Bridging Gujarat's Manufacturing Power with New South Wales's Energy Grid
The transition to renewable energy is a global priority, and the India-Australia corridor is at the heart of this shift. "SuryaTech Gujarat" (anonymized), a large-scale manufacturer of solar inverters and tracking systems, sought to enter the Australian market. They partnered with "GreenGrid Sydney," an established distributor of renewable energy components in New South Wales (NSW).
The goal was to create a Joint Venture (JV) that would not only distribute SuryaTech's products but also provide local maintenance and warranties—a critical requirement for utility-scale solar farms in Australia. CorpArray was engaged to structure the JV, manage the capital injection, and ensure compliance with both Australian consumer laws and Indian FEMA regulations.
Solar JVs are particularly complex due to the interplay of manufacturing logistics, long-term warranty liabilities, and cross-border equity structures. The challenges included:
Australian solar farm operators require 10-year to 25-year warranties. The JV entity (Surya-Grid Australia Pty Ltd) needed to be structured such that it remained solvent to honor these long-term commitments, even if the parent companies' relationship changed.
SuryaTech (the Indian parent) wanted to provide capital partly through cash and partly through 'technology contribution' (capitalizing the value of their designs). However, Indian FEMA rules and Australian Corporations Law have different methods for valuing non-cash equity contributions.
With a 50/50 equity split, the risk of management deadlock was high. The JV needed a governance framework that allowed for quick decision-making in the fast-moving Australian energy market.
We designed a structure that prioritized operational stability and regulatory transparency.
To accommodate the non-cash contribution, we implemented a dual-class share structure in the Australian JV. Class A shares (held by both) carried voting rights, while Class B shares (held by the Indian parent) were tied to the performance of the intellectual property. This was complemented by an independent valuation report that satisfied both ASIC (for share issuance) and the RBI (for ODI reporting).
To address the warranty concern, we advised the creation of a 'Warranty Sinking Fund' within the JV. A percentage of every sale was diverted to a restricted account to cover future liabilities. This made the JV a 'bankable' entity for Australian solar farm financiers.
We drafted a Shareholders' Agreement (SHA) that included a 'Chairman’s Casting Vote' that rotated annually between the two parents. We also included a 'Russian Roulette' buy-sell clause to resolve permanent deadlocks, providing a clear exit path for either party.
"A 50/50 JV is like a marriage; you need a pre-nuptial agreement. By focusing on the 'Exit' and the 'Warranty Liability' from day one, we created a structure that gave both partners the confidence to invest millions in a new market."