A Joint Venture (JV) Agreement is a business contract between two or more parties which decides to come into partnership over a specific venture or project over a specified period of time, without affecting their respective legal status. The JV agreement legally binds all the parties to JV and outlines rights and obligations of each member of JV and other operational and financial aspects of the joint venture. Before drafting the agreement, all the parties to JV should evaluate potential problems so that they can be ironed out in the contract. Critically thinking through potential problems can help you avoid costly joint venture disputes
What are the key components of the JV agreement??
JV agreement should include as specifically as possible the terms and conditions of the agreement. Each contract is as unique as the project and parties involved. As a guideline, you should consider including some of the following provisions into your document:
- Applicable Law
- Date of the establishment of agreement
- Business Name and purpose of joint venture
- Scope of the venture i.e. whether it is limited to a single project or specified time period
- Parties involved in the joint venture
- Ownership rights of each party entering into joint venture
- Description of the project proposed under joint venture
- Proposed Investments by each venture in form of cash, equipment or technological expertise
- Manner of handling the venture’s governance matters and policy making namely composition of BOD, Management committee, frequency of board meetings, quorum for important decisions at board meetings
- Rules regarding transfer of shares and change of control
- Non Compete clause
- Confidentiality and indemnity clause
- Arbitration clause in case of any dispute
- Distribution of joint venture assets upon the conclusion of the venture along with procedures for early termination of the venture
