Planning a Joint Venture
Why form a joint venture with another company? Because sharing
resources, technology, and distribution systems can make good business
sense. But how does one know what kind of entity to form? What issues
will affect the negotiating process?
Joint ventures (“JV”) may take a number of forms, but
the basis on which they are formed is always a commercial collaboration
in which two or more unrelated parties pool, exchange, or integrate
some of their resources with a view to mutual gain, while at the
same time remaining independent. This checklist provides a basis
on which to consider the issues surrounding the formation of the
JV and the ongoing legal rights and obligations between the parties:
- Identify the Scope/Purpose of the Joint Venture (“JV”)—what
activities will it do or not do, what conflicts exist, what technology
or intellectual property will be transferred
- Identify the Form of Joint Venture--jointly owned, partnership,
LLC, or contractual (non-equity)
- Identify Regulatory Issues--current and any anticipated changes
to regulatory issues
- Implications of JV on Existing Operations and Reporting Requirements—review
accounting treatment of investments, existing contractual obligations
- Consider Tax Consequences of Proposed Structure
- Internal Preparation--identify all other subsidiaries in the
corporate group as well as internal divisions and departments
that may have a material interest in any particular aspect of
the JV transaction
- Confidentiality Agreement—is one necessary, if so what
will it cover?
- Letter of Intent and Terms Sheet—binding or nonbinding?
- Parties—which parties are parties to the JV?
Find out more about the book From
Model Joint Venture Agreement with Commentary.
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