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JOINT VENTURE AGREEMENTS
&NEGOTIATIONS
NIRC-ICSISeptember 10, 2011
Atul MittalDirector
Deloitte Touche Tohmatsu India Pvt. Ltd.
Meaning….
A strategic alliance between two or more companies, individuals, or organisations
Ownership of business shared by participants
Operations based in different countries / spread over different countries.
Why Establish a Joint Venture ?
Creation of a new market
Foreign Investment opportunities
Requirement of funds for large projects
Enormous start-up costs and project risks
Memorandum of UnderstandingPurpose
Basis for an agreed text for public announcementStarting point for initial approaches to regulatory bodiesFulfilment of regulatory obligations in other jurisdictionsExecutive / reference summary of JVA’sSet out core principles with an understanding of the commitment of parties
Legal StatusNot legally binding on the partiesNot executed in sufficiently precise terms Confidentiality provisions, dispute resolution etc. should be binding
Memorandum of UnderstandingContents
• Business objective of the joint venture;Applicable laws and other regulatory requirements;Structure of the joint venture;The respective shares of the parties in the joint venture;Initial investment by the parties;Management matters, provisions regarding the board and the mechanics of voting;The parties’ commitments to provide the joint venture with know-how and technology;Procedure on termination of the joint venture;The timetable for the implementation of the joint venture; andAny conditions precedent.
Due DiligenceNature
Form of investigation prior to executing legally binding documentsInvestigations covering financial, legal and other business aspects Warranties and indemnitiesDisclosure letters
PurposePrevention of nasty surprisesAnswers questions relating to solvency and ownership of JV partnerIn-depth examination of the pre-contractual stageCovers all necessary information and details of important contracts
Legal Structure
Joint Venture Companies
Limited liability
Most popular JV vehicle
Company and not shareholders exposed to risks
Factors Governing Legal Structure
Corporate veil
Third party liabilities
Partnership liability inter se
Taxation implications
Management implications
Accounting implications
Transaction Documents
Master Agreement
Shareholders AgreementArticles of Association
Related AgreementsEmployment Distribution/MarketingManufacturing/SupplyEmployment Technology Transfer
Contents of a ‘JVA’….Name of the Joint VentureCapital StructureConditions Precedent Shareholding PatternScope and Territory of Operations Role of Shareholders and BoardOperation and Internal RelationshipsManaging Director/CEOs Role etc.Reserve MattersGeneral Meetings and Board MeetingsTransfer of Shares i.e. ROFR etc.Dividend Policy Accounts, Audit and Auditors
Contents of a JVA
Exclusivity and Non-CompeteOverriding Effect of the JVAForce MajeureWaiverAssignmentSecrecy and ConfidentialityBreach of AgreementTerm of AgreementNoticesGoverning LawDispute ResolutionOthers
.
ATUL MITTAL
Director
Tax & Regulatory Services
Deloitte
email: [email protected]
Tel: +91 (124) 46792828,
Mobile: +91 9810065744