nternational business law joint venture september 20101

8/13/2019 Nternational Business Law Joint Venture September 20101

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JOINT

VENTURE


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INTRODUCTION


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Joint Venture is not a strict legal term, but adescription of a certain business relation.

The term describes a business situation where 2 ormore parties join their capacities in order toachieve a certain common objective with a beneitor ever! part! and mostly over a long period oftime.

"hat does the term

#Joint Venture$ standor%


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Joint ventures have become an importantstrate&ic option or man! businesses' Due

to increased &(oba(isation) the pro(ieration

o modern techno(o&! as the means o

conductin& business) and increasedinternationa( trave() businesses are now

operatin& in a wor(d without borders)

a(beit that there are sti(( cu(tura( and

(an&ua&e issues' This &uide summarises the

*e! considerations in estab(ishin& a joint

venture or other strate&ic partnership'


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The term +joint venture, is an umbre((a term whichdescribes the commercia( arran&ement between two or

more economica((! independent entities'

In practice) the (e&a( orm o a joint venture is (i*e(! to

be determined b! a number o actors inc(udin& the

nature and si-e o enterprise) the anticipated (en&th o

the venture) the identit! and (ocation o the venturers

and the commercia( and inancia( objectives o the

participants'


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#riends$mar*et

competitors


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The parties a(wa!s hope to save

mone! and time b! uni!in& their

capacities to achieve a common

tar&et and proit both


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Ne&ative aspects o the Joint

Venture


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NE.OTI/TION 01/E


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as the Joint Venture is a complex business, that involveshigh investment costs and generally a long period of time,there will be the need for substantial resources and othercapacities

The 0arties) in the determinationo the content o the Joint Venture)

have to pass throu&h a ne&otiationphase) as o((ows3


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T1E 0/RTIE

1/44 DE/4

"IT1


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C1OOIN. /

0/RTNER


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Veri! easibi(it!


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Then the parties have to veri! the economic)technica( and commercia( easibi(it! o the JV'

These easibi(it! studies are based on assumptions

about the mar*et and principa((! re&ard the

inancia( burdens o constitutin& the JV andpositionin& it on the mar*et'


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Three basic (e&a( structures can be used or joint

venture) these bein&3


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0/RTNER1I0

/ partnership is the re(ation which subsists between

persons carr!in& on a business in common with a viewto a proit'

There are a(so certain #h!brid$ vehic(es or

arran&ements) such as a (imited (iabi(it! partnership)

with characteristics rom more than one o the abovecate&ories'


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In an! case peop(e are &ettin& used to

distin&uish 2 main dierent wa!s to setup a Joint Venture

b! contract b! estab(ishin& acompan!

Contractua(

Joint VentureE5uit! Joint

Venture


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6oth orms 7i'e' contractua( and e5uit! J'V'8 re5uire

dierent so(utions or simi(ar prob(ems) such as3

attribution o investment costs) attribution o

contro((in& powers) distribution o ris*s and proits)

disso(ution o the JV'

Each orm is more suitab(e or a

certain business tar&et


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CONTR/CTU/4 JOINT VENTURE


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E9UIT: JOINT

VENTURE


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The objectives determine the tar&ets o the JV; what it

was constituted or'

The! show what the uture shou(d brin&' The purpose o

this /&reement is to provide or the estab(ishment)

ownership and operation b! the 0arties o the New

Compan!) which sha(( be the eENT


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DIO4UTION O=

T1E JOINT

VENTURE


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The JV can

survive or it can

be disso(ved

T1E DIO4UTION oftenresults in its liquidation in

cases of hardship ordeadloc, as also ruled out

by law in many!urisdictions.

IN C/E IT URVIE3one party leaves the JV", if

it is profitable and the otherparty wants to continuewor.

This is often made by grantingput or call options to theremaining or leaving part


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DE/D4OC?

This reerence stands or a standsti(( resu(tin& rom theopposition o two unre(entin& orces or actions'


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Dead(oc* can arise either in a @AB@A joint venture where

the shareho(ders, appointed directors ta*e opposin&

views or where a director appointed b! a minorit!

shareho(der e


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It is he(pu( to have a po(ic! to revert to when an inso(ub(e

dead(oc* arises' The aim o the po(ic! shou(d be to ensure

that a sensib(e compromise is reached beore the dead(oc*

occurs'"hen there is an inso(ub(e dead(oc*) the o((owin&

options are usua((! avai(ab(e3

Transer o shares a dead(oc* cou(d serve as a tri&&er

(eadin& one part! to transer its shares to a third part!

subject to preemption ri&hts'

Vo(untar! (i5uidation the assets o the venture wi(( be

so(d and the venturers wi(( share the proceeds accordin&

to their e5uit! interest


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=urthermore) the JV a&reement has to determine the

price o the shares' In case o nonperormance o onepart! the price mi&ht have a pena(i-in& character'

/ situation o dispute can arise in determinin& the part!who has to (eave the JV' Especia((! in cases o dead(oc* it

is not eas! to decide which part! can sta!'

uch a dispute is oten so(ved in an auction procedure7a(so ca((ed Russian rou(ette8 or b! the decision that theminorit! part! has to (eave'


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PUT OPTION

#fter the occurrence of the "ompletion and during thecontinuance of this #greement, provided that aTermination $vent occurs as hereinafter set forth in

article %%..without pre!udice to any further right toclaim for damages, shall have the right to sell its &ew"ompany's (hares to && and && shall be bound to

purchase said (hares, the transfer price being equal tothe actual value of the (hares at that time owned by ##as assessed at that time in accordance with the priceformula)s* herein referred to in $nclosure +....


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nternational business law joint venture september 20101

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