Supporting Businesses beyond Borders
As businesses expand overseas, they soon learn that having lofty aspirations is not enough to break into other markets. Each international agreement, each new subsidiary, each new venture passes through a labyrinth of rules and legal systems that vary from place to place. It is global corporate law that gives companies the structure to traverse that labyrinth and not lose their way in the process.
What Global Corporate Law Governs
Essentially, global corporate law is concerned with the formation, operation, merger, and dissolution of businesses within a multinational context. It involves the application of international treaties and regional trade arrangements as well as domestic laws pertaining to corporations within each country. As opposed to domestic corporate law, where there is only one legislative body and one judicial system, global corporate law forces the practitioner to contend with conflicting legal traditions, such as the common law tradition in the United Kingdom and the USA, the civil law tradition in continental Europe, and the hybrid systems in China and India among others.
The Cost of Ignoring Jurisdictional Differences
The executives that overlook these differences face consequences down the road. A contract written in accordance with the contract law in one nation might be unenforceable once a regulatory authority from another nation insists that there are other standards for disclosure. Employment laws, taxation on dividends, and the protection of intellectual property vary based on the nation where the corporation is registered. Global corporate law is designed to identify these conflicts and provide the legal professionals with means to write contracts enforceable in several courts at once.
Regulatory Complexity Across Borders
The additional layers brought about by regulatory authorities complicate the process further. In Europe, the EU’s antitrust regulators, the Federal Trade Commission in America, and competition regulators in emerging markets all have their own threshold criteria for assessing merger and acquisition deals. Deals that meet one regulatory body’s threshold may be held up by another regulator, leading to increased costs and delays in integration. Companies can lower the probability of such complications by incorporating Global Corporate Law into their compliance planning from the outset.
AB InBev’s Acquisition of SABMiller
The case of acquisition of SABMiller by Anheuser-Busch InBev is a great example of this. The $100 billion acquisition that took place in 2015 and completed in October 2016 created the largest brewer company in the world. For this acquisition, it was necessary to have the approval of the competition authorities in over twenty-five nations, including the US, the EU, China and South Africa. A lot of divestitures had to take place; the stake that SABMiller had in the MillerCoors business venture was sold to Molson Coors, while its China operations were divested to China Resources Beer. The above acquisition is one of the best cases where international acquisitions meet the requirements of international legislation.
Everyday Operational Decisions
Global corporate law extends beyond mergers and acquisitions and is involved in day-to-day decision-making as well. When deciding in which jurisdiction to incorporate a subsidiary, corporations consider aspects such as tax agreements, currency regulations, and dispute resolution methods. The inclusion of arbitration clauses, typically regulated by international treaties, such as the New York Convention, allows for disputes to be decided out of court in neutral territory, as the disputing parties have different legal backgrounds. There are also differences between corporate governance codes, as certain rights of the shareholders familiar to the US do not necessarily apply to Japanese or Brazilian companies.
Talent Mobility and Compliance
Talent mobility brings up yet another set of legal issues. Organizations relocating their executives and experts across international boundaries have to ensure that they adhere to the laws regarding immigration, labor laws, and even non-compete agreements that may be in conflict. It is legal professionals specializing in Global Corporate Law who are able to put this jigsaw puzzle together for them.
The Price of Entry
The trend towards globalization appears to be continuing unabated, as is the complex legal landscape accompanying it. Issues such as digital commerce, privacy laws, and sanctions policies have been added to a list of traditional corporate concerns, creating yet more factors in an already complex equation. By taking steps to secure the services of specialized lawyers early on, companies ensure that they will be able to capitalize on opportunities that their competitors are too entangled in the legal web to exploit.