A joint venture is often the practical route for a foreign investor entering a sector with local partnership requirements or wanting local market knowledge. The agreement governing it needs to address considerably more than the ownership split.
Governance and control
- Board composition and reserved matters requiring both parties’ consent
- Management and day-to-day operational control
- Deadlock resolution where the parties cannot agree on a reserved matter
Capital and funding
- Initial capital contribution from each party and in what form
- Mechanism for future funding requirements
- Consequences of a party failing to meet a funding call
Exit and transfer of shares
- Restrictions on transferring shares to a third party
- Pre-emption rights for the other joint venture partner
- Valuation mechanism for a buy-out on exit or deadlock
- What happens to shared intellectual property or contracts on exit
What to do next
Address deadlock and exit provisions at the outset, while the relationship is still cooperative — these are the clauses parties are least willing to negotiate once a dispute has actually begun.