International Corporate Joint Venture

This Model Contract is a framework for a joint venture between two Parties to establish a jointly-owned company (“JVC”). Key features are: 1. It contemplates 50-50 equal ownership. If there are more than two Parties, or one is to have a majority share, its provisions will need to be adapted. 2. Each party makes an initial financial contribution to the capital of the JVC. It is important to establish whether or not a party will have any continuing obligation to provide further finance to the JVC. Article 5 is prepared on the basis that any future finance requires mutual consent. 3. Each corporate JVC must be formed in a particular jurisdiction. Usually, this will determine the governing law. It will be necessary to prepare Articles of association/by-laws or other formal constitutional documents in that jurisdiction that are consistent with the joint venture contract. It is good practice to ensure that the joint venture contract addresses key items as a matter of contract between the Parties. 4. For clarity regarding development of the JVC’s Business, it is good practice to have a Business Plan agreed between the Parties at the outset. This could be attached to, or at least identified in, the joint venture contract. 5. Many joint ventures involve contribution by a party of assets, property, technology or services or associated distributorship or supply arrangements. These will often require “ancillary contracts” to be entered into in order to spell out the detailed terms (price, specification, liability etc.). 6. Overall direction and management of the JVC is usually in the hands of the JVC Board of directors. It is important at the outset to clarify the balance of decision-making power between (i) the Parties as shareholders, (ii) the Board and (iii) individual executives of the JVC. It is common to specify that certain “Reserved Matters” will require mutual consent of the Parties either as shareholders or at the Board. 7. A sale by a party of its Shares in the JVC can, under the Model Contract, only be made with mutual consent. 8. If a party wishes to bring the joint venture to an end, this usually requires mutual agreement. Article 14.3 contemplates, after a reasonably lengthy procedure, that a party can nevertheless call for a winding up of the JVC in certain circumstances of breakdown or deadlock.