May 23, 2024

Investment by a Bank into a European Technology Company: Investment negotiations and regulatory concerns

by Soham Panchamiya, Pankhuri Malhotra, and Subha Chugh

in Case Studies
Introduction Our client, a regulated bank based in the UAE (the “Bank“) sought to expand its investment portfolio by investing in a cutting-edge technology company that wanted to expand its business operations and customer base in the Middle East and North Africa (MENA) region (“Company”). To achieve this goal, the Company planned to establish a new company which would serve as its exclusive distributor in the MENA region. The Bank wished to invest in this MENA entity. Client Challenge While both Parties understood the importance of securing a strategic partnership, their implementation strategies required little alignment. Navigating the intricate regulatory landscape and acquiring the necessary approvals posed a significant challenge. The Company was based in the Netherlands, requiring careful analysis of legal principles applicable to both Parties in their respective jurisdictions and issues arising from cross-border investment. Strategies, Tactics, and Solutions Our legal team meticulously analysed the UAE’s regulatory framework and the legal principles applicable to cross-border transactions. We then prepared an investment agreement between the Parties. The agreement outlined the terms and conditions for the Bank’s investment, granting it a 25% equity stake in the new company. Concurrently, we drafted a Shareholders’ Agreement and a Distribution Agreement to govern the relationship between the Parties. These agreements delineated each party’s rights, responsibilities, and obligations, ensuring a transparent and equitable partnership. Furthermore, we incorporated robust warranties and representations from the Company to safeguard the Bank’s interest and mitigate potential risks associated with the investment. We also extensively negotiated with the Company and its legal representatives to protect the Bank’s interests. This included strategically tweaking certain warranties and legal obligations. Outcomes Our approach facilitated the establishment of a mutually beneficial partnership between the Company and the Bank. Through the Bank’s investment, the Company gained access to the necessary capital, regulatory approvals, and the Bank’s extensive network in the MENA region. The comprehensive suite of agreements we drafted provided a solid legal framework, enabling the new MENA company to operate as the Company’s exclusive distributor in the region while adhering to the relevant regulations and fostering a collaborative relationship with the Bank. This strategic partnership not only paved the way for the Company’s expansion into the MENA market, with the Bank enjoying a fruitful investment, but it also exemplified our firm’s ability to navigate regulatory concerns while structuring investments and ventures.

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