2009 Pearson Education, Inc publishing as Prentice HallCHAPTER 4THEMULTINATIONALENTERPRISE4-1 2009 Pearson Education, Inc publishing as Prentice HallCHAPTER 4THE MULTINATIONAL ENTERPRISETopics for this chapter:lStrategies for Doing Business GloballylThe Business FormlThe Multinational OrganizationlInternational Regulation of Multinational EnterpriseslHome State Regulation of Multinational EnterpriseslHost State Regulation of Multinational Enterprises4-2 2009 Pearson Education, Inc publishing as Prentice HallStrategies for Doing Business Globally: Exporting and ImportinglExporting does not require having a subsidiary in a foreign nation, nor does it require a joint venture or partnership with a foreign business entity.lExporting creates issues of transportation, financing, contracting, and obtaining correct export licenses.lAn exporter will need an export manager, foreign sales agent, or a foreign distributor.Cargo ship loaded for another oceanic crossingDrawing used with permission of M. Nicole4-3 2009 Pearson Education, Inc publishing as Prentice HallStrategies for Doing Business Globally: Branches & Subsidiaries lBranch offices can be set up by foreign companies in the US by registering with the appropriate state agency.lA company may hire a foreign agent to act as a company representative. The agent may:Conduct market analysisEngage in product promotionServe as an import representative lThe laws of the host country determine what an agent may or may not do.lCompany is not subject to foreign nations regulations when all they have is an agent.4-4 2009 Pearson Education, Inc publishing as Prentice HallStrategies for Doing Business Globally: Bank BrancheslChina Merchant Bank has received approval from the Federal Reserve to open a NY branch.lWith the heightened threat from unstable banks, the Federal Reserve is tightening the application process to establish foreign branches in the U.S.lThe foreign parent bank must be subject to comprehensive supervision by banking authorities in the home country.4-5 2009 Pearson Education, Inc publishing as Prentice HallLicensing Intellectual Property and FranchisinglLicensing a companys intellectual property rights is a common way to gain entry into a foreign market.lA license is a contractual grant of a legally recognized right.lIn addition to allowing use of material that is protected by patent, trademark, or copyright, the licensee may also be allowed to use:trade secretstrade dresstechnological methods, or business plans and processes. 4-6 2009 Pearson Education, Inc publishing as Prentice HallThe Business Form:In Civil Law StateslIn civil law states, every form of business organization is a company.lA company is an association of persons or of capital organized for the purpose of carrying on a commercial, industrial, or similar enterprise. These companies may be a corporation or a partnership.4-7 2009 Pearson Education, Inc publishing as Prentice HallBusiness Forms in Civil Law States lIn some civil law states like France, all companies are viewed as juridical entities, meaning they have a legal existence independent of their owners.lIn Germany and the US, corporations are juridical entities, but partnerships are not. lA partnership is a company of two or more persons who co-own and manage a business and are each liable to the full extent of their personal assets. 4-8 2009 Pearson Education, Inc publishing as Prentice HallCivil Law PartnershipslIn a limited partnership, at least one partner must be a general partner with unlimited personal liability for the debts of the business. There must also be at least one limited partner who is liable only up to the amount of their investment.lSome countries allow silent partnerships where one partner carries on the business in his or her own name without revealing the participation of a limited liability partner.4-9 2009 Pearson Education, Inc publishing as Prentice HallCivil Law CorporationslTwo basic types of civil law corporations:1.Stock corporation: Can raise money in the public marketplace through the sale of freely transferable shares. Financial statements must be disclosed to the public.a.Articles of Incorporation: instrument creating and defining a particular corporation. Must be filed with state agency at time of formation.4-10 2009 Pearson Education, Inc publishing as Prentice HallFormation of Stock Corporationb.By simultaneous incorporation, promoters form a syndicate to purchase the shares. Only after formation are the shares sold to the public.c.A minimum capitalization is required. Civil law states generally do not recognize authorized but unissued shares. Entire capital must be subscribed before formal organization. 4-11 2009 Pearson Education, Inc publishing as Prentice HallFormation of Stock Corporationd.Once subscriptions have been paid, board of directors are elected at organizational meeting.e.After registration of Articles of Incorporation and notice of registration is published, the stock corporation comes into existence.f.Must be more than one subscriber, but shares can be transferred to anyone. France requires at least seven shareholders.4-12 2009 Pearson Education, Inc publishing as Prentice HallFormation of Stock Corporationg.Once subscriptions have been paid, board of directors are elected at organizational meeting.h.After registration of Articles of Incorporation and notice of registration is published, the stock corporation comes into existence. 4-13 2009 Pearson Education, Inc publishing as Prentice HallFormation of Stock Corporation i. Shareholders:1)Elect board of directors2)Review annual statements3)Declare dividendsj.Quorum: Number of persons or number of total shares represented, that must be present at a meeting for official action to be taken.k.Financial statements are public. 4-14 2009 Pearson Education, Inc publishing as Prentice HallCivil Law Corporations2.Limited Liability Company: A corporation that does not issue negotiable share certificates and is subject to minimal public disclosure laws.a.Popular corporate business entity.b.Widely used for setting up subsidiaries.c.Formation is similar to corporate formation in France and Germany. The LLC files Articles of Incorporation, capital is subscribed, organizational meeting is held, board of directors is elected, articles are registered. 4-15 2009 Pearson Education, Inc publishing as Prentice HallLimited Liability Companiesd.Minimum required capitalization varies from country to country.e.Investors are called members, not shareholders.f.Members do not own shares, they own a participation.g.Members meet informally if agreed.h.Transferring ownership is difficult and may be subject to right of first refusal of other members to purchase. 4-16 2009 Pearson Education, Inc publishing as Prentice HallBusiness Forms in Common Law States: lCommon law states include England, the US, and British Commonwealth countries.lCommon Law Partnerships:Association of two or more persons who co-own and manage a business for profit.Each partner is liable to the full extent of their personal assets for debts.Not a tax-paying or juridical entity.Income of partnership is allocated to partners as personal income. 4-17 2009 Pearson Education, Inc publishing as Prentice HallCommon Law PartnershipsLimited Partnership Consisting of one of more general partners who manage the business and are liable to the full extent of their assets and one or more limited partners whose liability extends only to the amount of their investment.Limited partnership is not a juridical entity. Secret partnership participation of one or more partners is not disclosed to the public. All of the partners have unlimited personal liability. 4-18 2009 Pearson Education, Inc publishing as Prentice HallCommon Law Partnerships: The Limited Liability CompanylRecognized only in the United States.lThe LLC is an unincorporated association that is treated as a partnership for tax purposes and provides limited liability for its members.lPopular because not subject to corporate taxation.lMembers in LLC may participate in management without subjecting themselves to personal liability.4-19 2009 Pearson Education, Inc publishing as Prentice HallLimited Liability CompanylMay delegate management to managers who do not need to be members of the LLC. lFormed by filing Articles of Organization with the state.lMust file yearly report but pays no yearly franchise tax or income tax.lManagement set out in Operating Agreement that is not a public document. Agreement deals with voting rights, right to distributions, and restrictions on transfer of members interests.4-20 2009 Pearson Education, Inc publishing as Prentice HallCommon Law Business Trust lBusiness arrangement that exists only in the US in which:Owners of a property, known as beneficiariesTransfer legal title to that property to a trusteeTrustee manages property for themBeneficiaries hold transferable trust certificates entitling them to income generated by the property and a residual equitable share at the time the trust is terminatedTrustee has unlimited personal liabilityBeneficiaries have limited liability4-21 2009 Pearson Education, Inc publishing as Prentice HallCommon Law CorporationslThe three kinds of common law incorporated business entities are:Public corporationsPrivate corporationsLimited liability companieslSome common law countries also recognize:Unlimited liability corporationsNo liability corporations4-22 2009 Pearson Education, Inc publishing as Prentice HallPublic CorporationslRecognized throughout the common law world.lOrganized by filing two documents:1.Memorandum of Association describes the basic details of the firm.2.Articles of Association describe the internal regulations of the corporation.lIn England, only two subscribers are needed but there is a minimum capitalization requirement of 50,000.4-23 2009 Pearson Education, Inc publishing as Prentice HallPublic CorporationslIn the US, there only has to be one subscriber and there is no minimum capitalization requirement.lMay issue a larger number of shares than are needed to start. Authorized but unissued shares are allowed in addition to the issued shares that constitute the corporations capital.lPar shares are the only shares allowed in England.lNo par shares are the norm in the US. Their price is set by the board of directors.4-24 2009 Pearson Education, Inc publishing as Prentice HallPublic Corporations: StocklStock issued in US and England can be classified.lPreferred stock Entitles owners to:guaranteed dividendpriority at the time of liquidationpriority over common shareslThe U.S. allows cumulative voting, a system of voting by which a voter, having a number of votes equal to the offices to be filled, may split their vote as they see fit.4-25 2009 Pearson Education, Inc publishing as Prentice HallPublic Corporations:Shareholder MeetingslFormal shareholder meeting required in England while actions in the US can be by written consent rather than at a formal meeting.lQuorum for meetings:England two shareholdersUS simple majority of voting shares, though Articles of Incorporation may set at lesser amount, such as a third or a fourth of voting shares.4-26 2009 Pearson Education, Inc publishing as Prentice HallPublic Corporations:Shareholder MeetingslIn US, board of directors may set dividends subject to requirements that:1.The corporation be solvent.2.Issuance does not violate the Articles of Incorporation.3.The source of the dividends be of a certain type (i.e., earnings surplus).4-27 2009 Pearson Education, Inc publishing as Prentice HallPrivate CorporationslCorporation that may not ask the public to subscribe to its shares, bonds, or other securities. It is subject to less stringent public disclosure laws.lIncorporation documents usually restrict transfer of shares.lIn US, these small corporations are known as close or closely held corporations.4-28 2009 Pearson Education, Inc publishing as Prentice HallAdvantages of Private or Closely Held CorporationslAdvantages of organizing as close corporation:May dispense with many corporate formalities.In England, may appoint a single director instead of a board.Shareholder may grant proxy rights. In US, may entirely dispense with board of directors and corporation run by shareholders.lUnlimited liability company Only in England and Commonwealth countries.Members are liable in the event that it is wound up and assets are insufficient.4-29 2009 Pearson Education, Inc publishing as Prentice HallImportance of Separate Legal IdentitylImportant consequences of the separate legal identity of juridical entities:Liability of owners is limited to their investment.Rights and benefits accruing to the company belong to the company, not the owners. The company can own its own property, trade secrets, formulas, etc.Owners are neither managers nor agents nor representatives of the company. They cannot act for the company or create liability for the company by their actions.4-30 2009 Pearson Education, Inc publishing as Prentice HallCase 4-1Case Concerning Barcelona Traction, Light & Power Co. (Belgium v. Spain)lBarcelona Traction (BT) was Canadian corporation injured by the actions of Spain. Alleged 88% of shareholders were Belgian.lCanada chose not to bring suit in the ICJ. Belgium brought suit.lSpain objected because only BT was injured and was not a Belgian corporation.4-31 2009 Pearson Education, Inc publishing as Prentice HallCase 4-1Case Concerning Barcelona TractionlCourt found that the injured party was the company and not its owners. Therefore, Belgium could not bring suit against Spain on behalf of the Belgian owners.lA corporation is an entity independent of its shareholders. When a shareholders interests are harmed by an act done to the company by a nation-state, it is the company that must seek judicial remedies. Seal of the International Court of Justice4-32 2009 Pearson Education, Inc publishing as Prentice HallThe Multinational OrganizationlLarge business firms use differing organizational structures to carry on operations internationally. Parent companies take on the following forms:lThe Nonmultinational EnterpriseA domestic firm that operates internationally through independent foreign agents. The agent may act for the principal as:A sales representative to sell goods or services, orA factor to buy good or procure services for the principal.Relationship governed by agency contract law.4-33 2009 Pearson Education, Inc publishing as Prentice HallThe Multinational OrganizationlThe National Multinational EnterpriseAn enterprise organized around a parent firm established in one state that operates through branches and subsidiaries in other states.Branch a unit or a part of the parent (assembly plant, purchasing office, manufacturing plant).Subsidiary a company organized as a separate entity that is owned by the parent. 4-34 2009 Pearson Education, Inc publishing as Prentice HallThe National Multinational EnterpriselThe following chart demonstrates part of the DaimlerChrysler corporate organization. DaimlerChryslerGerman ParentChryslerUnited StatesDivision of Parent FreightlinerUnited StatesTruck Mfg.SubsidiaryWestern StarCanadaTruck Mfg.SubsidiaryDetroit DieselUnited StatesHeavy Motor Mfg.Subsidiary4-35 2009 Pearson Education, Inc publishing as Prentice HallThe InternationalMultinational Enterprise lAn enterprise made up of two or more parents from different states that co-own subordinate operating businesses in two or more states. The Royal Dutch/Shell Group is an example: 4-36 2009 Pearson Education, Inc publishing as Prentice HallThe Subordinate StructurelA company may create the following subordinate entities to establish a foreign presence:Representative office A contact point where interested parties can obtain information. It does not conduct business.Agent An independent person or company with authority to act on behalf of another.Branch Unit or part of a company, such as an assembly plant. It is not separately incorporated. 4-37 2009 Pearson Education, Inc publishing as Prentice HallThe Subordinate StructureDisadvantages of representative offices, agents, and branches are:1.Parent has to assume all of the risk of investing abroad,2.A foreign firm is often taxed at a higher rate,3.Many developing states require local participation in order for foreign firm to invest or expand its local environment.4-38 2009 Pearson Education, Inc publishing as Prentice HallThe Subordinate StructureSubsidiary Company owned by a parent or a parents holding company. Unlike a branch, it is separately incorporated.Joint venture An association of persons or companies collaborating in a business venture.Can assume any type of business form, e.g., LLC, limited partnership, or association.Can be a specific limited project or a continuing business relationship.Holding company Company owned by a parent or parents to supervise and coordinate the operations of subsidiary companies. 4-39 2009 Pearson Education, Inc publishing as Prentice HallThe InternationalMultinational Enterprise lInternational guidelines for ethical behavior by multinational enterprises are mostly voluntary.lThe exception is the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. The convention requires state parties to outlaw the active bribery of foreign officials. States pass their own anti-bribery criminal statutes.The US passed the Foreign Corrupt Practices Act in 1977.4-40 2009 Pearson Education, Inc publishing as Prentice HallHome State Regulation of Multinational EnterpriseslMultinational enterprises are regulated within a state the same as a national enterprise. Important forms of national regulation are:1.Regulation of competition2.Regulation of injuries caused by defective products3.Prohibition of sharp sales practices4.Regulation of securities5.Regulation of labor and employment6.Establishment of accounting standards7.Taxation 4-41 2009 Pearson Education, Inc publishing as Prentice HallHome State Regulation of Multinational EnterpriseslUnfair Competition LawsIn the US, the principal law regulating anticompetitive practices is the Sherman Antitrust Act of 1890.Section 1: Forbids combinations & conspiracies in restraint of interstate and international trade.Apply this section by using the rule of reason. Factfinder weighs all of the circumstances of the case in deciding whether a restrictive practice should be prohibited.4-42 2009 Pearson Education, Inc publishing as Prentice HallHome State Regulation of Multinational EnterprisesCertain acts are automatically illegal or per se violations of Section 1:Horizontal price fixing Competitors at same level agree to charge same price. Vertical price fixing Seller at one level sells to buyer at different level who agrees to not resell below a set price.Horizontal market division Agree not to sell in each others territories.Joint refusals to deal Group boycotts. 4-43 2009 Pearson Education, Inc publishing as Prentice HallHome State Regulation of Multinational EnterprisesSection 2 of the Sherman Antitrust Act Forbids monopolies and attempts to monopolize interstate and international trade.Applies to the conduct of one firm if it is a dominant firm. To show violation usually look for circumstantial evidence such as:Discriminatory pricingDumping selling goods for less than production costUsing tying clauses requiring purchaser of one product to buy another product4-44 2009 Pearson Education, Inc publishing as Prentice HallHome State Regulation of Multinational EnterpriseslClayton Act of 1914 expanded enforcement provision and defined certain illegal acts, including:Exclusive dealing and tying clausesMergers that result in monopoliesInterlocking directorieslRobinson-Pitman Act of 1936 forbids price discrimination.lLaw may be enforced by U.S. Justice Department (criminal suits), U.S. Federal Trade Commission (civil suits and injunctions), and by private person who may seek treble damages to punish the violator.4-45 2009 Pearson Education, Inc publishing as Prentice HallPersonal Jurisdiction Requirements of U.S. Antitrust LawslAmerican courts assume personal jurisdiction either by:Section 12 of Clayton Act for person who transacts business in the forum jurisdiction.State long arm statute law defining the conduct of a foreign person within a state that will subject that person to the jurisdiction of the state.Defendant must have minimum contacts with the forum.4-46 2009 Pearson Education, Inc publishing as Prentice HallSubject Matter Jurisdiction Requirements of U.S. Antitrust LawslTwo tests are used to determine whether a court has subject matter jurisdiction in an American antitrust case:1.The effects test subjects foreign businesses to U.S. antitrust laws if activities were intended to affect U.S. commerce and the effect was more than minimal.4-47 2009 Pearson Education, Inc publishing as Prentice HallSubject Matter Jurisdiction Requirements of U.S. Antitrust Laws2.Jurisdictional rule of reason allows U.S. courts to assume jurisdiction over a foreign business for violating antitrust laws if:1.The alleged conduct was intended to affect the foreign commerce of the US.2.It was of such a type and magnitude as to violate the Sherman Act, and3.As a matter of international comity and fairness, court ought to assume extraterritorial jurisdiction over the matter. 4-48 2009 Pearson Education, Inc publishing as Prentice HallCase 4-2Metro Industries v. SammilMetro alleged that Sammi violated the market division prohibition of Sect. 1 of the Sherman Act by preventing Metro from acquiring stainless steel steamers from Sammis competitors. lCourt applied rule of reason and found no substantial impact on U.S. commerce. Fairness and comity do not preclude plaintiffs action, but plaintiff failed to show a substantial anticompetitive effect in the US. 4-49 2009 Pearson Education, Inc publishing as Prentice HallRegulation of Anticompetitive Behavior in the EUlEuropean Community Treaty contains two articles that regulate business competition:Article 81 Forbids competitors to enter into agreements to prevent, restrain, or distort trade.Expressly forbids:Fixing any trading conditionsLimiting or controlling production, markets, development, or investmentAllocating markets or suppliesApplying unequal terms to parties Using unrelated tying clauses 4-50 2009 Pearson Education, Inc publishing as Prentice HallRegulation of Anticompetitive Behavior in the EUArticle 82 forbids dominant businesses from taking advantage of their position to the detriment of consumers.Expressly forbids:1.Directly or indirectly imposing unfair prices or trading conditions.2.Limiting production, markets, or technical developments to the prejudice of consumers.3.Applying unequal conditions to equivalent transactions with different trading partners.4.Imposing unrelated tying clauses.4-51 2009 Pearson Education, Inc publishing as Prentice HallCase 4-3Airbus Industrie G.I.E. v. PatellUK citizens representatives sued in Texas court over plane crash in India. Airbus obtained judgment from India forbidding suit anywhere but in India and then an anti-suit injunction from English High Court forbidding proceeding in Texas.lEnglish court dismissed anti-suit injunction stating that India was proper forum, but English courts had no right to forbid UK citizens from choosing a forum in US. Proper remedy would be forum non conveniens.4-52 2009 Pearson Education, Inc publishing as Prentice HallCase 4-4Dow Jones & Co. v. GutnicklDow Jones published defamatory article in Barrons Online. lIssue whether article was published in US in way that did not give jurisdiction to Australian courts.lCourt haled that a U.S. company was subject to Australian jurisdiction for publishing on web server in U.S. state so long as the defamatory story would foreseeably cause damage to the reputation of a person in Australia. 4-53 2009 Pearson Education, Inc publishing as Prentice HallTort and Product Liability LawslProduct liability laws attempt to discourage manufacturers from putting defective products into the marketplace.lThree theories1.Breach of contract2.Negligence3.Strict liabilitylJapan uses only theories 1 and 2. US uses all three. EU relies mainly on 3.4-54 2009 Pearson Education, Inc publishing as Prentice HallTort and Product Liability LawslRelying only on breach of contract and negligence theories, recovery is restricted in Japan. Remedy is limited by two rules:Privity only the immediate purchaser can recover, though Japanese courts are now extending recovery to foreseeable users.Burden of proof the responsibility of proving the charge or allegation. Difficult to do when the defendant manufacturer remains in control of the evidence.4-55 2009 Pearson Education, Inc publishing as Prentice HallNegligence in JapanlNegligence is a more likely basis for imposing liability. Plaintiff must establish:1.The existence of a defect2.That the defect was the result of defendants conduct3. That plaintiff suffered an injury4.That the injury was caused by the defect5.That the defendant breached the duty of care to the plaintiff4-56 2009 Pearson Education, Inc publishing as Prentice HallCommon Law Product Liability Rules 4-57 2009 Pearson Education, Inc publishing as Prentice HallCommon Law Product Liability RuleslTwo doctrines make it somewhat easier for a common law claimant to prevail:Res ipsa loquitur means “the thing speaks for itself.” Excuses an injured claimant who can show that a product was defective when it left the hands of the defendant from having to prove that the defendant caused the defect.Negligence per se excuses a claimant from showing that a defendant breached a duty of care where the defendant violated a statutory manufacturing or disclosure requirement.4-58 2009 Pearson Education, Inc publishing as Prentice HallStrict LiabilitylStrict liability imposes liability on an actor regardless of fault.lDefendant can be held liable for acts that are unreasonably dangerous whether or not they exercised due care.lMajor advantage of this theory is that it does not require a showing of negligence.lUnreasonably dangerous means :1.That the product was dangerous beyond the expectations of the ordinary consumer or2.A less dangerous alternative was feasible but not used. 4-59 2009 Pearson Education, Inc publishing as Prentice HallEU Product Liability RuleslThe EU standard is similar to common law states. No requirement that defect is unreasonably dangerous.4-60 2009 Pearson Education, Inc publishing as Prentice HallExtraterritorial Application of Products Liability LawslTwo issues when U.S. court decides whether it can exercise jurisdiction:Personal jurisdiction Must be found in the individual states long arm statute.Must satisfy the federal constitutional requirement of due process by showing the defendant had minimum contacts with the forum. Case 4-5 deals with minimum contacts.4-61 2009 Pearson Education, Inc publishing as Prentice HallCase 4-5World-Wide Volkswagen v. WoodsonlPlaintiff bought defective car in NY and had accident in Oklahoma.lDefendant retailer (Seaway) and wholesaler (World-Wide Volkswagen) sold no cars in Oklahoma and argued they were not doing business in Oklahoma.lCourt found lack of minimum contacts and dismissed case. 4-62 2009 Pearson Education, Inc publishing as Prentice HallCase 4-6Asahi v. Superior CourtlPlaintiff crashed on defective motorcycle.lAsahi made tube valve system.lIssue whether mere awareness that products would reach forum in stream of commerce constitutes minimum contacts.lU.S. Supreme Court rules that foreseeability that a product would enter stream of commerce is insufficient basis for jurisdiction. It would be manifestly unjust to require foreign defendant to appear. 4-63 2009 Pearson Education, Inc publishing as Prentice HallSharp PracticeslSharp practices are dishonest business dealings meant to obtain a benefit for a person or firm regardless of the means used.lOne response by US was passage of Foreign Corrupt Practices Act after Lockheed Aircrafts bribing of Japanese Prime Minister. This act imposes accounting obligations on companies and attaches criminal penalties for bribing a foreign official.4-64 2009 Pearson Education, Inc publishing as Prentice HallCase 4-7United States v Blondek, et. al.lCan foreign officials be prosecuted for conspiring to violate the FCPA even though they cannot be prosecuted for receiving a bribe?lNo. Congress decided to not criminalize the taking of bribes by foreign officials. It is up to the officials home country to take action against them. 4-65 2009 Pearson Education, Inc publishing as Prentice HallHost State Regulation of Multinational EnterpriseslHost states will apply their own laws to foreign multinationals operating within their territory.lThe host state will make three types of investigations:1.Whether a foreign company has consented to the jurisdiction of the host state;2.Whether a local firm is part of a common enterprise with a foreign firm, making both liable for activities of the local firm; and3.Whether the independent corporate status of a subsidiary can be ignored so that liability can be imposed on the parent. 4-66 2009 Pearson Education, Inc publishing as Prentice HallHost State Regulation of Multinational EnterpriseslConsent to jurisdictionExpress consent when company incorporates or has its main office in a state.Foreign company that applies to do business within state consent to jurisdiction.No consent if just organizing subsidiary within state.Implied consent comes from application of long arm statute and establishing whether company is doing business within state. 4-67 2009 Pearson Education, Inc publishing as Prentice HallHost State Regulation of Multinational EnterpriseslCommon Enterprise Liability each member of a common enterprise will have liability for the conduct of the entire enterprise.lTo determine if there is a common enterprise, the court looks to the intent of the parties. If no formal agreement forming a joint venture or partnership, court will consider several factors:1.Sharing of profits or losses,2.Sharing in management, and3.Joint ownership of the business.4-68 2009 Pearson Education, Inc publishing as Prentice HallCase 4-8Touche Ross & Co. v. Bank Intercontinental, LimitedlIssue whether Touche Ross was a multinational firm engaged in a common enterprise with an office in the Cayman Islands or was the Cayman islands office a separate entity for which the NY and Florida offices were not responsible. lHeld that Bank was not deprived of an advantage and since action arose in Cayman Islands, injunction preventing the Florida suit should have been reinstated. Not all states have jurisdiction over all the firms, even in a common enterprise. 4-69 2009 Pearson Education, Inc publishing as Prentice HallAll rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.