October 23, 2021

Volume XI, Number 296

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Top 10 Issues When Considering a Joint Venture

Leading diverse companies through the consideration and implementation of Joint Ventures in the U.S. and numerous foreign jurisdictions provides a short list of Key Issues that a client must consider.
 

  1. JVs require client personnel to devote several months of close attention to detail and significant legal fees. Most JVs fail within 3-5 years. The JV business plan should be comprehensive and agreed upon up front as well as compelling.
     
  2. There often are cheaper and easier alternatives to a JV.
     
  3. Will company names, trademarks, patents or know-how be transferred to the JV? What happens to IP the JV develops? As most JVs fail and one party buys out the other, what happens to the IP? Would the JV be worth buying if the exiting partner takes back all its IP on the date it gets bought out? 
     
  4. Will the JV sell its goods and/or services through one of the party venturers? Realistically, what will happen if their sales disappoint? 
     
  5. What are the ownership/capital contribution percentages? Can each party provide enough capital? Future needs for Capital? 
     
  6. A minority party venturer will want veto rights over many key JV decisions. What Board and Officer slots go to which party venturer? 
     
  7. A formula for the likely eventual exit/buyout of a party is preferable, cheaper, quicker and easier than valuation, negotiation, arbitration or litigation.
     
  8. Who will fill the key executive employee slots? Fixed and incentive compensation? Non-Competition. Loyalty to the party they came from, if applicable?
     
  9. Triggering a buyout: Impasse in decision making? Poor financial results? Death of a venturer or key person? A specified period of years has passed?
     
  10. Will the JV be perpetual or have a term, for example, ten years?
© 2021 Dinsmore & Shohl LLP. All rights reserved.National Law Review, Volume I, Number 89
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About this Author

Harvey Jay Cohen, Domestic Foreign Transactions Attorney, Dinsmore Shohl law
Partner

Harvey Cohen is a long-standing, accomplished corporate attorney, uniquely focused on helping clients win by practically, pro-actively and efficiently assisting with their domestic and foreign transactions. With years of studies and dealings abroad, Harvey applies his global experience to address cross-border strategies and complex issues in tandem with client product or service needs, specific industry situations, as well as "must haves" and "must avoids" before crafting any solution or agreement. 

Harvey is known for asking the hard, practical...

513-977-8144
Jacob Manning, Business transactions lawyer, Dinsmore Shohl law firm
Partner

Jacob Manning advises businesses and individuals in a variety of business transactions, both domestic and cross-border. He drafts and reviews contracts, particularly those involving sales of goods, distributorships and licensing, and construction, vendor and service contracts on behalf of boards of education and other public entities. When clients are negotiating a contract, Jacob also provides advice about payment, including guarantees and letters of credit. Should a dispute arise, he represents clients both before US courts and in arbitration subject to international...

304-230-1604
Frank Schuckmann, Dinsmore Law, International Practice Group Lawyer
Of Counsel

Frank Schuckmann is a Partner in the Corporate Department and a member of the International Business Practice Group where he heads the German Desk for the firm. Frank represents domestic and international companies and individuals in the areas of mergers and acquisitions, corporate, financing, securities and customs matters. He specializes in the representation of German companies in their activities in the U.S., as well as representing U.S. companies as they enter Europe.  Recently, he has represented numerous international joint ventures in the area of biotechnology, and particularly...

614-227-4297
Peter Draugelis, Business Corporate Matters, Legal professional, dinsmore lawyer
Partner

Peter Draugelis is a Partner in the Corporate Department. Peter's practice covers a broad spectrum of business and corporate matters, including mergers and acquisitions, finance, supply and distributorship agreements, and international business transactions. He advises clients from small entrepreneurs to Fortune 500 companies concerning forming new businesses, strategic partnering relationships, and general business issues that in-house counsel and executives face on a daily basis. 

513-977-8415
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