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Overview of Legal Structures for Outsourcing

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By Fred Greguras

By Fred Greguras


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  • 1. OVERVIEW OF LEGAL STRUCTURES FOR OUTSOURCING January 20, 2004 Fred Greguras Fenwick & West LLP 1 1403992.1
  • 2. MAJOR LEGAL STRUCTURES Contract for services with an independent entity Build, operate and transfer Contract for services with a controlled subsidiary 2 1403992.1
  • 3. DELIVERY MODELS MAY IMPACT LEGAL STRUCTURE On-site Off-site Off-shore Domestic Global 3 1403992.1
  • 4. CONTRACT FOR SERVICES WITH AN INDEPENDENT ENTITY Service Agreement Customer Provider Services Payment 4 1403992.1
  • 5. CONTRACT FOR SERVICES WITH AN INDEPENDENT ENTITY U.S. corporation/foreign parent Master agreement/single engagement Independent contractor relationship Performance requirements Project with fixed price (“spec”) Time and materials SLA 5 1403992.1
  • 6. CONTRACT FOR SERVICES WITH AN INDEPENDENT ENTITY (CONT’D) Use of employees or contractors Confidentiality Subsidiary issue Assignment of Intellectual Property Moral rights Governing Law Dispute Resolution Tax Considerations 6 Registration requirements 1403992.1
  • 7. CONTRACT FOR SERVICES WITH AN INDEPENDENT ENTITY (CONT’D) Time to Implement Cost Risk Intellectual Property Business Crime Privacy 7 1403992.1
  • 8. CONTRACT FOR SERVICES WITH AN INDEPENDENT ENTITY DEDICATED OPERATION STRUCTURE Service Agreement Customer Provider Dedicated Payment Operation Services 8 1403992.1
  • 9. CONTRACT FOR SERVICES WITH AN INDEPENDENT ENTITY DEDICATED OPERATION STRUCTURE (CONT’D) Independent contractor Separate/virtual facility T&M pricing/cost plus pricing Performance requirements Use of employees or contractors Confidentiality 9 1403992.1
  • 10. CONTRACT FOR SERVICES WITH AN INDEPENDENT ENTITY DEDICATED OPERATION STRUCTURE (CONT’D) Assignment of Intellectual Property Moral rights Governing law Dispute resolution Tax considerations Registration requirements 10 1403992.1
  • 11. CONTRACT FOR SERVICES WITH AN INDEPENDENT ENTITY DEDICATED OPERATION STRUCTURE (CONT’D) Time to implement Cost Risk Intellectual Property Business Crime Privacy 11 1403992.1
  • 12. BUILD/OPERATE/TRANSFER STRUCTURE Service Agreement Customer Provider Dedicated Payment Operation Services Option 12 1403992.1
  • 13. BUILD/OPERATE/TRANSFER STRUCTURE (CONT’D) Independent contractor Virtual team with option to transfer team and possibly facility at a specified cost T&M pricing/cost plus pricing Option pricing 13 1403992.1
  • 14. BUILD/OPERATE/TRANSFER STRUCTURE (CONT’D) Performance requirements Use of employees or contractors Confidentiality Assignment of Intellectual Property Moral rights Governing law Dispute resolution 14 1403992.1
  • 15. BUILD/OPERATE/TRANSFER STRUCTURE (CONT’D) Tax Considerations Registration requirements Time to implement Cost Risk Intellectual Property Business Crime Privacy 15 1403992.1
  • 16. CONTRACT FOR SERVICES WITH A CONTROLLED SUBSIDIARY Service Agreement Customer Provider (Parent) (Subsidiary) Services Payment Controlling Shareholder (Parent) 16 1403992.1
  • 17. CONTRACT FOR SERVICES WITH A CONTROLLED SUBSIDIARY (CONT’D) Control Usually a general services agreement rather than project oriented Arms length contractual terms Cost plus pricing (transfer pricing) Performance requirements Use of employees or contractors Confidentiality 17 1403992.1
  • 18. CONTRACT FOR SERVICES WITH A CONTROLLED SUBSIDIARY (CONT’D) Assignment of Intellectual Property Moral Rights Governing law Dispute resolution Other tax considerations Registration requirements Time to implement 18 1403992.1
  • 19. CONTRACT FOR SERVICES WITH A CONTROLLED SUBSIDIARY (CONT’D) Cost Risk Intellectual Property Business Crime Privacy 19 1403992.1
  • 20. SUMMARY Blocking and tackling usually with an international twist Vendor’s track record Intellectual property comes in many forms 20 1403992.1