Advice for a CEO

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Advice for a CEO

Ohio Shale Corporation is an incorporated organization based in the state of Ohio. Accordingly, the large corporation possesses registration to conduct business in the following states of West Virginia, New York and Pennsylvania. The main concentration of the business largely comprises the exploration and production of petroleum and natural gas. Consequently, Ohio Shale has a 35 percent market share in the production of natural gas making it one of the largest production and exploration companies in America. Regardless of its considerable share in the oil and natural gas market, the firm seeking to enter into a joint venture agreement with Wuhan Energy Company. In overview, Wuhan Energy is the second largest oil and gas drilling equipment in China. In addition, the company’s equipment account for 40 percent of oil production and exploration in China. Based on this credible performance, the issuance of a joint venture agreement between both firms will enable Ohio Shale to gain penetration into the China oil exploration and production market.

Background

The prospect of entering into a joint venture agreement possesses considerable benefits for both corporations. Initially, the company does not possess any business relationship with Wuhan Energy Company. This is in accordance to the insufficient presence that the Chinese organization possesses in the United States. A similar situation is also evident in the case of Ohio Shale. Indeed, even though Ohio Shale possesses a significant market presence in terms of oil production and exploration, its presence is only regional based on its transactions in three states in the United States. Apart from having a null commercial relationship with Wuhan Energy, the organization does not possess patents and licenses to utilize any of the Chinese organization’s products. This also makes it impossible for Ohio Shale to conduct business transactions in the United States while using Wuhan Energy’s oil and drilling equipment.

Furthermore, utilizing Wuhan Energy’s oil and drilling equipment may imply legal consequences for Ohio Shale. This is because the paraphernalia used by Wuhan Energy in oil production and exploration possess patents and thus qualifies as intellectual property. Based on this, it is impossible for the organization to apply such equipment in the American oil and natural gas market due to the considerable legal issues that may arise from infringement of Wuhan Energy’s patented and copyrighted drilling equipment. In addition, it is imperative for Ohio Shale to consider the challenges that will arise from the joint venture contract. Since the agreement is a form of merger, then it is necessary for the future distributor to consider various aspects that are usually problematic in acquisition and merger agreements. For instance, the organization will need to concentrate on the division of assets as well as the shares of the merging organization.

Issues

Based on the background of the relationship between Ohio Shale and Wuhan Energy Company, certain issues are prevalent due to the possible joint venture agreement. One of the issues constitutes the subsistence of a commercial relationship. As stated, Ohio Shale, presently, does not have any business relationship with Wuhan Energy. This is a considerable issue since it predisposes Ohio Shale negatively. Simply, without the existence of a commercial relationship, then Ohio Shale is incapable of engaging in a joint venture agreement with the Chinese corporation. Because of this predicament, Ohio Shale will be unable to distribute Wuhan Energy products in the United States. In addition to this challenge, the organization will also be unable to increase its presence internationally, especially in the Chinese market. For instance, Ohio Shale will be unable to carry out oil and gas exploration projects in China. In addition, the organization will also lack the ability to acquire significant financial resources in China.

Another issue that Ohio Shale stands to face involves the infringement of intellectual property. As noted, the equipment utilized by Wuhan Energy in oil exploration and production has patents. Based on this, any legal entity that attempts to use this equipment without possessing a license to manufacture agreement with the patenter will be liable to prosecution under intellectual property laws. However, infringement is not the only challenge that arises out of this. With respect to the issue of intellectual property, Ohio Shale will also need to consider the limitations it bears in terms of Wuhan Energy’s products. In order to function significantly as a distributor of Wuhan Energy products, Ohio Shale will require possessing the authorization to use the trademarks of the respective organization. In addition, the organization will also require trademarks in order to permit it to initiate enhancements to the Chinese corporation’s products as well as determine the ownership and licensing of these improved products.

The last issue involves acquisition. Indeed, Ohio Shale is seeking to enter into a joint venture agreement with Wuhan Energy Company. The main purpose of this is to enable Ohio Shale to distribute the products of the respective company in the American market and enable Wuhan Energy to penetrate the respective grounds. In addition to this objective, the organization attempts to gain certain benefits from carrying out the distribution of Wuhan Energy equipments in the United States. Foremost, by using Wuhan Energy as joint partner, Ohio Shale will receive an opportunity to gain exploration projects in the Chinese market. Furthermore, the organization stands to receive financial backing from Chinese investors. Based on the benefits it stands to gain, it is imperative for Ohio Shale to consider the type of agreement that will best satisfy these objectives. By engaging in a joint-venture agreement, the company will be able to maintain an equal pact with Wuhan Energy and enable it to penetrate the Chinese market as it facilitates the distribution of Wuhan Energy’s products in America.

Analysis

The issues that Ohio Shale stands to face due to its respective business interests possess legal implications. These legal implications are significant to the success of the agreement between both corporations since they possess a limiting effect in the event that both companies do not comply with the relevant legislations. Concerning the issue of a commercial relationship, Ohio Shale needs to be compliant of Article 2 of the Uniform Commercial Code. In brief, the Uniform Commercial Code focuses on harmonizing the legislation of sales as well as other commercial relationships in all the states of the America. However, since Ohio Shale seeks to provide a distribution chain for Wuhan Energy’s products, then it will have to comply with laws on the sale of goods. Specifically, the company needs to exude compliance with Article 2. Even though not all states possess Article 2 guidelines regarding the sale of goods, majority have adopted them.

Nonetheless, Ohio Shale requires formulating an amenable sales contract. This is in accordance with the regulations provided by Article 2. Based on this, the Article also provides certain regulations concerning the formation of a sales contract. In order to possess a viable contract as well as obtain distribution privileges, Ohio Shale needs to inculcate the principles for the institution of a contract. Foremost, the organization needs to ensure that the contract possesses an Acceptance as well as an Offer. This ensures that both parties are in agreement concerning the form of business they hope to perform. Moreover, Ohio Shale needs to ensure that the contract addresses certain commercial issues, which form the contents that the agreement must contain. These issues constitute the terms of purchase, risk of loss in transit, warranties, inspection and rejection. In addition, the contract also needs to contain clear measures that may allow litigation if one of the parties breaches as well as the proper remedies.

In terms of using Wuhan Energy’s equipment in the United States, Ohio Shale needs to comply with American intellectual property laws. Accordingly, the organization needs to ensure that it possesses the company’s trademarks in order to utilize its products. Based on this, it needs to comply with 15 United States Code Section 1127, which defines trademarks. Additionally, since the organization plans to use the products within the American market, it needs to ensure that the commodities receive trademarks from the United States Patent and Trademark Office. This is because trademarks also undergo regulation from State Law. Based on the issue of a joint venture, both parties need to ensure that they possess an agreement that identifies their mutual roles and objectives. Within the pact, the companies must also ensure that they are explicit regarding fiduciary responsibility, the obligation to share in incurred losses, enterprise control as well as the right to profit sharing.

Conclusion

In conclusion, the only predicament that the business association between Ohio Shale and Wuhan Energy faces involves legal compliance. As long as both organizations comply with the different laws guiding joint ventures, intellectual property and the sale as well as distribution of goods, then it is possible for Ohio Shale to have a successful relationship with the Chinese corporation. Nonetheless, the problem facing Ohio Shale involves the installation of North Star as an offshore affiliate. Therefore, in order for North Star to reach its objective, it needs to comply with international law set by the International Monetary Funds by ensuring that it is established in designated regions that are free or limited from tax exemption.