Foreign Equity Investment – Crown Agarwood Group

A foreign investor injects US$10 million into a Philippine-based agarwood company in exchange for an agreed equity interest.

FOREIGN INVESTOR
       │
       │ US$10M Equity Capital
       ▼
┌─────────────────────────────┐
│ PHILIPPINE AGARWOOD COMPANY  │
│                             │
│ Plantation                  │
│ Nursery                     │
│ Extraction                  │
│ Manufacturing              │
│ R&D                        │
│ Export / Sales              │
└─────────────────────────────┘
       │
       ├── Agarwood
       ├── Oud Oil
       ├── Extracts
       ├── Perfumes
       ├── Incense
       └── Downstream Products

1. Illustrative capitalization

Shareholder	Capital / Value	Ownership
Foreign Investor	US$10.0M	70%
Philippine Founder/Partner	Existing assets/business contribution	30%
Total	US$10.0M + contributed value	100%

The 70/30 figure is only an illustrative commercial structure. The legally permissible percentage depends on the precise activity and the treatment of land, natural resources, forestry rights and other regulated activities.

The Philippines generally allows foreign ownership unless restricted by the Constitution, special laws or the Foreign Investment Negative List.

2. What the US$10M buys

The foreign investor should not simply be given shares in exchange for an informal promise to develop the business.

The investment should purchase a defined package of rights:

Equity

Common or preferred shares
Voting rights
Dividend rights
Economic participation
Exit rights

Strategic control

Potentially:

Board representation
Approval rights over major decisions
Budget approval
Capital expenditure approval
Appointment rights for key executives

Commercial participation

International sales
Export markets
Luxury oud business
International distribution
Brand development

3. US$10M investment deployment

A possible allocation:

Business Area	Investment
Plantation establishment	US$3.00M
Nursery	US$0.75M
Agarwood induction/R&D	US$0.75M
Extraction facility	US$2.00M
Downstream manufacturing	US$1.00M
Luxury oud brand	US$0.75M
Working capital	US$1.00M
Regulatory/certification/laboratory	US$0.25M
Contingency	US$0.50M
Total	US$10.00M

4. Do not invest the US$10M all at once

I recommend a milestone-based equity subscription.

Stage 1 — Platform establishment

US$1.5M

corporate establishment
legal due diligence
land/site arrangements
nursery
initial plantation
feasibility
management

Stage 2 — Plantation expansion

US$2.5M

Released after agreed plantation milestones are achieved.

Stage 3 — Extraction

US$2.5M

Released following:

site approval
engineering
equipment procurement
required permits

Stage 4 — Manufacturing

US$1.5M

For:

oud products
fragrance
incense
cosmetics
specialty extracts

Stage 5 — Global commercialization

US$1.0M

For:

GCC
Japan
EU
Singapore/Hong Kong
international distributors

Reserve

US$1.0M

5. Foreign investor rights

The investment agreement should give the investor strong protection without creating unnecessary operational interference.

Board

For a 70% investor:

7-member board

4 foreign-investor nominees
2 Philippine nominees
1 mutually agreed independent director

Reserved matters

Certain decisions require, for example, 75% shareholder approval:

new shares
major borrowing
sale of substantial assets
merger
acquisition
liquidation
related-party transactions
change of business
sale/licensing of core IP
major capital expenditure

This prevents the majority shareholder from making every strategic decision unilaterally.

6. Investor economic waterfall

I would structure the investment approximately like this:

GROSS REVENUE
      ↓
Operating Expenses
      ↓
Taxes
      ↓
Debt Service
      ↓
Maintenance Reserve
      ↓
Working Capital
      ↓
Reinvestment
      ↓
DISTRIBUTABLE PROFIT
      ↓
DIVIDENDS
      ↓
70% FOREIGN INVESTOR
30% PHILIPPINE SHAREHOLDER

The actual dividend policy should be incorporated into the company’s constitutional documents and shareholders’ agreement.

7. Optional preferred-equity structure

For a sophisticated foreign investor, an even stronger structure is:

Foreign Investor

US$10M Preferred Equity

with:

preferential dividend
liquidation preference
conversion rights
anti-dilution protection
information rights
board appointment rights

followed by:

Common Equity

held by the Philippine founder/strategic shareholders.

This can make the investment more attractive because the investor obtains downside protection while the local founder retains meaningful upside.

8. Founder/Philippine shareholder protection

A good foreign-equity structure should also protect the Philippine shareholder.

The Philippine shareholder could receive:

30% ordinary equity
board representation
dividend participation
tag-along rights
pre-emptive rights
protection against unfair dilution
defined management role
potential performance-based equity increase

This makes the arrangement a genuine strategic investment, rather than simply a foreign takeover.

9. Land should be separated from equity

This is especially important for the Philippine agarwood project.

I would structure:

PHILIPPINE LANDOWNER
       │
       │ lawful lease / farm agreement
       ▼
AGARWOOD OPERATING COMPANY
       │
       ├── Plantation
       ├── Nursery
       └── Farm Management

rather than making the foreign investor the direct owner of Philippine plantation land.

The Philippine Constitution contains restrictions concerning acquisition of private land, and forestry/natural-resource arrangements can have additional nationality requirements.

10. Foreign investor’s exit

The investment should have a defined 5–10 year exit strategy.

Possible exits:

Strategic sale

Sell shares to a global fragrance, cosmetics or oud company.

Trade sale

Sell the entire agarwood platform.

Buyout

Philippine shareholders purchase the foreign investor’s shares.

Secondary sale

Foreign investor sells shares to another institutional investor/family office.

IPO

Long-term possibility if the company reaches sufficient scale.

11. Foreign Equity Investment vs JV

For your project, the distinction is important:

	Foreign Equity	JV
Foreign investor	Capital investor	Strategic partner
Philippine partner	Shareholder	Active co-venture partner
Control	Primarily through equity	Shared by agreement
Complexity	Lower	Higher
Technology	Can be licensed	Can be contributed
Management	Investor-led possible	Joint
Best for	Capital-led expansion	Local asset/relationship integration

My recommendation

If the foreign investor is bringing most of the US$10M, while the Philippine side contributes the operating platform rather than substantial capital, I would favor:

Foreign Equity Investment + Strategic Shareholders’ Agreement

rather than calling the entire arrangement a traditional JV.

The plantation/land component can then be separately structured around legally appropriate Philippine land-use and operating arrangements.

Recommended investment proposition

US$10M Foreign Equity Investment

→ Philippine Agarwood Holding/Operating Company

→ 70% illustrative foreign strategic ownership

→ 30% Philippine strategic/founder ownership

→ staged capital deployment

→ investor board control

→ reserved-matter protections

→ preferred-equity option

→ plantation + extraction + downstream integration

→ technology licensing

→ international oud/fragrance commercialization

→ defined investor exit

This gives the foreign investor equity ownership and economic upside, while avoiding the unnecessary complexity of making every part of the business a separate JV.