Overview of Legal Structures for Outsourcing

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By Fred Greguras

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Overview of Legal Structures for Outsourcing

  1. 1. OVERVIEW OF LEGAL STRUCTURES FOR OUTSOURCING January 20, 2004 Fred Greguras Fenwick & West LLP 1 1403992.1
  2. 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. 3. DELIVERY MODELS MAY IMPACT LEGAL STRUCTURE On-site Off-site Off-shore Domestic Global 3 1403992.1
  4. 4. CONTRACT FOR SERVICES WITH AN INDEPENDENT ENTITY Service Agreement Customer Provider Services Payment 4 1403992.1
  5. 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. 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. 7. CONTRACT FOR SERVICES WITH AN INDEPENDENT ENTITY (CONT’D) Time to Implement Cost Risk Intellectual Property Business Crime Privacy 7 1403992.1
  8. 8. CONTRACT FOR SERVICES WITH AN INDEPENDENT ENTITY DEDICATED OPERATION STRUCTURE Service Agreement Customer Provider Dedicated Payment Operation Services 8 1403992.1
  9. 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. 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. 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. 12. BUILD/OPERATE/TRANSFER STRUCTURE Service Agreement Customer Provider Dedicated Payment Operation Services Option 12 1403992.1
  13. 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. 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. 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. 16. CONTRACT FOR SERVICES WITH A CONTROLLED SUBSIDIARY Service Agreement Customer Provider (Parent) (Subsidiary) Services Payment Controlling Shareholder (Parent) 16 1403992.1
  17. 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. 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. 19. CONTRACT FOR SERVICES WITH A CONTROLLED SUBSIDIARY (CONT’D) Cost Risk Intellectual Property Business Crime Privacy 19 1403992.1
  20. 20. SUMMARY Blocking and tackling usually with an international twist Vendor’s track record Intellectual property comes in many forms 20 1403992.1

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