Presentation by Morenike Kehinde

1. LEGAL STRUCTURES TO ESTABLISH TO ATTRACT
INVESTORS AND PENETRATE THE GLOBAL MARKET
MORENIKE KEHINDE
MAISÓN LEGAL

2. WHY DOYOU NEED INVESTORS?
• To start a business
• Business growth/Market expansion
• Diversification
• Intra-state branches
• Inter-state branches
• Global reach
• Competitive advantage

3. PRIVATE EQUITY
 Private equity is a provision of equity capital by financial investors to non-quoted companies with high
growth potential. Private equity covers not only the financing required to create a business, but also
includes financing in the subsequent stages of its life cycle.
 Private equity comes from high networth individuals and firms that purchase stakes in companies.
 When sourcing for funding, investors will usually make a preliminary request for you to provide
documents which will include your corporate information, budgets, forecasts, key supplier/customer
contracts, employees and employment contracts, intellectual property portfolio, a schedule of
properties or leases, a list of equipment owned by the company, details of other investors,
shareholders, and bank loans, any existing or future litigation, tax filings, insurance documentation, and
data protection policies, amongst other things.

4. PROCESS – PRIVATE EQUITY
 Expression of Interest/ Letter of Intent
 Due Diligence - This is the investigatory work done before investment where the investor conducts
detailed research into the financial, corporate and contractual status of the company.
 Term Sheet
 The term sheet sets out the terms on which an investor will give funding, either by taking equity, a
convertible note, or another arrangement. It will also set out any conditions the company has to
meet in order to successfully gain funding. It will usually include decisions about dilution of shares
and decision making rights.
 It is important to seek professional advice to ensure that each term is understood, and the
Solicitor negotiates the most favourable terms possible.

5. PROCESS – PRIVATE EQUITY
 Long form documents
 Shareholder’s Agreement or Investment Agreement- this will set out the agreed terms in the term
sheet in more detail. Future investors may want to see this agreement to know how much control
other investors have in your company.
 Vesting Provisions (these can be drafted into the shareholder’s agreement) – vesting provisions are
usually designed to protect the investor or major shareholders from key members of the founding
team leaving the company soon after investment, meaning that certain shares will vest over time or
upon meeting certain milestones.
 Subscription Agreement – this agreement is the promise of your business to sell a certain number
of shares to the investor at a certain price, and the agreement of the investor to pay that price.
 Articles of Association – the Articles govern the operations of the company once it has received
the investment and it is a contract between the company and its members.

6. PROCESS – PRIVATE EQUITY
 Closing Date - Once all the specific conditions of investment have been met, the documents have
been prepared and terms agreed, a closing date will be scheduled for execution of the agreements and
the transfer of the shares and funds.
 Receive funding

7. DUE DILIGENCE – TO CONDUCT ON THE PRIVATE EQUITY FIRM (INVESTOR)
 Companies registration certificate and constitution documents
 All available public documents
 Compliance declaration of all laws
 Accredited investors - As provided in the Securities Act (US), this is a person who is permitted to invest in startups and
other high-risk private company securities. (For Companies interested in American Investors)
 Rule 501(a).The principal categories of accredited investors are as follows
1. Directors, executive officers, and general partners of the issuer, including general partners of general partners in
two-tier syndicating. (The term "executive officers" is more fully defined in the Regulation.)
2. Purchasers whose net worth either individually or jointly with their spouse equals or exceeds $1 million. It is
important to note that while there is no definition of "net worth" in Regulation D, there similarly is no
requirement of liquidity in the calculation of net worth for this accreditation standard. Thus, a purchaser's home,
furnishings, etc. are includable in the determination of net worth.

8. DUE DILIGENCE – TO CONDUCT ON THE PRIVATE EQUITY FIRM (INVESTOR) CONTINUED.
3. Natural person purchasers who have "income" in excess of $200,000 in each of the two most recent years and
who reasonably expect an income in excess of $200,000 in current year (or $300,000, jointly with their spouse).
4. A business entity will be treated as a single accredited investor unless it was organized for the specific purpose of
acquiring the securities offered, in which case each beneficial owner of the security is counted separately.
 What is their track record?
 What is their vision for the company?
 Are your objectives aligned?
 How would it affect your next round of funding?

9. DUE DILIGENCE – TO CONDUCT ON THE START–UP/COMPANY
Companies looking to raise funds should prepare for due diligence before funding, this speeds up the
process once the potential funding partner/investor requests for the documents. It is important to give
complete and accurate information, and not hide information from investors.
 Company Registration (Ltd, Plc.) –The entity must be able to allot shares to the investors
 Corporate Governance (Transparency, Accountability, Risk, Systems and Policies)
 Company Meetings (Board Meetings, Minute books, Resolutions etc.)
 Business Plan
 Valuation
 Share capitalisation table - The cap table summarizes who owns what part of the company before and
after the financing. It is important for founders to understand exactly who owns what part of a
company and what the implications are in a potential funding round.
 Contracts – Employees (Compliance with Labour laws),Vendors, Business partners, Consultants.

10. DUE DILIGENCE - CONTINUED
 Intellectual Property (IP) - Locally and Globally
 Portfolio Assessment
 Ownership Assessment
 Valuation of IP
 Commercialisation
 Data protection – Policies, Compliance
 Disputes
 Taxes – Pay your taxes to avoid penalties and a build up of high amounts that it becomes difficult to
pay up. Investors don’t want to carry burdens. (Tax Incentives forVenture Capital Companies)
 Debt portfolio
 Statutory and Regulatory Compliance
 Professional Advisers (Lawyers,Accountants,Auditors etc.)

11. GAME THEORY
 Game theory is a mathematical theory that deals with strategies for maximizing gains and minimizing
losses within prescribed constraints, such as the rules of a card game.
 Game theory is widely applied in the solution of various decision-making problems, such as those of
military strategy and business policy. Game theory states that there are rules underlying situations that
affect how these situations will be played out. These rules are independent of the humans involved and
will predict and change how humans interact within the constructs of the situation. Knowing what
these invisible rules are is of major importance when entering into any type of negotiation.
 Everyone has a natural negotiating style. These styles have analogues that can work either well or
poorly in trying to achieve a negotiated result. It's important to understand how certain styles work
well together, how some conflict, and how some have inherent advantages over one another. For
example, the Prisoner’s Dilemma.
 Thus it is important to work with experienced professional advisers to guide the negotiation.

12. LEGAL CONSIDERATIONS FOR GLOBAL EXPANSION
 While international expansion remains at the forefront of the expansion plans of many
companies, risks also abound. In particular, regulatory risk has become one of the major
concerns associated with international expansion.
 Global expansion requires legal due diligence structured and specifically tailored for the
particular business. Some of the issues to consider when scaling your business globally are:
 Governing Law - The importance of understanding the laws of the country as it relates to
your business cannot be over-emphasized. It is important to codify all the laws that affect your
business and use that as a plan before even launching the business, otherwise the business will
lose money, face major restrictions and may pay penalties caused by ignorance.
 Contracts - The choice of the governing law and the choice of the competent jurisdiction in
case of a dispute where there are international contracts is a fundamental issue that must be
carefully addressed.

13. LEGAL CONSIDERATIONS FOR GLOBAL EXPANSION - CONTINUED
 Legal Structure – The nature of your business and the country will determine the available legal
structures.
 LLC’s/Corporations - In Canada for example, Limited Liability Companies (LLC), are considered
as a hybrid form of business, encompassing the characteristics of corporations and partnerships.
They are classified differently for tax purposes.
 Corporations in Canada have more of a semblance to LLC’s in Nigeria.
 Joint Venture - The creation of a joint venture together with a local partner will help the
company rely on a market player that has good knowledge of the market and the way it
operates. Through the creation of a joint subsidiary, a contractual partnership will be in place and
will enable the partners to respond jointly to any business requests and projects.

14. LEGAL CONSIDERATIONS FOR GLOBAL EXPANSION - CONTINUED
 Corporate Governance – Most countries require a local presence for certain business activities in the
territory of the country. Sometimes a simple branch or representative office might be sufficient.
Other times, countries require a subsidiary to be established, which comes with a very different set of
compliance, regulatory risk and tax considerations.When establishing a foreign office or subsidiary,
one must consider the number of directors for the entity, local director requirements, local agents,
requirements for shareholder meetings, number of shareholders, amongst other requirements.
 Regulatory compliance - Most countries require import/customs or export licenses to move
technology or products between the foreign jurisdictions. There may also be further regulatory
considerations unique to the type of service, product, or facility that will operate within the
jurisdiction.

15. LEGAL CONSIDERATIONS FOR GLOBAL EXPANSION - CONTINUED
 Tax considerations - There may be different tax implications based on the choice of entity established
within a jurisdiction. One entity form could provide a more favourable tax result than another while
also serving the required functions within the jurisdiction.
 Employment - To engage an employee in a new jurisdiction, companies may need to enter into local
employment agreements, use local payroll providers and enter into or adhere to applicable collective
bargaining agreements. There may also be issues in acquiring work permits for non-local nationals.
Such employees may be entitled to a set of benefits and rights not required in Nigeria.

16. LEGAL CONSIDERATIONS FOR GLOBAL EXPANSION - CONTINUED
 Global equity - It is important to consider whether there are securities laws in place in the new
jurisdiction that would restrict or cause affirmative requirements to apply to the grant of awards. A
new jurisdiction may have unique fund remittance limits, reporting or repatriation requirements that
can cause restrictions, or affirmative requirements that apply to equity awards. There may be unusual
tax benefits or consequences to awarding equity to employees.
 Data privacy; intellectual property, technology and information law - A new jurisdiction may have its
own requirements regarding data privacy registration, data transfer obligations, customer/employee
notifications, data monitoring and payment obligations. Local laws may have different requirements to
validate and enforce the intellectual property assignments by employees and independent contractors.
Local jurisdictions may have unique rules regarding trade secret protection, and local employees may
require special training to understand how to effectively protect company secrets. Appropriate
intercompany agreements should be in place to permit the use of relevant intellectual property by
newly formed subsidiaries or affiliates.

17. LEGAL CONSIDERATIONS FOR GLOBAL EXPANSION - CONTINUED
 Company policies regarding security, trade secrets, compliance, privacy and non-compete policies may
need to be revised to comply with the rules of the new jurisdiction.

18. THANKYOU

19. To Contact Us
 Instagram - @maison.legal @morenike.timi
 LinkedIn – Maison-Legal Morenike Kehinde
mk@maisonlegal.com.ng
0803 475 4628