Basic Elements of a Joint Venture

In our last blog, we talked about the preparatory steps needed to enter into a joint venture. In this blog we will be discussing the basic elements of a Joint Venture, which one should be aware of while binding into a contractual agreement.

The Ways You Can Enter Into A Joint Venture

A joint venture can be structured in four major ways – when a foreign investor buys an interest in a local company; when a local firm acquires an interest in foreign firm; when both local and foreign companies forms a joint enterprise; and together with public capital and/or bank debt.  

Choosing Right Partner Is Very Important

The success of a joint venture depends on both the partners, which makes it important to choose your partner carefully. For this, you need to do a screening of all the prospective partners. Make sure you have checked the credentials of your partner before signing the agreement. The marketing and distribution network, R&D, technical knowhow, infrastructure and reach of the company should also be considered before signing the joint venture agreement.

Maintain Contractual Integrity 

Every joint venture partner has a fiduciary responsibility – a duty to act for someone else's benefit while subordinating one's personal interests to those of the other person – and has the duty to act in Good Faith in matters that concern the common interest or the enterprise.

A joint venture can terminate at a time specified in the contract – upon the accomplishment of its purpose, upon the death of an active member, or if a court decides that serious disagreements between the members make its continuation impractical (Source: TheFreeDictionary).

All the participating parties in a joint venture share some mutual responsibilities and goals, and have a set of certain rights and duties. The parties have a mutual right to share the profits and control the enterprise, and a duty to share in any losses incurred. In order to avoid any trouble in later stages, the parties should be aware of all the terms, conditions, and clauses of the agreement. 

The Right Guidance

Every initiative requires effective guidance from the expert and experienced. CEO coaching provides you the requisite guidance and knowledge you need to have before entering into a joint venture. There are a number of reputed CEO Associations that holds expertise in providing CEO training. You should consider joining a CEO club to understand more about a joint venture.