Executing a Flip Transaction: Bringing a Foreign Startup Into the U.S. Investment Market
Drafting Shareholder Agreements, Transferring Contracts, IP and Tax Concerns
Course Details
- smart_display Format
On-Demand
- signal_cellular_alt Difficulty Level
Intermediate
- work Practice Area
Commercial Law
- event Date
Wednesday, January 8, 2025
- schedule Time
1:00 p.m. ET./10:00 a.m. PT
- timer Program Length
90 minutes
-
This 90-minute webinar is eligible in most states for 1.5 CLE credits.
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 considerations, IP and contractual concerns, and how they are structured and documented. The panel will also address immigration issues that need to be resolved for personnel relocating to the U.S.
Ms. Mignano represents emerging and small businesses in the Bay Area. She provides businesses with counseling and transactional services, including business formation and expansion into U.S. markets, contract drafting and negotiation, and financing matters. Prior to launching Smith Shapourian Mignano PC, Ms. Mignano practiced law in the San Francisco office of an international law firm.
Ms. Alcorn is a top 10 California immigration attorney, entrepreneur, and thought leader. She founded Alcorn Immigration Law, lauded the Top Immigration Law Firm For Startups In California. Ms. Alcorn authors TechCrunch’s advice column “Dear Sophie” and hosts the podcast Immigration Law for Tech Startups. Global entrepreneurs, investors, marginalized groups, and even countries frequently seek her counsel on immigration, mobility, and economic policy. Ms. Alcorn’s mission is to help people harness their strengths, follow their hearts, find direction in their goals, and live their dreams in the U.S.
Venture capital investors have shown a strong preference for U.S. companies, where the legal and regulatory framework and exit strategies are better understood. A foreign startup seeking to become a U.S. entity might consider a flip transaction. In a flip, foreign shareholders exchange their foreign stock for stock in a new U.S. entity (typically a Delaware corporation). Before proceeding, counsel should consider tax, intellectual property, immigration, and operational issues, along with associated costs and documentation.
Tax implications of flip transactions depend on the existing entity's current jurisdiction and the makeup of its shareholders. Upfront due diligence should include examining company contracts to determine if any third-party consents or approvals are required. Counsel must also consider intellectual property ownership 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 relocate 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 the startup entity's shareholders. Contract rights will likely remain with 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.
- Advantages for foreign startups of establishing a corporate presence in the U.S.
- Tax issues to consider
- Contractual limitations
- Intellectual property concerns
- Immigration issues
- Structuring and documenting the transaction
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, and immigration and IP issues?
- What are best practices for structuring and documenting the transaction?
