Joint Venture Agreements - Key Drafting Issues

The most important provisions in a JV are:

(1) clearly defined objectives;

(2) The degree of participation and the management responsibilities of each joint venturer in the economy;

(3) contribution of capital and ownership of real estate / distribution of gains and losses;

Avoid (4) The dispute mechanism for managing impasses that can cause deadlock or litigation;

(5) termination / dissolution of the joint venture and buy-out provisions;

(6) confidentiality;and

(7) compensation.

(1) Clearly defined business objectives to achieve. The agreement must initially lay the purpose of the joint venture, generally a common business interest or investment. For example, you could say that paragraph: "1.1. Business purpose. The business of the Joint Venture shall be as follows:" and then describe the business purpose. This paragraph should include the term of the agreement.

(2) degree of participation and the management responsibilities of each jointPartner companies. Next, the Agreement should define the roles that perform the tasks of management, and the degree of involvement of each joint venturer. This provision will be contractually binding, so that it clearly drafted precisely define the tasks, duties, rights and obligations of the parties. In the case of a new company or in which an equity investment is involved, it is typical of the representation on the joint venture or other party, the bureau or similar addressBody.

(3) contribution of capital and property rights / Division of profits and losses. The agreement should describe the following capital contributions and other resources will provide all parties to the venture, and the nature and rate of profit and loss account for the sharing venture. Who will be primarily responsible for the losses, how and when will the profits be distributed? As a rule, parties often earnings per share in proportion to their respective shareholdings. In cases where aCompany brings more money, can, however, that companies will be given priority on the distribution of profits.

(4) A dispute mechanism. The agreements should, on the content of an internal mechanism for resolving disputes that may arise between the joint venture. This mechanism is necessary to avoid management impasses that may result in deadlock or litigation. Neither party would benefit from contracting demands from the outside through litigation or arbitration, while the joint ventureinto force. This provision could lead to a carton, which of executives from each partner organization, which would be responsible for the full hearing and resolution of disputes.

(5) termination of the joint venture / buyout provision. Joint ventures are usually not intended to last forever. The parties often have an expiration date, at which time terminate the contractual agreement or a party, will buy the other the capital. Buyout provisions can be difficult to negotiate in advance, because theParties may not be able to accurately predict the value of the strategic alliance or joint venture at the time of the buyout. One solution is that the assessment on the income or profits, based on the date of the buy-out, or that a third party evaluators will determine the assessment. Alternatively, the parties may adopt a "shotgun" or "auction" rule under which a party initiates the process by proposing to buyout the other party to a certain valuation, and the other partymust agree to buy or sell at that price or auction begins with the suggestion that a higher rating to buy.

(6) Confidentiality / Intellectual Property. The parties have a strategic alliance or joint venture should consider carefully how developed for mapping, monitoring and protecting confidential information and other intellectual property that is contributed to, or their business relationship. The parties may want to provide that all employees and consultants with access to confidentialInformation needs to run its own stand-alone confidentiality and nondisclosure agreement. The parties should also consider how to provide intellectual property that is developed in the course of the business. In a classic joint venture, where the new intellectual property into the ownership of the new company, the parties should consider who is to own the new intellectual property, if the company is now dissolved

(7) compensation. Finally, compensationDeployment of a joint venture agreement must be in place to indemnify the Manager and its directors, officers, employees and agents, and any person who is doing his duty or at the request of the joint venture as a director, officer, partner, trustee, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against liability. Most importantly, this provision should adapt very well to such directors or employees, the cost of defending a third law, includingAttorneys' fees, judgments, fines and amounts paid in settlement, actually and reasonably by such Indemnitee in connection with the defense or settlement of such action, suit or proceeding if the Indemnitee acted in good faith or in a manner reasonably believed caused by such Indemnitee or not in conflict with the interests of the joint venture will be, provided that the Indemnitee behavior did not constitute gross negligence or willful misconduct or gross misconduct.

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