Equity Joint Ventures: Structuring Capital Contribution, Waterfall and Other Payment Provisions

Navigating Promoted Interest, Carried Interest, Cash Flow Splits and Related Issues

Recording of a 90-minute CLE/CPE webinar with Q&A


Conducted on Thursday, September 22, 2016
Recorded event now available


This CLE webinar will provide guidance to deal counsel for structuring capital contribution and distribution provisions in equity joint venture (JV) agreements. The panel will discuss key legal and tax issues and JV agreement provisions, including promoted interest, carried interest, cash flow splits and related provisions.

Description

Capital contribution and waterfall provisions are critical and complex components of equity JV agreements and are fiercely negotiated. Counsel drafting and negotiating these provisions must ensure that the clauses are consistent with the economic arrangement of the parties.

The provisions dealing with capital contributions address the venture’s need for funding and property and the members’ or partners’ obligations to fund those. Counsel must navigate issues such as the timing and amounts of contributions, the consequences for failing to fund contributions, and ways to make up for unfunded contributions.

The sequential order of the waterfalls is critical to ensuring the waterfall provisions work as intended and the distributions conform with the substance of the deal among the JV partners. Structuring waterfall provisions requires an understanding of payment priorities, economic terms and tax implications. Counsel must ensure the waterfall provisions are consistent with the partnership tax allocation provisions of the JV agreement to avoid adverse tax consequences for the entity and its members or partners.

Listen as our authoritative panel of deal attorneys discusses best practices for structuring capital contribution and waterfall provisions in equity JV agreements, focusing on how to avoid potential legal and tax pitfalls.

Outline

  1. Structuring capital contribution provisions
  2. Structuring waterfall provisions
    1. Promoted interest
    2. Carried interest
    3. Cash flow splits
  3. Tailoring tax provisions to waterfalls

Benefits

The panel will review these and other key issues:

  • What are the key considerations for counsel when drafting and negotiating capital contribution provisions in JV agreements?
  • What are the different types of waterfall provisions and when should each be used?
  • What are the key considerations and best practices for counsel drafting and negotiating waterfall provisions in JV agreements?
  • What are pitfalls to avoid when tailoring tax provisions to waterfall provisions?

Learning Objectives

After completing this course, you will be able to:

  • Determine the mechanics of drafting capital contribution provisions in joint venture agreements
  • Identify the different types of waterfall provisions and when each should be used
  • Recognize how to tailor tax provisions in joint venture agreements to waterfalls
  • Recognize how the IRS economic effect rules relate to waterfall distributions

Faculty

Afshin Beyzaee, Partner
Liner, Los Angeles

Mr. Beyzaee heads his firm's tax practice and is also a member of the firm's corporate department. He provides clients tax advice in a variety of planning matters, including structuring taxable and tax-free mergers and acquisitions, business reorganizations, real estate transactions, and issuances of debt, equity, hybrid, and derivative securities. His clients include publicly traded and privately held corporations, partnerships, business trusts, S corporations, private equity and real estate funds, financial institutions, and trade associations.

Michael J. Kiely, Partner
Liner, Los Angeles

Mr. Kiely's legal practice spans all areas of real estate, including finance, development, and land use. He has extensive experience representing developers, sellers and buyers, investors and promoters, lenders, and real estate joint ventures, with a particular emphasis on projects involving the intersection of private real estate development and government. His practice includes a substantial public/private partnership, or P3, emphasis, including governmental facilities development projects, mixed-use and transit-oriented development projects, and public finance.


EA Credit

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Mergers and Acquisitions Law Advisory Board

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Partner

O’Melveny

Igor Kirman

Partner

Wachtell Lipton Rosen & Katz

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