For transactions lawyers, international microfinance projects may be the pro bono version of the decathlon.
Consider Nixon Peabody’s range of work on behalf of Impact Energies, an Ithaca, New York, company that distributes clean energy products throughout Ghana by providing microfinance loans to locals. Ghanaians use those loans to purchase and then resell products such as energy-efficient stoves and lamps.
“Generally, there are different transactions required to conduct microfinance: the financing of the top-tier microfinance lender—in this case, Impact Energies—the loan from the microfinance lender to the MFI, the microfinance institution that ultimately makes loans to indigent individuals; and the loans from the MFI to the indigent individuals or pools of indigent individuals,” says Daniel McAvoy, an associate in Nixon Peabody’s business group who led the microfinance team. “We worked on the first two of those pieces.”
There were also issues arising from the cross-border nature of the project. “Nixon Peabody helped us with international issues, such as finding counsel in Ghana and writing agreements with Ghanaian counsel,” says Impact Energies founder Hugh Whalan, who had previously worked with Nixon Peabody on a pro bono project. “We also do a lot of work with product suppliers, so there are tax issues. We’re operating in two tax environments, so they’re helping us limit tax liability.”
In addition to helping sort out tax issues, which included determining who ultimately could invest in the company, Nixon Peabody also advised Whalan on the best corporate structure for the entity. Impact Energies is structured as a for-profit B Corporation; Whalan says he settled on that structure because it allowed the group greater access to capital, which could in turn better support its socially responsible mission. Nixon Peabody also prepared documentation that could eventually be used to help hedge the company’s currency risks, McAvoy says.
In addition to McAvoy, other Nixon Peabody lawyers who worked on the project included partners Allan Cohen, William O’Brien, and Deborah DeMasi; counsel Sarah Nelson; and associates Carly Eisenberg, Susannah Keagle, Deirdre Nash, Richa Naujoks, and Talis Seja.
“These microfinance transactions are great learning tools for young attorneys,” says DeMasi, who is based in Washington, D.C., and focuses on financial matters. “They are unique in that they need to be structured simply so not to require too much administration from the borrower or lender.”
So far, partners and attorneys from Nixon Peabody have logged 445 hours with Impact Energies, which in addition to microfinance and other international tax and currency issues included agreements for the purchase and sale of energy products, purchase agreements and forms of securities for initial sales to capital providers, corporate documentation for entities within Impact Energies’s structure, and drafting compliance and other policies.
And their work is not yet done. Says Whalan: “Going forward, they will also be helping us prepare for our first round of sophisticated investments.”