We specialise in advising on and drafting the documentation for various alternative finance transactions.
We generally structure these products for international clients using a combination of non-interest based contracts. These contracts define the kind of structures that underpin specific products. Different products may use the same contracts and some products are comprised of a combination of contracts. The main contracts that would be used for transactions would be:
1. Profit sharing agreements: in which two parties collaborate on a project. One party provides the investment and the other party provides the expertise. The profits of the joint venture are shared between the two parties as previously agreed in the contract.
2. Joint venture agreements: in which an investor and an entrepreneur agree to collaborate on a project, and both contributing the agreed capital. The contract will also set out the terms for sharing the profits and losses.
3.Declining balance partnerships: are a variation of the joint venture agreements. It is usually used for property transactions, in which the ownership of the asset is divided into units which one party buys from the other over time. The purchasing party gradually increases their share until full ownership of the asset is transferred to them.
4. Leasing contracts: in which the owner of an asset (the lessor) leases an asset to a lessee, who pays a pre-determined rental to the lessor for the use of the asset. An example of this is that a bank buys machinery and leases it to a customer. All terms are agreed at the start. There can also be an option to buy the asset in some of these contracts.
5.Purchase and resale contracts: in which a bank, for example, purchases an asset identified by a second party with the intention of immediately reselling it to the second party for payment of a pre-arranged higher sum as a set date in the future. Payment can be made in instalments.
6.Invesment Certificates: these are investment certificates which are economically equivalent to bonds. They differ from bonds, in that they are not debt-based instruments that pay interest. These certificates are asset-backed or asset-based instruments and represent the actual or beneficial ownership by the certificateholders in an underlying asset. Distributions are made to the investors in line with their proportional ownership of the asset. Such investment certificates may be issued by governments or private companies.