Executing a Flip Transaction: Bringing a Foreign Startup Into the U.S. Investment Market

Drafting Shareholder Agreements, Transferring Contracts, IP and Tax Concerns

Recording of a 90-minute premium CLE video webinar with Q&A


Conducted on Thursday, September 2, 2021

Recorded event now available

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Course Materials

This CLE course will discuss how to structure a "flip" transaction, in which shares of a foreign entity (typically a startup) are exchanged with a U.S. entity to enter the U.S. investment market. The panel will discuss the pros and cons of flip transactions, upfront tax, IP and contractual concerns, and how they are structured and documented. The panel will also discuss immigration issues that will need to be resolved for personnel relocating to the U.S.

Description

Venture capital investors looking to invest in startup companies have shown a strong preference for U.S. companies, where the legal and regulatory framework as well as exit strategies are better understood. A foreign startup seeking to become a U.S. entity might consider a flip transaction. In a flip, the foreign shareholders exchange their foreign stock for stock in a new U.S. entity (typically a Delaware corporation). Before proceeding, counsel should consider any tax, intellectual property, immigration and operational issues, and associated costs and documentation.

Tax implications should be examined at the outset and may depend on the existing entity's current jurisdiction and the makeup of its current shareholders. Upfront due diligence should include examining company contracts to determine if any third-party consents or approvals are required. Counsel must also consider who will own intellectual property and how IP rights will be shared between the U.S. parent and its foreign subsidiary. The transfer of IP rights could also have tax consequences.

If officers, directors, or other key personnel will be moved to the U.S in connection with the flip transaction, counsel must understand the complex immigration laws and procedures with which such personnel must comply and be able to facilitate such a move in conjunction with the corporate relocation.

In addition to formation and qualification to do business in the U.S., existing shareholder agreements should be terminated, and corresponding agreements entered into between the U.S. company and startup entity's shareholders. Contract rights will likely remain in the foreign subsidiary, but if not, they will need to be assigned. Depending on where the IP resides, licensing agreements may be required between the parent and subsidiary.

Listen as our authoritative panel discusses the structuring and documentation of flip transactions.

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Outline

  1. Advantages for foreign startups of establishing a corporate presence in the U.S.
  2. Tax issues to consider
  3. Contractual limitations
  4. Intellectual property concerns
  5. Immigration issues
  6. Structuring and documenting the transaction

Benefits

The panel will review these and other essential matters:

  • What are the advantages for foreign startups in establishing a corporate presence in the U.S.?
  • What are the key tax considerations, contractual limitations, immigration, and IP issues?
  • What are best practices for structuring and documenting the transaction?

Faculty

Alcorn, Sophie
Sophie Alcorn

Founding Attorney
Alcorn Immigration Law

Ms. Alcorn is a top 10 California immigration attorney, entrepreneur, and thought leader. She founded Alcorn...  |  Read More

Mignano, Lindsey
Lindsey S. Mignano

Partner
Smith Shapourian Mignano

Ms. Mignano represents emerging and small businesses in the Bay Area.  She provides businesses with counseling and...  |  Read More

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