How to write a letter of recommendation for a company (form, template). Quasi-security obligations: international practice, regulation and development prospects in Russia for the settlement organizer of the purchase)
Writing a great letter of recommendation for a company in a formal style can be challenging.
You can greatly alleviate this problem for your guarantor if you yourself present him with a layout of a letter of recommendation.
In this case, you can initially present the content of the document in the right direction.
2. In the first paragraph, the guarantor explains how long he has been working with you. Briefly describe your type of activity and job responsibilities. Here you can write in a few words about the company itself.
3. In the next paragraph, it is necessary to give a more specific description of your professional and career growth throughout your time working in the company, list all the main achievements, and focus on the most important positive qualities from the point of view of the guarantor. Then the guarantor’s impression of joint activities with you.
To summarize what was written above, it is important to describe the personal qualities and positive character traits of a person. Express your opinion about what responsibilities and in what position he can bring the greatest benefit to the organization.
Letter No. 1:
OJSC [company name] is our partner in the field (area of activity). During the period of cooperation, [name of organization] confirmed its highest professional status, activity and competence in performing assigned tasks.
All tasks are completed on time, within strictly defined deadlines and with excellent quality. The company's employees perform their duties efficiently.
We are pleased with the work of [company name] and are ready to recommend this company as a responsible and reliable partner.
[Your name]
Sample letter No. 2:
The company [name of organization], working in (year) year for [name of organization], carried out work on [name of work] and established itself as a highly qualified, executive company.
The work was carried out efficiently and on time. There were no complaints against the company during the work.
[Your name]
Sample letter No. 3:
[name of organization] has been a partner of [name of organization] for [number] years. For such a long time, [name of organization] has established itself as a stable and reliable partner, providing high efficiency, reliability and a flexible approach to the Customer’s needs, never exceeding deadlines.
[Your name]
Sample letter No. 4:
By this letter I confirm that [name of organization] has experience in cooperation with [name of organization] in the field of [field of activity]. During the cooperation, company representatives showed a creative approach, high professionalism and efficiency in carrying out the designated tasks.
We confirm that the services of [organization name] correspond to a highly professional profile.
[Your name]
Sample letter No. 5:
Our cooperation with the company [name of organization] has continued since [year]. During this period, the company [name of organization] has established itself as a reliable business partner and sustainable enterprise.
Thanks to the main principle of the company's work - the formation of partnerships with clients based on professionalism and mutual cooperation, it, in our opinion, occupies a stable position in the field of [field of activity].
Sample letter No. 6:
With this letter, the organization [name of organization] informs that during the period of cooperation with [name of organization], this company has managed to establish itself as a reliable and professional partner.
The main distinguishing feature of the work of [name of organization] is the high level of organization and efficiency of the organization’s employees, the readiness to quickly respond to changing circumstances.
Based on the above, the company [name of organization] would like to note the high potential of OJSC [name of organization], focus on prosperity and further successful development.
[Your name]
Letter #7:
During the period of work with [name of organization], the company’s employees have proven themselves to be positive. Their work meets the specified level, is performed with high quality and strictly on time. I would like to note the efficient work of the specialists and the efficiency of completing tasks, and their attentive attitude towards the Customer.
[Your name]
Sample letter No. 8:
By this letter, we, [name of organization], confirm that [name of organization] is our long-term and reliable partner.
[name of organization] has been successfully and actively working since [date], providing a full range of services in this area.
During this period, we were provided with services at the highest professional level. The professionalism of [organization name] employees ensures a decent quality of services provided.
Based on the above, [name of organization] characterizes [name of organization] as a reliable and professional partner in the field of [field of activity] services.
<1>The preparation of this article was supported by the Central European University (CEU) Special and Extension Programs. The author's views expressed in this article do not necessarily reflect the views of CEU.
Burkova A., candidate of legal sciences.
Sometimes in international practice there is a document called a comfort letter (in English - “comfort letter”). What it is? What is its status under foreign law?
A comfort letter is a letter issued by an organization or person that expresses support for another person.
In international practice, there are usually several most common cases of providing comfort letters:
- provision of letters of comfort by the parent organization in relation to its subsidiary to the creditor of the subsidiary. In these letters, the parent organization expresses its agreement that the subsidiary company receives financing;
- provision of comfort letter by audit firms for the purpose of allotment of shares/bonds by their clients. In such letters, audit firms confirm the financial performance of the companies since the last audited statements were provided, and also confirm that there have been no significant financial changes in the company's activities compared to how such activities are described in the prospectus;
- provision of comfort letters by governments, for example, confirming the government's agreement that certain funds will be provided to public/state-owned companies or that the government will provide all necessary licenses to a person for a certain project.
Comfort letters from the government are often used for project financing. This is due to the fact that, unlike conventional lending, where all risks associated with lending are, as a rule, fully borne by the borrower, when organizing project financing, risks are distributed among several persons, including between the borrower, lender and other project participants . Thus, the management of political risk when implementing project financing, the size of which is usually significant and which may affect the strategic interests of the state, is most appropriate to entrust to state bodies or the government, involving them in the project. In this case, the state undertakes certain guarantees to create special conditions for a certain period of time that will facilitate the implementation of the project.
As another example of using a comfort letter abroad, we can cite comfort letters to supervisory authorities. For example, in some countries (UK, France, etc.) it is standard practice to provide comfort letters to the supervisory authorities of the relevant countries when the main shareholder of a bank with foreign capital changes.
What legal force do comfort letters have?
In fact, the legal effect of a letter of comfort depends on its provisions and the requirements of the law or jurisprudence of the jurisdiction in which the letter of comfort was issued or the dispute is pending.
As a rule, the force of a letter of comfort is lower than the legal force of a guarantee or surety. Letters of comfort are usually issued in cases where the guarantor is not prepared to provide a legally valid guarantee/surety. For example, due to the fact that the guarantee would violate the guarantor's standards or internal provisions or agreements, or the guarantor does not want the corresponding obligations to be placed on its balance sheet, or because the guarantor believes that such security is sufficient in this particular case.
In these cases, essentially comfort letters are used where some semblance of a guarantee is considered better than just nothing. They are not suitable for creditors who may sue the guarantors in the future.
Interestingly, the approach that comfortable writing is not always an obligation prevails in Anglo-Saxon law (UK and US). However, in France and Germany, comfort letters are very often recognized as valid obligations. It is also believed that if the letter of comfort states the law and choice of court, this means that the intention of the parties was to create a legally enforceable document, in which case the letter of comfort can be equated to a surety or guarantee.
The conditions for comfortable writing in commercial practice usually cover the following main points:
- confirmation that the person providing the comfort letter is aware of the funding.
The parent company says it is aware of the proposed loan and approves it. Such confirmation is intended to eliminate subsequent objections from the parent company that the subsidiary acted independently and therefore bears all responsibility independently;
- obligation not to reduce its share in the organization.
The parent company agrees that it will not reduce its share of the subsidiary's share capital until the loan is repaid. Sometimes it is also stated that if the parent company ceases to own the borrowing subsidiary or reduces its interest in it, the parent company will provide a guarantee to the lender for the obligations of the subsidiary;
- the degree of support that creditors require.
May vary greatly from case to case. For example, the parent company, in accordance with the letter of comfort, confirms that it will not receive money from the subsidiary if this results in the subsidiary being unable to fulfill its obligations to the creditor. However, with this form of support, it should be borne in mind that the parent company agrees not to withdraw money from the subsidiary, but it does not agree to provide money and pay for its subsidiary to the creditor if the subsidiary fails to fulfill its obligations.
Support can also be expressed in the form of subsidies: the parent company agrees to provide the subsidiary with all the necessary funds so that the subsidiary fulfills its financial obligations to creditors.
The degree of support is usually expressed in terms of intention - "in our intentions" or "according to our policy." The expression of such an intention in Anglo-Saxon law does not provide any guarantee for the future, since it is believed that intentions may change.
Indicative in this sense is the dispute in the case of "Kleinwort Benson Ltd v Malaysia Mining Corpn." According to the circumstances of the case, the plaintiff agreed to provide funds to the defendant's subsidiary. The defendant was asked to provide a guarantee to secure the subsidiary's loan obligations but refused to do so. In exchange, the respondent provided the applicant with a comfort letter which stated the following: "It is our policy to ensure that the subsidiary's business is conducted in such a manner that it can fulfill its obligations to you." Then the market crashed and the subsidiary was declared bankrupt. The applicant attempted to obtain funds from the defendant by relying on a comfort letter from the parent organization. The applicant considered that since the letter was a commercial document, it was presumed that such a document was provided to create a legally valid obligation. The court rejected the claim, noting that the wording of the comfort letter essentially represents simply an excerpt from the internal documents (policies) of the defendant, therefore the comfort letter cannot be considered as a promise not to change such internal rules in the future, and therefore cannot be considered as a legally valid obligation . The Court emphasized that the question of whether a contract creates legally binding obligations depends on the circumstances of each particular case. In Kleinwort Benson Ltd v Malaysia Mining Corpn it was important that the parties were on equal footing, that the respondent expressly refused to provide a valid guarantee and that the applicant instead agreed to accept a letter of comfort on the basis that the interest on the loan would be higher than it was would have been if the defendant had provided a guarantee.
According to the UK's Direct Marketing Association, every £1 spent on email marketing in 2015 generated £38 in return. Want to achieve the same results, but don't know how to write a letter to a client?Then use the bestsample letters to clients,which we have collected for you in this review.
How to write a letter to a client correctly
You think about your customers all the time, but it's not mutual. To capture their attention and get ahead of your competitors, you need to regularly remind yourself. Emails do this very well. According to the authors of the Pipedrive blog, there are several tricks that can work in your favor:
- Patience and more patience. Bring your potential buyer closer to the deal gradually by regularly sending him .
- Agree on strategy in sending letters to clients with the marketing department, so as not to be too intrusive and not to clog the client’s mailbox with repeated information.
- Use a CRM system. It will simplify the technical side of communication with clients and speed up work with mail.
A CRM system is a convenient program that helps keep records of clients and transactions, records all calls, and also helps to conveniently organize correspondence with the client. For example, the program integrates with the mail service (you can connect an unlimited number of mailboxes) and allows you to save the correspondence history directly in the counterparty’s card. If I wrote to you new client, then you can create a deal card directly from an incoming letter.
Letters to clients: examples and ready-made samples
We have compiled a selectionbusiness letters to clients,which you can take as a sample. All you have to do is add details to them.
1. Are you writing to a potential client for the first time? Send this short message:
Letter subject: Perhaps you are our new client
Hello, [Name].
We [brief information about the company].
If this interests you, I am ready to discuss the possibility of cooperation. Let us know what time would be convenient for you to call.
[Signature]
2. Tell your potential client about your successful experience of cooperation with his competitors:
Letter subject: Keep up with your competitors
Hello, [Name].
We work successfully with [competitor of X and Y] V [field of activity] already [so much time] and together we achieved good results. You can find detailed information about them here [link to case/review].
We will be glad if you join us.
[Signature]
3. If you received contacts of potential clients at a business event, send themoffer lettersuchsample:
Letter subject: More about our company
Hello, [Name].
I hope you liked it too [event], and would like to thank you for your interest in [Company name].
I am attaching more detailed information about our company. I will be happy to discuss all your questions over the phone.
[Signature]
Reminder letters
4. Some time after sending letters to clients offering services or additional information remind about yourself:
Letter subject: Is there something you want to discuss?
Hello, [Name].
I hope that you had the opportunity to read my previous letter and become more familiar with [additional information].
Do you have any questions or thoughts about my proposal? I will be happy to discuss them over the phone or in person. When will you have time for this?
[Signature]
5. If you can show the effectiveness of your proposal with numbers, then share them in letters to company clients. Facts convince better.
Letter subject: A few facts you might not know about [Company name]
Hello, [Name].
I recently sent you a letter about [Company name], and I think we could be useful [your company].
Our clients are seeing growth [specify indicators] when used [name of product and service]. We also offer [tell us about promotions] And [mention other great deals].
If you would like to know more details, please let us know and we will arrange negotiations by phone or in person.
I'm looking forward to your answer.
[Signature]
6. Offer clients a trial period or free samples. Buyers are more willing to make a deal if they test the product first.
Letter subject: Gift for your company
Hello, [Name].
A few days ago I sent you information about [the product's name] and now I propose to try it in action.
I have created/attached some guest logins/free samples/vouchers that can be used to access/receive [product or service]. Share them with your colleagues. It would be interesting to hear their opinion.
I will be happy to discuss everything in more detail over the phone or in person. I'm sure we can really be useful to you in [field of activity].
[Signature]
7. If you are not sure that you are corresponding with an employee authorized to negotiate, ask him to help reach the decision-maker:
Letter subject: I hope you can direct me to the right person
Hello, [Name].
A few days ago I sent you a letter about [company or product] and now I doubt that I came to the right address.
Is it you who makes decisions on the issue that interests me? If not, could you help me contact the right person at your company?
Waiting for your reply.
8. Use this text of the letter to the client if, after meeting with him, you want to inquire about his future plans:
Letter subject: Your plans
Hello, [Name].
Thank you for your time. Now I would like to know how you see further discussion of our issue.
If you are still interested, please inform us of your plans.
Waiting for your reply.
[Signature]
9. After meeting with the client, remind him of the following stages of negotiations:
Letter subject: Action plan for the near future
Hello, [Name].
Thank you for taking the time - today's meeting was very productive. Let me briefly remind you what we will do next:
[Date of]: I will send you [contract/full set of documents].
[Date of]: You will pass on your comments and wishes to me.
[Date of]: We will make all final changes and sign the agreement.
If you need to discuss anything before this date, please let me know.
10. Composesuchletter to client, if during the meeting he wanted to receive additional information:
Letter subject: Information on your request
Hello, [Name].
We were glad to meet personally with representatives of your organization. I promised to send you additional information about [question]- they are in the attached file.
Ready to answer any questions. Feel free to call me at [number] anytime or write to this address.
[Signature]
If the client does not contact
11. If the client does not answer the phone call , use the followingletter writing sample:
Letter subject: Couldn't contact you
Hello, [Name].
I wanted to discuss with you [question], but you are probably busy. Please call me back at [number] or let me know when it’s convenient for you so that I can call.
[Signature]
12. Didn’t get through to the client and left him a voice message? Complete it with the following letter:
Letter subject: Didn't get through to you
Hello, [Name].
I recently called you to discuss [question].
[Signature]
13. If a customer persists in not responding across all channels, they may have a lot on their plate. Use this template - even a very busy person can find a couple of seconds to answer:
Letter subject: Short answer required
Hello, [Name].
Unfortunately, I can’t contact you in any way. I assume that you are very busy or are no longer interested in our services.
Please indicate the appropriate answer in your response:
- Please leave me alone!
- Too busy, write to me again in a month please.
- I will contact you myself.
[Signature]
14. If you want to unobtrusively remind about yourself, share with the client information that will be useful to him:
Letter subject: Useful information for your business
15. If the client delays payment, remind him of this:
Letter subject: Delay of payment
Hello, [Name].
[Date of] I sent you an invoice by email. Payment has not yet been received, so please check if your financial department our account? If necessary, I will resend it. I expect payment from you within a week.
Thank you for your help.
[Signature]
These templates will save you time to actually communicate with clients. And to achieve greater effect, automate the creation and distribution of templates via . right now - it's free and only takes a couple of minutes.
SOME LEGAL CONCEPTS NOT KNOWN IN RUSSIAN LAW
A.Yu. BURKOVA
Russian legislation is still in a state of development. Every year it is enriched with new institutions and concepts. However, some of these concepts have not yet come to Russia or are insufficiently developed. These concepts exist both in corporate law and in civil, financial or banking law of other states.
Escrow accounts
An escrow account is an account from which money (property) is transferred upon the occurrence of certain circumstances or the fulfillment of certain obligations. Escrow accounts are sometimes called escrow accounts or security deposit accounts (you may also see other terms).
The scheme works as follows. One party deposits money (property) with the escrow agent. An escrow agent holds the escrow deposit until a specified event occurs or an obligation is satisfied. The beneficiary has the opportunity to receive funds (property) only if pre-agreed conditions are met. All these conditions are negotiated when transferring money or other property to the escrow agent. If the beneficiary fails to fulfill the terms of the agreement, the escrow agent, upon the arrival of the agreed period, returns the deposit amount to the person who transferred the funds (property).
A person who acts as an escrow agent serves as a fiduciary with equal responsibilities to all parties who have an interest in the property placed in escrow. Therefore, independent organizations that have no interest in the transaction act as escrow agents. In this regard, for example, an escrow agent cannot support only one of the parties, or provide (offer) assistance to one of the parties. Instead, the escrow agent, if acting as a lawyer, must refer the parties to another lawyer who can assist them in resolving the dispute.
Escrow agent services are often provided by financial organizations, lawyers, and notaries. In some states, the activities of escrow agents are subject to mandatory licensing. It is interesting that in the West, due to the prevalence of the escrow agent institution, there is a specialization. Often, specialized escrow agents are trained in areas such as real estate, insurance, taxes, and inheritance. The need for such specialization is due to the fact that the functions of escrow agents are very closely related to the study of rights and circumstances, the occurrence of which obliges escrow agents to transfer funds (property) to beneficiaries.
The main responsibility of the escrow agent is to ensure the security of the transferred property in escrow. If it is money, it must be deposited in a special bank account that is separate from the agents' accounts.
Letter of Intent
Sometimes in commercial relationships, before concluding the main contract, the parties sign a letter of intent. This document may also be called a memorandum of intent, letter of intent, or other names.
A letter of intent usually serves to outline the general terms under which the parties will be willing to enter into a particular transaction.
Although in some cases the letter of intent may be binding on the parties, more often the parties use the letter of intent as a document that consolidates the results of the parties' negotiations on the future terms of the transaction.
Indeed, it is convenient to have a short document that outlines the main parameters of a future transaction, and based on it, prepare a detailed contract. At the same time, the parties know that if something goes wrong, the party can always withdraw from this transaction before signing the main agreement.
A letter of intent is sometimes used as evidence to potential investors that negotiations between the parties have actually taken place and that the parties have reached a certain understanding of the terms on which they are willing to cooperate, and these terms are specified in the letter of intent.
Comfort letter
A comfort letter is a letter issued by an organization or person that expresses support for another person.
In international practice, there are usually several most common cases of providing comfort letters:
provision of letters of comfort by the parent organization in relation to its subsidiary to the creditor of the subsidiary. In these letters, the parent organization expresses its agreement that the subsidiary company receives financing;
submission of a comfort letter by audit firms for the purpose of placing shares (bonds) by their clients. In such letters, audit firms confirm the financial performance of the companies since the last audited statements were provided, and also confirm that there have been no significant financial changes in the company's activities compared to how such activities are described in the prospectus;
submission of letters of comfort by governments, for example confirming the government's agreement that certain funds be provided to public (state-owned) companies, or that the government will provide all necessary licenses to a person for a certain project.
Comfort letters from the government are often used for project financing. This is due to the fact that, unlike conventional lending, where all risks associated with lending are, as a rule, fully borne by the borrower, when organizing project financing, risks are distributed among several persons, including between the borrower, lender and other project participants . Thus, the management of political risk when implementing project financing, the size of which is usually significant and which may affect the strategic interests of the state, is most appropriate to entrust to state bodies or the government, involving them in the project. In this case, the state undertakes to guarantee the creation of special conditions for a certain period of time to facilitate the implementation of the project.
As another example of using a comfort letter abroad, we can cite comfort letters to supervisory authorities. For example, in some countries (UK, France, etc.) it is standard practice to submit comfort letters to the supervisory authorities of the relevant countries when the main shareholder of a bank with foreign capital changes.
The legal effect of a letter of comfort depends on its provisions and the requirements of the law or judicial practice of the jurisdiction in which the letter of comfort was issued or the dispute is pending.
As a rule, the force of a letter of comfort is lower than the legal force of a guarantee or surety. Letters of comfort are usually issued in cases where the guarantor is not prepared to provide a legally valid guarantee (surety), for example, due to the fact that the guarantee would violate the guarantor's regulations, or internal regulations or agreements, or the guarantor does not want the corresponding obligations to be placed on it balance, or because the guarantor believes that such security is sufficient in this case.
In these cases, comfort letters are used where some semblance of a guarantee is considered better than just nothing. They are not suitable for creditors who may sue the guarantors in the future.
Warranties and indemnity obligations
Often, when concluding a financial or commercial transaction, the creditor (bank, seller, etc.) wants to obtain security for the fulfillment of the obligations of the debtor (borrower, buyer, etc.) to him.
One way to ensure the fulfillment of obligations is to obtain a guarantee from a third party. Under the terms of this guarantee, a third party - the guarantor - undertakes to answer to the creditor in the event of default by the debtor.
For example, under English law there are several types of security obligations from third parties, including through:
guarantees in which a third party guarantees the fulfillment of the debtor’s obligation to the creditor;
obligation of compensation (indemnity), in which a third party agrees to compensate the creditor for his losses resulting from entering into a transaction with the debtor.
The main difference between a guarantee and an obligation to indemnify is that the obligation to indemnify is the main primary obligation, while the guarantee is a secondary obligation, somewhat reminiscent of an accessory obligation under Russian law.
Venture funding
In the current global economy, access to finance for small and medium-sized enterprises is an important prerequisite for strengthening the competitiveness of the European market.
The benefits of small businesses are that they have the potential to create new jobs and technology.
Raising capital is one of the conditions for successful business development. Own funds and raising funds through the issuance of securities are not always sufficient and possible for small businesses, especially in the early stages of their development.
However, many investors do not provide financing to small companies due to the fact that the effort and costs that will be necessary to arrange financing for a small business will be the same as for ordinary enterprises, and the expected profit from such financing may not cover the calculations of financiers their risks.
In these cases, these small companies typically look for a venture capitalist who can provide sufficient funds to enable the small businesses to enter and grow in their respective markets.
Non-compete clauses
A non-compete clause means that one of the parties to the contractual documentation agrees not to engage in similar activities with the other party. Such a clause is valid throughout the validity of the contract between the parties and, in certain cases, may exist after the termination of the parties’ relationship.
The purpose of a non-compete clause is to prevent the counterparty from engaging in competitive activities, starting own business or benefited from access to confidential information about that person's operations and trade secrets.
Sometimes non-compete clauses are structured as exclusivity clauses, such as the exclusive right to deal with a particular supplier or the exclusive right to be a distributor of a particular product.
Non-compete clauses have both advantages and disadvantages.
Among the advantages, as noted above, is the limitation of opportunities for counterparties to abuse the information they receive or access to the market.
Among the disadvantages is the ability, through non-compete clauses, to limit the development and activities of the individual concerned, for example, limiting the ability of a former employee to conduct business in accordance with his abilities or limiting the ability of an agent to represent several principals in the same territory.
Non-compete clauses can also negatively impact the status of competition in a given market. Therefore, in many countries, the law provides that if non-competition clauses directly violate competition provisions, the relevant clauses are automatically invalidated.
Subordination
Subordination provisions - provisions under which the creditor (subordinated or junior creditor) agrees that payment of its obligations occurs only after the claims of the ordinary (senior) creditor are satisfied.
The parties, concluding agreements that contain provisions on subordination, pursue several goals:
a senior creditor, for example a bank, may provide financing by stipulating that the claims of insiders of the debtor, such as the parent company or a major shareholder, must be subordinated to the claims of the bank;
subordinated debt may be created to increase capital for regulatory purposes. Central banks in some countries allow commercial banks to include subordinated loans in capital to calculate compliance with banks' banking regulations;
subordinated debt allows you to increase the debtor's financing. Some creditors are willing to subordinate their claims so that the debtor receives more loans and other financing to develop the debtor’s business;
a subordinated loan in some cases helps the borrower survive without going through bankruptcy, financial recovery or liquidation procedures. Sometimes the shareholders of a company or the largest suppliers may subordinate their claims against the debtor in order to induce other creditors not to require the debtor to fulfill its obligations to them or to postpone obligations so that the borrower can restore its solvency.
Representations and Warranties
Representations, warranties and undertakings are a common element of many contracts drafted in Anglo-American countries. Recently, this part of the agreement has also appeared in agreements drawn up by Russian banks. Representations and warranties indicate certain facts at the time the contract is signed (representations and warranties), while covenants define the rules that the parties must follow or comply with during the contract (covenants, undertakings).
Representations and guarantees are confirmations given by the borrower on certain issues that are material for the bank to make a decision to provide funds under loan agreements. These confirmations relate to the legal, commercial and financial status of the borrower.
Representations and warranties can serve several functions:
indirect receipt of information from the borrower before concluding financing agreements, when either the borrower does not want to provide certain information, or the lender does not have time to conduct the necessary verification of the borrower and his activities. During the negotiation of financing agreements, the lender inserts certain representations and warranties into the draft agreements and expects that the borrower will either request that the representations and warranties be modified or disclose relevant information about its activities to the lender;
representations and warranties serve as a checkpoint, failure to comply with which may suspend the provision of tranches or funds. In this case, the contract stipulates that on each date of provision of funds, representations and warranties must be reliable. This means that if the guarantees or representations are not reliable, the bank is not obliged to provide funds or their next tranche to the borrower. The unreliability of representations and warranties may give rise to an event of default if the contract expressly provides that it arises if any of the representations and warranties is unreliable.
It should be noted that representations and warranties can only protect the rights of the creditor if the creditor relies on them and has no knowledge to the contrary. If the creditor knew for sure that the representations and warranties provided were not reliable, these provisions are likely to not protect the rights of the creditor, since by using them the creditor is abusing its rights.
Representations and warranties may relate to the existence of a legal entity, its legal capacity, availability of necessary permits, validity and enforceability, absence of litigation, absence of violations of law, encumbrances, etc.
Pari passu
"Pari passu" clauses can be found in most international financing agreements.
Usually the text of "pari passu" looks like this:
The debtor's obligations under this agreement are at least "pari passu" (have the same priority as the debtor's other unsecured obligations).
In international transactions, such provisions are inserted in order to protect the creditor from the risk that his obligation will rank lower than that of another creditor, and that some other creditor will appear who will have priority in satisfying his claims.
The practical significance of the "pari passu" principle is not in doubt, especially in the case of the debtor's insolvency, when, depending on the priority of the creditor's claims, such claims may be fully satisfied or not fully satisfied.
"Shadows director"
"Private director" means a person who has the power to give instructions to the ordinary directors of a company and the ordinary directors are subject to those instructions.
Any person can act as a “hidden director”: individual or organization. However, more often than not, the “hidden director” is the company's shareholders, who can issue binding instructions to the ordinary directors on an ongoing basis. If the directors do not comply with these instructions, the shareholders may replace them with other persons.
Thus, a “hidden director” is a person who can have a real influence on the company’s activities. Therefore, its activities are regulated and controlled. It is subject to certain standards.
Nominee Director
A nominee director is an individual or legal entity appointed as a director in a company, who, however, performs his functions formally. In reality, the management of the company is in the hands of the person who appointed the nominee director. This person gives instructions to the nominee director: what to do, what transactions to make, what documents to sign.
Typically, the person who appoints and controls a nominee director in a company is one of the shareholders (founders) of the company.
Such shareholders (founders) or their representatives can, in principle, themselves act as a director of the company.
However, they are reluctant to act in this capacity for several reasons, for example because:
they want anonymity;
or because otherwise they will be recognized as tax residents in a given country and will be forced to pay taxes;
or because shareholders (founders) or their representatives do not want to prepare and execute all the necessary corporate documents, etc. and entrust this work to a professional who acts as a nominee director. Nominee directors fill out and prepare all documents on a professional basis and can more quickly resolve formal procedures in the company.
The nominee director also conducts annual corporate meetings, which again relieves shareholders (founders) and their representatives from completing these formalities.
Due to these reasons, shareholders (founders) of companies sometimes make a choice in favor of nominee directors.
In these cases, it is common practice for local persons to be appointed as directors.
We note that while a few years ago nominee directors in certain jurisdictions could act solely on the instructions of the persons who appointed them, the situation has now changed dramatically due to ongoing international measures to combat illegal money laundering.
More and more states are adopting the following concept: even if nominee directors are appointed, they must act in the best interests of the company. In other words, the status of nominee directors is equal to the status of ordinary corporate directors.
Independent director
Although the phrase “independent directors” has already appeared in the legislation on joint stock companies in Russia, their activities and cases of use are not sufficiently regulated.
In international practice, the purposes of using independent directors can be different:
ensure that boards of directors include directors who can act independently without conflicts of interest;
attract high-level specialists to the company's work who can give valuable advice for the development of companies;
ensure a reasonable balance of interests of the company, its shareholders and other persons;
introduce best corporate governance practices into the work of boards of directors.
Typically, independent directors in international practice include persons who meet the following parameters:
are not employees of the company over the past several years or employees of affiliates;
are not affiliated with the company’s largest suppliers, clients, its consultants or auditors, etc.;
do not own any shares or shares in the company where they are independent directors.
An independent director is expected to improve management efficiency, which has a positive effect on the company's image and makes a tangible contribution to increasing shareholder value.
An independent director ensures equal treatment of the interests of all shareholders of the company. He is ready to defend independent decisions and oppose decisions of management and the board of directors that could adversely affect the company's operations and its financial position. For these purposes, an independent director must be aware of the company’s activities and its specifics.
Within the framework of his powers, an independent director can help protect the legitimate interests of the company and its shareholders from illegal actions of third parties.
An independent director may be necessary to establish international contacts and increase confidence in the company or to improve the corporate governance system.
An independent director who has worked in similar enterprises before his appointment to the company can help the company formulate its development strategy and provide valuable advice for its development.
Some of these concepts may be of interest to the Russian market. Therefore, they may appear in Russia in the future.
Bibliography
1. Richard Calnan. Taking Security: Law and Practice. Bristol: Jordans Publishing Limited, 2006.
2. Philip R. Wood. Project Finance, Securitisations, Subordinated Debt. 2nd ed. London: Sweet & Maxwell, 2007.
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