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drafting of
joint venture agreementskiran m. chitale
disclaimers: 1. contents of this presentation reflect my personal views.
2. any intellectual property referred here is owned by respective owners
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• what is joint venture?
• types of joint venture
back to basics
• types of joint venture
• why jv ?
2
why jv ?
• combining each
others strengths
• better financials
• best practices and
• co-branding of
enterprises
• technology
• sharing risks in • best practices and
experience
• regulatory reasons
like sectoral caps
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• sharing risks in
business
• larger market share
• eliminating
competition
key considerations
� maintain highest transparency
� if you want one, ask for two
� voice your expectations and concerns
� be honest – concede to others’ views
� reason for a jv
� have a summary of key issues
� assess “give and take”
� identify the single contact point to represent
� make a list of critical dates
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jv process
� swot-analysis of the partners
� identification of area of business
� finding a suitable partner
� defining the purpose for the jv� defining the purpose for the jv
� conducting initial discussions
� feasibility study and market survey
� preparing a draft business plan
� drafting mou
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…jv process
� defining a schedule of action points
� drafting of joint venture agreement (jva)
� drafting of other related agreements/documentsdocuments
� initiate process for jvc incorporation
� nominating directors on the board
� drafting of memorandum and articles andother documents
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mou/ term sheet
� introduction of the parties
� confidentiality
� objective of joint venture
� products and services to be offered by jvc
� basic terms of joint venture� basic terms of joint venture
� modes of funding,
� management personnel
� technology
� project profile
� obligations of parties
� validity period and binding clauses
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jva� contents, preamble
� definitions
� business purpose of jvc
� related agreements
� sales and distribution activities
� conditions and closing of subscription� conditions and closing of subscription
� form and capital structure of jvc
� name of the jvc, brand and logo
� board of directors and their powers
� management of the jvc
� shareholders’ meetings
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…jva� accounts, audit and dividend distribution
� transfer of shares - restrictions
� exclusivity and non-competition conditions
� deadlock and its resolution
� intellectual property rights
� representations and warranties� representations and warranties
� confidentiality
� termination and dissolution
� arbitration and applicable law
� force majeure
� notices and miscellaneous
� annexures9
board/ shareholder issues
� composition
� independent directors
� ceo, cfo, technical director
� voting rights
� dividend
� restrictions on transfer
� meetings
� quorum
� frequency� voting rights
� veto right
� casting vote to Chairman
� affirmative vote
� nominee/ independent director
� frequency
� location
� matters for discussion
� % shareholding
� jva - vis-à-vis – articles
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funding
� business plan – not be annexed to JVA
� Annual operating plan
� funding structure
� guarantees/ letters of comfort
� foreign borrowings
� tie ups with local banks for loans
� consequences of funding defaults by JV
partner
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technology
� technical collaboration agreement
� technical fees
� technical training and assistance
� transfer vs. licensing
� intellectual property rights
� future developments
� technology to be developed by the JVC
� use of partners’ brands/ logos
� trademark license agreement
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governance issues
� information rights
� accounting standards, International accounting
� audit
� insurance and risk management
� health and safety� health and safety
� ethical business practices
� management information/ reports
� employee stock options
� data privacy
� anti-bribery
� applicable laws
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governing law/ dispute resolution
� choice of law
� interim relief and appeal provisions
� court/ dispute resolution
� arbitration
� rules: UNCITRAL/ ICC/ London/ Singapore
� language of arbitration
� venue of arbitration
� costs of arbitration
� nomination by parties
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other issues
• key definitions (products, services, customer, market)
• non-compete (business, products, territory, right to
refuse, NOC, existing ventures)
• exclusivity (definition, what you want)
• non-solicit (employees, management staff, period)
• transfer (lock-in, affiliates/ competitors, valuation, FEMA • transfer (lock-in, affiliates/ competitors, valuation, FEMA
and other laws, put and call options, drag along and tag
along rights for sale of shares)
• ipo (timing, size, stake, valuation)
• valuation (methods)
• merger/ acquisition (either party by a third party)
• other factors (success vs. failure of joint venture)
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recent news item…
16Source : The Hindu
recent news item…
17Source : Economic Times
recent news item…
Source : Economic Times
18
failed jv
19Source : International Business Times
some jv examples
company/
brand
jv partners product/
industry
Vistara Airlines Tata Sons Singapore Airlines
Aerospace
Bharati AxaGeneral Insurance
Bharati Entp Axa, France General insurance
Insurance
Tata Starbucks Tata Global Beverages (Tata Sons)
Starbucks, USA Coffee
Mahindra Renault
Mahindra & Mahindra
Renault SA, France
Automobile
Mahindra AgriSolutions
Mahindra & Mahindra
Sumitomo Corporation,
Japan
Crop care
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examples of failed auto jvs
venture models reason for break-up
Hero-BMW F650 Poor consumer response
Suzuki-TVSFiero, Max 100,Shogun, Shaolin
Ownership issues
21
Yamaha-Escorts
RD 350, RX 100RX 135,
Falling demand
Kinetic-Honda Zoom, DX, Marvel Kinetic buys partner’s stake
Kinetic-Hyosung
Aquila, Comet Steep pricing
LML-Piaggio Vespa 150 NV LML bought partner’s stake
Source : Business Standard
your role…
takeaways…
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takeaways…
questions …??
experience sharing…
usual questions
� why mou/ is mou mandatory?
� do we need to register jva ?
� jva vs. articles of association
� which laws apply to jva?
� who decides % share in equity?
� is it mandatory to form a jvc ?
� can jv be formed between firms/ llp ?
� do we need to pay stamp duty on jva?
� who can sign the jva ?
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Thank you for your patience !!Thank you for your patience !!
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