Equity Joint Venture – Crown Agarwood Group

An Equity Joint Venture (Equity JV) is likely the most suitable structure when the foreign investor provides substantial capital while the Philippine partner contributes local assets, operating capability, plantation access, technology, relationships, or management.

1. Core structure

             FOREIGN INVESTOR
                 US$10M
                    │
                    │ Equity Capital
                    ▼
        ┌──────────────────────────┐
        │   PHILIPPINE EQUITY JV   │
        │   AGARWOOD PLATFORM       │
        └──────────────────────────┘
                    ▲
                    │
        Philippine Partner
        • Local assets
        • Operations
        • Farm platform
        • Local relationships
        • Management
                    │
        ┌───────────┼──────────────┐
        ▼           ▼              ▼
   Plantation   Extraction    Downstream
      SPV          SPV          Products
        │           │              │
        └───────────┼──────────────┘
                    ▼
              GLOBAL MARKET

The exact foreign ownership percentage must be confirmed against the specific activities and land/resource arrangements. Philippine foreign investment is generally open unless restricted by the Constitution, special laws or the applicable Foreign Investment Negative List.

2. Recommended Equity Structure

A commercially attractive starting point is:

Partner	Contribution	Illustrative Equity
Foreign Strategic Investor	US$10.0M cash	70%
Philippine Strategic Partner	Assets + platform + management + eligible contributions	30%
Total	US$10M + approved non-cash contributions	100%

The 70/30 ratio should not be treated as the final legal cap table until the Philippine partner’s contributions and each JV activity have been valued and reviewed.

3. Philippine Partner’s Equity Contribution

The Philippine partner should have a clearly documented Contribution Schedule.

Potential contributions include:

A. Existing business platform

corporate infrastructure
management team
operating systems
existing customer network

B. Plantation platform

eligible plantation assets
farm infrastructure
nursery facilities
equipment
farm-management systems

C. Local operating capability

farm development
labor management
logistics
procurement
local supplier relationships

D. Intellectual/technical contribution

Where legally owned and transferable:

local know-how
cultivation protocols
operating procedures
formulations

E. Commercial contribution

Philippine distribution
farmer network
local market access

Land requires special treatment. Foreign participation cannot simply be used to circumvent constitutional restrictions on private-land ownership, and forestry/natural-resource arrangements may have additional nationality requirements.

4. US$10M Foreign Capital

I recommend the foreign investor subscribe for equity through milestone-based capital calls.

Phase	Amount
Formation & due diligence	US$1.0M
Nursery & initial plantation	US$2.0M
Plantation expansion	US$2.0M
Extraction facility	US$2.0M
Downstream manufacturing	US$1.0M
Brand & international commercialization	US$1.0M
Working-capital reserve	US$0.5M
Contingency	US$0.5M
Total	US$10M

This prevents the JV from spending the entire investment before the underlying plantation and operating milestones are achieved.

5. Board Governance

For a 70/30 structure, I suggest a 7-member board:

Appointment	Seats
Foreign Investor	4
Philippine Partner	2
Independent / mutually agreed	1
Total	7

Key principle

The foreign investor receives operational control, but major strategic decisions require protection for both shareholders.

6. Reserved Matters

Require a 75% shareholder vote or other agreed supermajority for:

issuing new shares
changing share capital
major borrowing
sale of substantial assets
acquisition of another company
merger
liquidation
change of principal business
related-party transactions
sale of core IP
major capital expenditure
major changes to the plantation strategy
extraordinary dividends

This prevents either shareholder from being exposed to unilateral decisions on matters fundamental to the investment.

7. Management

Foreign Investor

Can nominate:

Chief Financial Officer / Finance Director

Responsible for:

capital control
accounting
budgeting
investor reporting
audit
treasury

Philippine Partner

Can nominate:

Chief Operating Officer

Responsible for:

plantation
nursery
farm operations
labor
Philippine logistics

Jointly appointed

Chief Executive Officer

Responsible for:

overall strategy
execution
investors
major customers
government relations

8. Profit-Sharing Model

The JV should distribute profits, not gross revenues.

SALES
 ↓
Cost of Goods
 ↓
Operating Expenses
 ↓
Taxes
 ↓
Debt Service
 ↓
Maintenance Reserve
 ↓
Working Capital
 ↓
Reinvestment
 ↓
DISTRIBUTABLE PROFIT
 ↓
DIVIDENDS
 ↓
70% Foreign Investor
30% Philippine Partner

A preferred-return mechanism can be added for the foreign investor if required to make the US$10M investment more attractive.

9. Preferred Return Option

One sophisticated structure is:

First

Investor receives an agreed preferred return from legally distributable profits.

Second

Remaining distributable profits are shared:

70% Foreign Investor / 30% Philippine Partner

Third

After achieving an agreed investor return threshold, the JV could transition to ordinary dividend sharing.

This can align the parties:

Foreign investor = capital protection + upside

Philippine partner = meaningful long-term equity upside

10. Equity JV Subsidiaries

I recommend that the Master JV not conduct every activity directly.

JV HoldCo

Agarwood Platform Holdings Philippines

↓

Plantation SPV

Owns/operates eligible plantation assets and farm operations.

↓

Extraction SPV

Operates:

oud oil extraction
supercritical extraction
fractionation
hydrosol
extracts

↓

Manufacturing SPV

Produces:

perfumes
incense
candles
cosmetics
specialty products

↓

International Commercial Company

Handles:

GCC
Japan
EU
Singapore
Hong Kong
other export markets

This structure helps isolate operational and regulatory risks.

11. Technology Ownership

The foreign investor should normally retain ownership of proprietary technology rather than automatically contributing all IP to the JV.

FOREIGN IP OWNER
       │
       │ Technology License
       ▼
EQUITY JV
       │
       ▼
Philippine Production

The license can cover:

extraction technology
proprietary equipment/processes
formulations
software
laboratory methods
trademarks
technical know-how

This is particularly useful if the foreign investor’s contribution includes proprietary extraction or induction technology.

12. Tree-to-Oud™ Traceability

The JV should establish a digital asset registry:

Tree ID → Farm Block → Induction → Resin Development → Harvest → Extraction Batch → Oil → Finished Product

This provides:

investor transparency
inventory control
quality assurance
provenance
sustainability documentation
export traceability
potential premium pricing

13. Investor Protection

The Equity JV Agreement should include:

Pre-emption rights

Existing shareholders get first rights to new shares.

Anti-dilution

Protection if shares are issued at an unfavorable valuation.

Tag-along

Minority shareholders can participate in a third-party sale.

Drag-along

Allows an agreed majority sale to proceed under defined conditions.

Right of first refusal

Existing shareholders can buy shares before an external buyer.

Information rights

Monthly management reporting and quarterly financial reporting.

Independent audit

Annual audited accounts.

14. Deadlock Mechanism

A 70/30 Equity JV still needs a deadlock mechanism for reserved matters.

Recommended sequence:

CEO / Management Discussion
          ↓
Board Discussion
          ↓
Shareholder Negotiation
          ↓
Independent Mediation
          ↓
Arbitration
          ↓
Buy-Sell / Exit Mechanism

The exact dispute-resolution forum should be determined in the definitive agreements.

15. Exit Structure

The foreign investor should have a defined liquidity path.

Year 5+

Possible:

Strategic sale

to a major fragrance, cosmetics or oud company.

Year 7+

Potential:

Secondary sale

to another institutional investor/family office.

Long term

Potential:

IPO / larger strategic transaction

Partner buyout

The Philippine shareholder may have an option to purchase the foreign investor’s stake based on an agreed valuation formula.

16. Recommended Equity JV Deal

For the proposed platform, my preferred commercial framework is:

US$10M Foreign Strategic Capital + Philippine Strategic Contribution → Equity JV

with:

70% Foreign Investor

30% Philippine Strategic Partner

7-member Board

4 foreign / 2 Philippine / 1 independent

75% reserved-matter threshold

Milestone-based capital deployment

Preferred-return option

70/30 ordinary profit participation

Technology licensing

Separate plantation, extraction and manufacturing SPVs

Tree-to-Oud™ traceability

5–10 year investor exit strategy

The key difference from a simple foreign equity investment

The Philippine partner’s 30% is not merely an ownership gift. It should represent a properly documented contribution to the venture—assets, eligible rights, operating platform, management, technology, or other measurable value.

Likewise, the foreign investor’s US$10M should be tied to a defined subscription and capital-call schedule, rather than an informal promise of funding.

That produces a much stronger investment proposition:

“The foreign investor supplies growth capital and international capability; the Philippine partner supplies the local operating platform and strategic resources; both participate in the value created by an integrated Philippine-to-global agarwood business.”

If the project is intended to use private Philippine land, DENR forestry instruments, or natural-resource rights, those components should be structurally separated and legally reviewed before fixing the final equity percentages.