Jilian Consultants Co., Ltd.
Jilian Consultants Co., Ltd.

Key Terms of the Overseas Financial Consultants Agreement

Overseas Financial Consultant Service Scope

The financial advisor agreement often describes the service scope of the financial advisor in a detailed and summarized manner. For example, the detailed listing may include: assisting in screening and recommending the counterparty, coordinating the due diligence of all parties, assisting in negotiations, evaluating transaction prices, and creating various promotional materials.

The "fallback clause" generally describes: providing other services that are reasonably necessary to facilitate the proposed transaction. To avoid ambiguity and disputes, both parties may consider clearly excluding items outside the service scope in the financial advisor agreement.

Exclusive Clause of Overseas Financial Consultants

The exclusive clause means that for the proposed transaction, the company cannot accept the services of other financial advisors while receiving the services of the Overseas Financial Consultant. Companies usually do not want to sign an exclusive clause to leave themselves more room for choice and use competition between financial advisors to gain more benefits.

However, financial advisors hope to obtain the status of exclusive services to ensure that the services they provide can get the proper return. We believe that companies do not need to blindly exclude exclusive clauses, because giving financial advisors a certain exclusive status can encourage them to invest more resources and focus to facilitate proposed transactions.

In addition, in the case where the company accepts the exclusive clause, appropriate measures can be taken to effectively limit the binding force of the exclusive clause.

The Right of First Refusal of Overseas Financial Consultants

The Right of First Refusal means that when the company needs financial advisor services for other matters, the current financial advisor on the current matter has the right to provide financial advisor services to the company before the third party when the conditions are the same.

Financial advisors hope to lock future opportunities to provide services to the company to a certain extent through such clauses. However, companies often do not want to grant financial advisors the Right of First Refusal, because they are concerned that this right will limit their freedom to choose financial advisors. Even if the company accepts the clause, it often limits and regulates the exercise of this right by specifying the termination conditions and exercise procedures of the Right of First Refusal.

Term and Termination of Overseas Financial Consultants

Both the company and the financial advisor usually require the right to terminate the Overseas Financial Consultant agreement for any reason. Because promoting transactions requires close cooperation between both parties, if there are differences or unhappy cooperation, neither party wants to be bound by the financial advisor agreement.

The negotiation of the termination clause between both parties may have several rounds of confrontation, but they may finally compromise with each other. The common compromise is that both parties agree to enjoy the right to terminate the financial advisor agreement for any reason after a certain period of time from the signing of the financial advisor agreement. This gives both parties time to adapt to each other. If the project progresses smoothly, the company's reliance on the financial advisor tends to increase, and the probability of exercising the right to terminate for any reason will decrease.

The Tail Period Clause of Overseas Financial Consultants

This clause refers to a certain period of time after the termination or cancellation of the financial advisor agreement, during which if the company completes the proposed transaction in the financial advisor agreement without the assistance of the financial advisor, the financial advisor can still demand successful fees from the company.

In the current market practice, it is difficult for the company to completely reject the tail period clause. The main negotiating point between both parties for this clause is the term of the tail period and the exceptions that exclude the application of the clause.

The exceptions that apply to the tail period clause usually include: financial advisor default, termination of the financial advisor, and key teams or key personnel of the Overseas Financial Consultant who do not provide substantive services for the transaction.