore very difficult to reach when urgent queries arise and they are attending to matters in court. Lead counsel that has experience with that lawyer will know what has worked in the past to get urgent queries resolved when the availability of local counsel becomes a cause of frustration.
Apart from providing legal advice, your lead counsel must play an active project management role to ensure that the closing occurs successfully and efficiently. When dealing with multiple jurisdictions in one transaction, particularly when you are taking security over assets in most or all of them, it is important to always make sure that the main legal risks and hurdles that may be encountered are clarified and made known to clients upfront; to iron out potential sticky points with local counsel during the early stages of planning; to communicate timing expectations to clients and local counsel on the regular and make sure that local counsel provides regular updates on the status of matters on the ground. Having to manage client expectations and the external legal team at the same time can cause major headaches for in-house lawyers, but with the right legal management team on board, in-house lawyers don’t have to spread themselves too thin and can save time.
Prepared by:
Jessica Lewis | Attorney | Banking and Finance Law
This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)