Joint Venture, 4 Things to Consider Before Drafting a Joint Venture

4 Things to Consider Before Drafting a Joint Venture

  • Post author:
  • Post published:April 26, 2021
  • Post category:Law
  • Reading time:5 mins read

A corporate joint venture refers to the approval between two parties to work as a team on a specific project considering it a common goal. That approval is further strengthened by the formal written agreement that the lawyer creates by joint venture agreement drafting. The agreement becomes null and void after meeting the objectives. For instance, two parties can merge their efforts to do a certain digital marketing project. In which both the parties approve about equally benefiting from the knowledge gathered by the undertaking.

Joint ventures usually occur when a huge amount of money is required to meet an objective. Also, when no individual business has the necessary knowledge base. Or when there is too much risk for a single party in completing the project. Therefore to manage the legal aspects of the joint ventures, you will need joint venture agreement lawyers.

Joint Venture, 4 Things to Consider Before Drafting a Joint Venture

A corporate joint venture is different from a corporate partnership. In which the purpose is to work together for a long period to receive profits. Hence we are outlining four things to consider before drafting a joint venture.

You can cover all these aspects when you start your joint venture agreement drafting.

1. Find out Objectives of Both Parties

At the start of any JV, it is necessary to identify the parties. It is also important to find out their commercial objectives. That might not be similar or in line with each other. For example, a financial investor, a person who is inactive in participating in a company’s work, will have different objectives than that of a management investor, who has an active role in the regular activities of the joint venture project. These objectives can tremendously impact resource allocation in joint venture agreements. Also, they will influence the rules and procedures each party requires to do their activities.

After finding out the objectives of both parties, you can reach a lawyer for joint venture agreement drafting.

Joint Venture, 4 Things to Consider Before Drafting a Joint Venture

2. Learn about your Partner

It is necessary. Try to gain an in-depth understanding of your Partner. Do an ample amount of research to know the corporate background of the party you will be joining. To receive better insight into your partner’s values, you can reach out to joint venture agreement lawyers.

It would help if you did not consider that the person you have been doing discussions with within your partner’s office has the value and vision their company holds. Other aspects to consider include, did the other party do any joint ventures before? How many profits did they receive? Can you speak with anyone who was in their previous joint venture? There are plenty of things that are at risk than the financial results you are expecting. Your reputation can be at stake even for your partner’s moves that are not related to the joint undertaking.

When it comes to learning about your partners, you can receive professional tips from joint venture agreement lawyers.

Joint Venture, 4 Things to Consider Before Drafting a Joint Venture

3. Find out What Each Party will be Providing in the Joint Venture

It is also necessary to find out what individual parties are providing in the joint undertaking. For example, it can be intellectual material, goods, management expertise, or financial assistance. These aspects will also affect the bargaining status of both parties and their direct shareholding. That may raise a question, will there be a high percentage of certain shareholders in the project? This contribution by each party will also determine what permissions will be given to each party when creating the joint venture agreement. You should also find out clearly what significance is being given to the non-financial contributions.

Each party’s contribution is important for joint venture agreement drafting, so everyone is given the permissions to work conveniently.

4. Find out your Partner’s Native Culture

Identify your partner’s native culture. In case your partner resides in another country, you should take time to find out how your partner’s native culture can impact your joint undertaking—look up the business norms in your partner’s nation. Please find out how contracts are viewed, how issues are resolved, and how do they expect partners to behave with each other in your partner’s native culture even if the region of the joint undertaking is at any other place. Cultural views and traditions define the way people think and carry out their actions. Moreover, each culture is different from another. Hence as a general rule, the diversity between the cultures of two parties will lead to more unforeseen disagreements. Therefore, ventures like these are not simple; however, they are worthy of initiation.

Joint Venture, 4 Things to Consider Before Drafting a Joint Venture

Whenever you need expert advice on understanding your partner’s native culture, you can consult joint venture agreement lawyers. Hence with the above four tips, you can draft profitable joint ventures that can lead to a successful business. These guidelines are also helpful for those who are proceeding with their first joint ventures.

Spread the love