Understanding the International Joint Venture Agreement
JOINT VENTURE AGREEMENT CHECKLIST
An important Dispute-Avoidance tool for multi-party projects and a means for facilitating discussions.
A well-drafted Joint Venture Agreement is key to successful multi-party projects. It is essential that all participants understand their rights and obligations and the rights, obligations and expectations of all other participants. When tension and stress levels rise, even well-intentioned participants often forget (sometimes innocently), what they promised at the beginning of the project. Joint Venture agreements substantially reduce the risk of “forgetfulness” and/or provide a clear, written reminder of important commitments, thereby reducing the risk of misunderstandings, which often result in costly disputes. A well-drafted Joint Venture Agreement will likely include all of the following issues and more.
1. Identify the Parties & Purpose of the Joint Venture Project;
2. Joint Venture Entity; Determine whether this will be a holding entity or operational entity:
a. Limited Liability Company [LLC] or Corporation?
b. Preferred Name?
c. Who will be the Directors and Officers (Corporate) [Pres., Treas., Secy.] or Managers (LLC).
d. Percentage of ownership for each Party?
3. Determine what will happen if one Party is dissolved/passes away/becomes disabled/becomes unable to participate. For example, mandatory buyout or will heirs and/or successors have the right to control the business (e.g., via director’s vote, etc.).
4. Determine what will happen if the parties disagree to extent of deadlock.
5. What is each Party’s level of commitment (time, money, effort, etc.)?
6. What is the initial Capital Contribution from each Party? (e.g. cash, know-how, leads, assignment of intellectual property, tangible property, other property, etc.)
7. Does any party expect to recoup initial Capital Contributions through dividends/disbursements? If so, when?
8. Will Parties be paid as employees?
9. Determine how Capital Contributions will be used.
10. What significant issues is any party relying upon, that, if not agreed upon by the parties, a party would not agree to be a part of the project.
11. Consider requiring that the entity enter into comprehensive agreements to protect the interests of owners, e.g. assignment of Intellectual Property rights etc.
*This is not an exclusive list, but instead a tool to facilitate discussions.
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