There are a number of issues that should be considered when structuring a deal.
- Should it be a simple tiered structure?
- Should you establish an off-shore holding?
- How about investing through an SPV or using an equity or convertible loan investment?
- Are there regulatory restrictions?
Finding the right location to do business is important and knowing how to plan ahead can save a lot of time, money and hassle for the investor, the founders and the advisors. As more and more technology companies explore international opportunities, they face a number of common and specific legal and regulatory issues. Making the transition from working out of a basement to running multiple offices worldwide has numerous challenges for emerging companies. Getting on top of these challenges and knowing what to expect is key. For example, ‘going international’ means that you are subject to a whole new set of regulations that may be very different from those in your own jurisdiction.
Nobody expects you to know everything from the start. They do, however, expect you to understand the legal and regulatory landscape of where you will run your business to ensure that you are choosing the right location for your company. For example, from a purely fund-raising standpoint, Thailand may have limitations on start-ups on the issuance of a convertible loan; whereas it may be readily available as an investment choice for start-ups and investors right next door in Singapore. Furthermore, many jurisdictions now offer governmental promotional privileges; such as tax incentives and the relaxation of various regulatory restrictions.
It is essential to be aware of the legal and regulatory tools offered by the government, and sometimes all it takes is simply asking around or knowing the right person to talk to. For start-ups, your investor may be a good place to start.