Checking a Local Partner and Project Company Abroad
A checklist before you enter a partnership, invest in a project company or transfer money
A local partner can bring land, connections and on-the-ground knowledge, but also debts, lawsuits and encumbrances that never appear in the presentation. This list brings together the checks worth completing before you sign and before the first transfer. Each item explains why it matters and how to check it.
1. Company identity and ultimate beneficial owner
The extract shows the shareholders, the directors, the registered capital and the company's status. Rely on a recently issued document from an official source, not on a copy the partner sent you.
When the shareholder is a company, a fund or a trust, ask for the full ownership chain. EU member states keep a register of beneficial owners, and the local bank will require the same information in any case.
The company name, registration number, address and shareholders must match the contract, the offer and the bank account. A discrepancy in a single detail is a reason to stop and ask.
A change of owners or directors shortly before the deal, a change of name or a transfer of registered office requires an explanation. A historical extract from the register shows the changes over time.
A company that has not filed annual accounts may face sanctions and even deregistration, and missing accounts make its position hard to assess. In some countries the accounts are open to inspection at the register.
2. Signatories and authority
Authority is set by the articles and the register, not by a business card. Some companies require two signatures, or limit the director by amount or type of transaction.
When the deal goes beyond day-to-day management, such as selling land, granting security or admitting a partner, the articles or local law may require prior approval. A contract signed without it may be vulnerable.
Anyone signing under a power of attorney must produce it, and notarisation and an apostille may be required. Check the scope of the authority and the date on which it expires.
The bank will check this anyway, and a late finding may freeze an account or a transaction. It is better to check before you commit.
3. Litigation, insolvency and encumbrances
Many countries have online court case databases, sometimes searchable by party name. Claims by suppliers, contractors or buyers say a lot about how the partner does business.
Pending insolvency proceedings, or past proceedings involving one of the owners, change the entire risk picture. In EU member states such registers are open to the public.
A charge over the land, the shares or the bank accounts affects what you actually receive. Check both the land register and, where one exists, the register of security over movable assets.
Debts to the authorities can lead to attachments and delay permits or registration. In some countries an official certificate of no tax debts is available, and you can ask the partner to produce it.
A partner active in several countries may be involved in proceedings outside the project country. Ask for a written declaration and include it as a representation in the agreement.
4. Financial capacity and track record
Financial statements show equity, liabilities and cash flow, not just the revenue shown in the presentation. Audited statements are preferable to internal ones.
If the partner commits to contribute capital, ask for proof that can be verified: balances, a credit approval or another source. A partner who depends on future buyers' money adds risk to the project.
Ask for a list of completed projects with addresses, and check in the registers who the developer was and whether the units were registered. A site visit and a conversation with past buyers or suppliers say as much as the presentation.
Searching by company and owner names, including earlier companies that were closed, can reveal past failures. A company closed with debts shortly after a project ended is a sign that needs an explanation.
5. The project company itself
Obtain a current land register extract and check that the registered owner is the project company, not the partner personally or another of his companies. A lease, a building right or an option agreement is not ownership.
A bank mortgage, a note in the register or a restitution claim can delay or block the project. In Romania, for example, the full picture appears in the land book extract (extras de carte funciară).
Check what the plan applicable to the land allows, whether there is a valid building permit and in whose name it was issued. A presentation with renderings is not a permit.
Shareholder loans, bank credit, supplier debts, guarantees the company has given and agreements with buyers. Get the list as a representation in the agreement, with the partner liable if it turns out to be incomplete.
A construction contract, an exclusive marketing agreement or off-plan contracts with buyers determine much of the project's economics. Some of them may be with parties related to the partner.
Money you put into the project company comes under the control of the account signatories. The bank signing mandates should match what was agreed in the partnership agreement.
6. The partnership agreement
A good agreement sets a cap on each partner's commitment and a capital call mechanism. Without written rules on dilution, priority loans or suspension of rights, a partner who does not pay can stall the project.
For each type of decision, set who decides and by what majority: day-to-day management, budget, loans and security, sales and related-party transactions. Whatever is not agreed in advance will be decided by the default rules of local law.
In a partnership of two equal parties, a single dispute can paralyse the project. A staged path of escalation, mediation or expert determination, ending with an exit mechanism, is better than a stalemate.
When the local partner is also the contractor, the marketer or the project manager, set the terms in advance and who approves them. Approval by the partners who have no personal interest is a common mechanism.
Rights of first refusal, tag-along and drag-along rights determine what happens when someone wants to sell. In a bank-financed project, the bank will usually also require its consent to any change of control.
The articles are filed with the local register and the bank will rely on them. If the agreement sets a restriction that does not appear in the articles, a third party may not be bound by it.
Matters of the company's internal organisation are usually governed by the law of the country where it is registered, even when the agreement chooses another law. The arbitration or jurisdiction clause should suit the place where the assets you may need to enforce against are located.
This list is general information and not legal advice for any specific case. Law, registers and procedures vary from country to country, and some of the checks require a lawyer licensed in the project country. It is worth seeking advice before signing the partnership agreement or before the first transfer, while the structure can still be changed and protections added.
