Host Country Regulation: Corporate Law, Taxation, and Currency Risk

Chapter 18

Regulation

Who is the host country?The issues that concern less developed

countries are not necessarily the same as those of more developed countries.

Why?Hint: look to history

What kind of investment is it? Passive investments are treated differently

thanactive investments.

Why? What are examples of each?

Currency RiskIn whose currency is an

international loan paid, the lender’s or the borrower’s?

How can currency risk be hedged?– What is arbitrage? . . . a

currency swap? – What is countertrade?

Differentiate between barter, counterpurchase, offsets, and buy-backs.

Buying Foreign Stock

• 1. What is an American Depository Receipt?

• 2. How is insider trading handled?• 3. How much disclosure is required in

the particular market?• 4. How much influence can a foreign

investor assert? (i.e. getting a seat on the board of a Japanese company).

Subsidiary or Branch?

• 1. A subsidiary is a separate corporation whose stock is owned by the parent company.

• 2. A branch is just a division of the home corporation.

• 3. The differences affect tort liability and tax liability.

• 4. Which is more important, form or substance?

• 5. What is the transfer pricing problem?• 6. What are foreign sales corporations

and extraterritorial income?

The End