Cross Border Service Fee Scope Drafting Fundamentals for Intercompany Contracts
Defensible intercompany service fee drafting relies on verifiable economic benefit, objective allocation keys, non-duplication proof, and explicit markup logic.
Reserved Matter
Meaning
A corporate decision requires the specific approval of a designated group of shareholders or board members before it can be executed. In shareholder agreements, a reserved matter prevents the executive team from taking major actions, like selling the company or issuing new shares, without broad consensus. This mechanism protects the interests of minority investors.
Minority Protection
Joint venture partners use specialized veto rights to prevent majority shareholders from acting unilaterally on major issues. By defining a clear reserved matter list, minority investors ensure that their capital cannot be repositioned or diluted without their explicit consent. This right provides leverage during disputes over corporate direction.
Threshold Consent
Executive teams must review the corporate bylaws to identify which actions require more than a simple majority vote. For any reserved matter, the company must secure a supermajority or unanimous approval from the designated class of shares. This step must be documented in the minutes of the board meeting before the action is executed.
Strategic Impact
Major structural changes like restructuring debt or changing the core business model are heavily restricted to protect the value of the enterprise. When a reserved matter is triggered, the founders and investors must negotiate to find a compromise, because a failure to agree can lead to a corporate deadlock where the company cannot proceed with its plans, which may ultimately require a buyout or the liquidation of the business if the stalemate persists.