For your U.S. domestic and cross-border financing transaction to be successful, it’s important to have a process agent in place before the closing date. The process agent acts as the physical representative in the jurisdiction that will serve as governing law for any issues that arise during the terms of the transaction and receives service of process for legal actions related to the transaction.
One factor of securing a process agent that is less widely discussed is appointment terms. How long should an appointment last? What kind of pricing structure is involved with getting a process agent? What other small details should be considered before entering an agreement?
Before appointing a process agent for a transaction, it can be helpful to know what type of pricing structures makes sense for your deal.
Appointment Term by Transaction Type
There are three main types of transactions based on duration:
- Fixed-term transactions have a maturity or end-date. For example, a bond offering is a fixed-term transaction that might last 5-10 years. In this case, a process agent will often be appointed irrevocably, as required by the lender, and paid for in advance for the entire term of the loan.
- Indefinite termination date transactions, such as derivative transactions, do not have a set end date. For these types of transactions, a process agent might accept an appointment for a three- or six-year term, then renew periodically until terminated.
- Rolling year-on-year contracts are renewed annually and as such, may require a process agent appointment to be renewed each year. For instance, in a bridge loan where a borrower is establishing short-term financing, you might appoint a process agent for one year with an option to renew on a yearly basis until longer-term financing is in place.
Watch Out for Pricing Based on Number of Agreements
You’ll also want to check whether the process agent charges an additional fee per agreement, as it’s not uncommon to have multiple operative agreements in a single deal. For example, if you need a process agent for a global bond offering (e.g. Indenture, Purchase Agreement, Subscription Agreement, etc.) or a real estate financing transaction (e.g., Loan Agreement, Guaranty, Environmental Indemnity Agreement, etc.) in the U.S., a pricing structure should cover the transactions as a whole.
If you choose a process agent that charges by the number of operating agreements in a single financing transaction, you may spend much more money than necessary. Ideally, you’ll want a process agent that understands their role in relation to a transaction as a whole, regardless of the number of agreements or documents involved.
Do you have other questions about pricing structures for process agent appointments?
This content is provided for informational purposes only and should not be considered, or relied upon, as legal advice.