Docstoc

joint venture agreement checklist

Document Sample
joint venture agreement checklist Powered By Docstoc
					             Prepared By:
             Robert Auerbach
             Email: robert@auerbach.co.nz
             Website: www.marketnewzealand.com/auerbach




             Joint Venture Agreement
             checklist


                                                                                                        Disclaimer:
                                              These checklists are provided for information purposes only and are no
                                                    substitute for professional advice, which should be sought prior to
                                                   entering into any transaction. New Zealand Trade and Enterprise
                                              (NZTE) has not verified these checklists and makes no representations
                                                as to the completeness, correctness, currency, accuracy or fitness for
                                             purpose of the information, or the person that prepared the information.
                                                    Accordingly, NZTE will not be responsible for any damage or loss
                                            suffered by any person arising from the information whether that damage
                                                                           or loss arises from negligence or otherwise.




             This document is one of a series of free information tools for exporters to assist businesses
             through every stage of the export process.

             For the protection of Robert Auerbach's clients, all names in this document are fictitious. Any
             resemblance to actual people or companies is purely coincidental.

             For information or advice, visit www.marketnewzealand.com, ring NZTE on 0800 555 888 or
             contact your Client Manager.
     Joint
  Venture
Agreement
 Checklist

 May 2006

                                                                                                                   1
             contents
             abstract .......................................................................................................................3
             1. the joint venture partners......................................................................................4
             2. creation of joint venture corporation ...................................................................4
             3. the shareholders ....................................................................................................4
             4. date that the joint venture corporation will officially commence business .....5
             5. description of business to be handled by the joint venture corporation.........5
             6. territorial limitations...............................................................................................6
             7. minimum performance requirements...................................................................6
             8. transactions between the shareholders and the joint venture corporation.....6
             9. funding requirements of the joint venture corporation......................................7
             10. headquarters of the joint venture corporation..................................................7
             11. financial and management reporting .................................................................8
             12. the board of directors ..........................................................................................9
             13. shareholders meetings......................................................................................10
             14. certain action requiring shareholder approval ...............................................10
             15. procedure if a party wishes to sell its shares .................................................11
             16. distribution of profits .........................................................................................11
             17. expenses of the shareholders ..........................................................................12
             18. what to do in the event of corporate deadlock, irreconcilable differences and
             disputes.....................................................................................................................12
             19. licenses and permits..........................................................................................12
             20. insurance ............................................................................................................12
             21. confidential information and trade secrets .....................................................12
             22. intellectual property ...........................................................................................13
             23. restraint of trade.................................................................................................13
             24. term of agreement ..............................................................................................14




     Joint
  Venture
Agreement
 Checklist

 May 2006

                                                                                                                                           2
             abstract

             A joint venture, properly conceived and executed, can offer significant benefits to an exporter. A
             joint venture may provide the cash an exporter needs to penetrate a new market.

             An exporter may lack the resources to set up a branch but not wish to surrender control to an
             independent distributor. A joint venture to establish a marketing presence in the target market
             may be the answer.

             An exporter may not be able to produce a product competitively but does not want to surrender
             production control. A joint venture to manufacture the product in the target market may be the
             answer.

             Thus, a joint venture partner may offer an exporter cash, marketing resources, manufacturing
             resources, technology and know-how.

             A joint venture checklist identifies all issues that joint venture partners should consider before
             they sign a joint venture agreement. Use of the checklist will greatly reduce the possibility of
             disappointments and misunderstandings. An exporter will have more realistic expectations.
             The checklist covers these issues among others:
                  Contribution of Joint Venture Partners
                  What will each partner contribute? When will the contribution be made? What will the partner
                  receive for its contribution?

                 Business of the Joint Venture
                 Define the scope of the joint venture's business. Specify prohibited activities.

                 Self Dealing
                 Consider all other relationships between a joint venture partner and the joint venture. Such
                 relationships, if not arms length, may lead to misunderstandings and disputes.

                 Theft of Joint Venture Opportunity
                 A joint venture partner should not steal a business opportunity properly belonging to the joint
                 venture.

                 Territory
                 Specify any territorial limitations for the joint venture.

                 Funding Requirements
                 Create a business plan, including a pro forma budget and cash flow statement.

                 Management
                 Establish a management structure.

                 Profit Distribution
                 Specify the dividend policy.

                 Selling Out
                 Establish the procedure for withdrawing from a joint venture.

                 Dispute Resolution
     Joint       Consider mediation or arbitration.
  Venture
Agreement
 Checklist

 May 2006

                                                                                                               3
             A joint venture may turn out to be a very strategic relationship for some exporters. Unfortunately,
             for all too many, it is a recipe for disaster. They do not do their homework. They act too hastily.
             They do not check the credentials of their partner.

             A bad joint venture is the business equivalent of a bad marriage. Do not confuse a casual
             flirtation with a long term relationship. Rarely does a solid, enduring relationship evolve from a
             casual flirtation.

             By using the joint venture checklist, an exporter will certainly know what he is getting into. Such
             knowledge can be crucial to the success of the relationship.



             1. the joint venture partners

             1.1. Specify the name, address, telephone and facsimile numbers of each participant in the joint
             venture.




             2. creation of joint venture corporation

             2.1. Name of corporation:

             2.2. This checklist shall hereinafter refer to this corporation as the “Joint Venture Corporation”.

             2.3. Place of incorporation:




             3. the shareholders
             3.1. Who they are:

                                                        Contribution                        Percentage
             Shareholder                                 to Capital                         Ownership



             Name:
             Tel:
             Fax:                                    NZD$___                                             %

             Name
             Tel:
             Fax:                                    NZD$___                                             %

             Name
             Tel:
             Fax:                                    NZD$___                                             %

             Total Paid in Capital                   NZD$___                                        100%


     Joint              3.1.1. Will the contribution to capital set forth above cover all anticipated start-up
  Venture
Agreement
 Checklist

 May 2006

                                                                                                                  4
                        expenses? If not, where will the rest of the money come from to finance the Joint
                        Venture Corporation’s operations during the start-up phase?

             3.2. The shareholder’s capital shall be paid within two weeks after both of the following two
             conditions are met:

                        3.2.1. Execution of a Joint Venture Agreement; and

                        3.2.2. The incorporation of the Joint Venture Corporation.

             3.3. Specify any non-capital contributions that any shareholder shall make to the Joint Venture
             Corporation. For example:

                        3.3.1. Technology and know-how.

                        3.3.2. Human resources.

                        3.3.3. Sales and marketing.

                        3.3.4. Machinery and equipment.

                        3.3.5. Other.




             4. date that the joint venture corporation will officially
             commence business

             4.1. Specify date:




             5. description of business to be handled by the joint venture
             corporation

             5.1. Describe in as much detail as possible what activities the Joint Venture Corporation shall
             engage in.

                        5.1.1. Specify the products that the Joint Venture Corporation shall import and
                        distribute.

                        5.1.2. Will the Joint Venture Corporation be permitted to import and distribute products
                        supplied by third parties? What about competitive products?

             5.2. Are there any prohibited activities?

                        5.2.1. An example of a prohibited activity might be one which is competitive with an
                        activity presently engaged in by a shareholder.

             5.3. Will the shareholders or their affiliated companies be precluded from engaging in certain
             activities in competition with the Joint Venture Corporation?

                        5.3.1. If so, for how long?

                        5.3.2. What constitutes a competitive activity?
     Joint
                        5.3.3. For how long will the shareholders or their affiliated companies be prohibited
  Venture
                        from engaging in competitive activities?
Agreement
 Checklist

 May 2006

                                                                                                                5
                       5.3.4. What about business presently and formerly handled by the shareholders?

             5.4. Presumably the Joint Venture Corporation will have certain exclusive rights in a defined
             territory.

                       5.4.1. What are those exclusive rights?

                       5.4.2. Are there any conditions imposed upon the Joint Venture Corporation in
                       consideration for the grant of those exclusive rights? (i.e. minimum performance
                       requirements).




             6. territorial limitations

             6.1. Do the shareholders wish to impose any territorial limitations upon the Joint Venture
             Corporation?

                       6.1.1. Specify the countries in which the Joint Venture Corporation may do business.




             7. minimum performance requirements

             7.1. Specify below any minimum performance requirements that the shareholders wish to impose
             upon the Joint Venture Corporation.

             7.2. What happens if the Joint Venture Corporation does not meet such minimum performance
             requirements?

                       7.2.1. Either party should have the right to terminate the Joint Venture and force a
                       liquidation of the Joint Venture Corporation.

                       7.2.2. The parties may wish to consider other, less draconian measures such as
                       reducing the size of the Joint Venture Corporation’s territory, or taking away the Joint
                       Venture Corporation’s exclusive rights.




             8. transactions between the shareholders and the joint
             venture corporation

             8.1. Will the shareholders be transacting any business with the Joint Venture Corporation? If so,
             what types of transactions do the shareholders anticipate entering into with the Joint Venture
             Corporation?

                       8.1.1. What type of contracts do the shareholders need with the Joint Venture
                       Corporation concerning these transactions? The parties should discuss the terms and
                       conditions of any such contracts.

             8.2. Any future transactions not expressly allowed by the Joint Venture Agreement shall be
             subject to the consent of both parties.
     Joint
  Venture
Agreement
 Checklist

 May 2006

                                                                                                              6
                        8.2.1. The parties should establish procedural guidelines for the consideration of such
                        transactions in the future.




             9. funding requirements of the joint venture corporation

             9.1. Determine the Joint Venture Corporation’s working capital requirements during the first two
             years of operation.

                        9.1.1. Prepare a budget and cash flow analysis to be attached to the Joint Venture
                        Agreement.

             9.2. Will the initial capital contributions of the shareholders plus whatever capital the Joint
             Venture Corporation is able to internally generate through its business operations be sufficient to
             meet its budgeted cash flow requirements?

             9.3. Consider whether the Joint Venture Agreement should provide that the shareholders
             guarantee loans of the Joint Venture Corporation up to a certain designated amount.




             10. headquarters of the joint venture corporation

             10.1. Where located?

             10.2. Size and type of premises?

             10.3. Rental of office space and any office equipment should be specified.

             10.4. Rental of manufacturing space and any machinery and equipment should be specified.

             10.5. Type and availability of warehouse space, and the rental thereof, if required by the Joint
             Venture Corporation.

             10.6. Type and availability of any transportation equipment, and the rental thereof, if required by
             the Joint Venture Corporation.

             10.7. Management Structure: Customary positions

                        10.7.1. Managing Director:

                        10.7.2. General Manager:

                        10.7.3. Marketing Manager:

                        10.7.4. Operations Manager:

                        10.7.5. Financial Manager:

                        10.7.6. Company Secretary:

                        10.7.7. Company Treasurer:

                        10.7.8. Chairman of the Board:

                        10.7.9. Other Officers [Specify]:

     Joint                 Note: All of these positions need not be filled. Some may not apply to the Joint
  Venture                  Venture Corporation, others can be combined. In short, there’s plenty of flexibility.
Agreement
 Checklist

 May 2006

                                                                                                                7
                        10.7.10. Create job descriptions for all officers, indicating whether or not they are full
                        time or part time employees. Make sure the job descriptions address the following key
                        areas of responsibility: Financial and accounting; legal; general administration; sales
                        and marketing; operations management and execution; strategic planning; public
                        relations; research and development; and other.

                        10.7.11. Focus upon the three key areas of any business: Operations, Finance and
                        Marketing. Who will assume responsibility in each of these three key areas?

                        10.7.12. Prepare an organisational chart showing who reports to whom.

                        10.7.13. Where will each officer be based? Will any New Zealanders be residing
                        overseas? What about their wives and children? Are there any legal impediments?
                        Who will handle the immigration law matters?

             10.8. Define the number and functions of all other staff.

                        10.8.1. Who makes staffing decisions?

             10.9. Set salaries, fringe benefits and other forms of compensation for officers and staff.

             10.10. What type of support and assistance will the Joint Venture Corporation receive from the
             shareholders?

             10.11. Describe the type of day to day interactions that the shareholders are likely to have with
             each other or with the Joint Venture Corporation.

                        10.11.1. Have we identified all potential bottlenecks and areas of friction?

             10.12. Employment Contracts.

                        10.12.1. Do we need an employment contract with any senior officer of the Joint
                        Venture Corporation? If so, refer to the Robert Auerbach Employment Contract
                        Checklist.




             11. financial and management reporting

             11.1. Types of financial and management reports desired.

                        11.1.1. Budget.

                        11.1.2. Schedule of sales booked and tendered for.

                        11.1.3. Schedule of debtors.

                        11.1.4. Schedule of creditors.

                        11.1.5. Income [loss] statement.

                        11.1.6. Balance sheet reviewed quarterly.

                        11.1.7. Cash flow statements.

                        11.1.8. Other financial or management reports [specify].

             11.2. Frequency in which such financial reports are furnished.

                        11.2.1. Monthly, quarterly or semi-annually?
     Joint   11.3. Who prepares financial reports?
  Venture
Agreement
 Checklist

 May 2006

                                                                                                              8
                        11.3.1. Are they prepared “in-house” (if so, by whom?) or by an outside accountant?

                        11.3.2. Suggest financial reports shall be prepared internally, subject to review by an
                        independent outside accountant if any shareholder so requests.

             11.4. What bank accounts are required and where?

                        11.4.1. Who has cheque signing power?

                        11.4.2. How many signatures are required?

             11.5. Nominate a law firm to incorporate and represent the Joint Venture Corporation.

             11.6. Who will be the outside accountant?

             11.7. Determine the Joint Venture Corporation’s fiscal year.




             12. the board of directors

             12.1. Who are they?

             12.2. Name

                  Address


                        12.2.1. Will each shareholder have the same number of directors? If so, how will they
                        handle a corporate deadlock? Might they wish to appoint an independent person as a
                        director in order to break any deadlock that could arise?

                        12.2.2. In the event that any director should resign, his replacement shall be
                        designated by the shareholder he represented.

                        12.2.3. If the independent person resigns as a director, his replacement must be
                        acceptable to the shareholders.

             12.3. Who will act as Chairman of the Board?

                        12.3.1. Will he have a casting vote?

             12.4. How often should the Board meet?

                        12.4.1. Suggest that there be not less than four meetings a year.

             12.5. Where should the Board meet?

                        12.5.1. Suggest that the Board may also meet by teleconference.

             12.6. How much advance notice should be given of meetings?

                        12.6.1. Suggest not less than 30 days advance notice.

                        12.6.2. The notice should include the nature of business to be transacted at the
                        meeting.

             12.7. What constitutes a quorum?

                        12.7.1. Suggest a simple majority.

             12.8. In order to vote, a director must attend the meeting, either in person or by teleconference
     Joint
             facility. However, if permitted by law, a director shall have the right to appoint an alternate or
  Venture
Agreement
 Checklist

 May 2006

                                                                                                              9
             nominee to represent him if he is unable to attend a meeting either in person or through
             teleconference facility.

             12.9. Should the Board appoint any committees?

             12.10. What about directors’ fees and expenses for attending Board meetings or providing
             director-type services to the Joint Venture Corporation?

             12.11. Minutes of all directors meetings should be recorded and circulated.

                       12.11.1. Who will handle this function?




             13. shareholders meetings

             13.1. How often?

                       13.1.1. Suggest at least once a year, within three months of the close of the Joint
                       Venture Corporation’s fiscal year.

             13.2. Where should the shareholders meet?

             13.3. How much advance notice?

                       13.3.1. Suggest at least 30 days.

                       13.3.2. The notice should include the nature of business to be transacted at the
                       meeting.

             13.4. What constitutes a quorum?

                       13.4.1. Suggest: A simple majority of shares represented in person or by proxy.

             13.5. Minutes of all shareholders meetings should be recorded and circulated.

             13.6. Devise a procedure to deal with corporate deadlock.

                       13.6.1. Suggest some form of mediation or arbitration.




             14. certain action requiring shareholder approval

             14.1. The following corporate actions should require either shareholder approval or a two thirds
             majority of the Board of Directors.

                       14.1.1. Issuing shares or otherwise changing the capital structure.

                       14.1.2. Expanding the board of directors.

                       14.1.3. Buying out a shareholder.

                       14.1.4. Compensation practices.

                       14.1.5. Entering into a licensing agreement or exclusive distribution agreement.

                       14.1.6. Any other transactions between the Joint Venture Corporation and the
                       shareholders, or their affiliates.
     Joint
  Venture              14.1.7. Borrowing money.
Agreement
 Checklist

 May 2006

                                                                                                             10
                        14.1.8. Purchasing or selling a “substantial asset”. (Defined as possessing a value
                        greater than 20% of total assets.)

                        14.1.9. Incurring or discharging a “substantial liability”. (Defined as possessing a
                        value greater than 20% of total liabilities).

                        14.1.10. A merger or acquisition.

                        14.1.11. Any other change in control.




             15. procedure if a party wishes to sell its shares

             15.1. This being a privately held company, do the parties wish to impose reasonable restrictions
             upon each other’s right to sell the Joint Venture Corporation’s shares to outsiders?

                        15.1.1. Perhaps give each party a right of first refusal to repurchase the shares on the
                        same terms and conditions as those offered by a bona fide third party in an arms
                        length transaction.

             15.2. In the event that a party is unable to find a purchaser for its shares, it shall offer them to the
             other party.

             15.3. If, within 60 days of such offer, the other party is either unwilling or unable to purchase the
             shares, the Joint Venture Corporation shall be liquidated forthwith.

             15.4. The value of the shares shall be determined by the shareholders in the first instance. If
             they are unable to agree upon the value within 30 days, then it shall be determined by a mutually
             acceptable certified public accountant with experience in business valuation, whose fees shall be
             paid by the Joint Venture Corporation.

             15.5. The standard of value to be applied by such certified public accountant shall be the market
             value of the Joint Venture Corporation as a going concern, with due consideration for good will
             and earnings growth potential, the value of all assets and liabilities at their present market value
             and using price earning multiples prevailing for similar type distribution businesses.

             15.6. Payment terms.

                        15.6.1. The settlement date shall be ___ days after the parties agree upon the price
                        for the shares or the accountant renders his valuation report, whichever the case may
                        be.

                        15.6.2. Specify whether it’s all cash at settlement or whether the purchase price is to
                        be paid in instalments. If instalments, provide details on term of loan, rate, etc.




             16. distribution of profits

             16.1. Will all profits be reinvested or a proportion distributed to shareholders in the form of a
             dividend?

                        16.1.1. Should this be taken up in this agreement or left to the board of directors?

     Joint
  Venture
Agreement
 Checklist

 May 2006

                                                                                                                 11
             17. expenses of the shareholders

             17.1. Are any expenses of the shareholders reimbursable by the Joint Venture Corporation? If
             so, list them.

             17.2. Specify the procedure for reimbursement.

                        17.2.1. When is prior approval required before an expense is incurred?

                        17.2.2. When is prior approval not required?

                        17.2.3. Who approves expenses?

                        17.2.4. What documentation is required?

                        17.2.5. Frequency of reimbursement.

                        17.2.6. Any other details regarding the reimbursement process.

             17.3. List all non-reimbursable expenses.

             17.4. Specify any other important expense policies for the Joint Venture Corporation.




             18. what to do in the event of corporate deadlock,
             irreconcilable differences and disputes

             18.1. Do the parties wish to provide for arbitration or a mechanism for winding up and liquidating
             the Joint Venture Corporation?




             19. licenses and permits

             19.1. The Joint Venture Corporation should appoint local counsel to obtain for it all appropriate
             licenses and permits, and to ensure that it complies with all applicable laws in the territory.




             20. insurance

             20.1. What types of insurance will the Joint Venture Corporation purchase?




             21. confidential information and trade secrets

     Joint   21.1. The parties may wish to treat certain types of information as confidential.
  Venture
Agreement
 Checklist

 May 2006

                                                                                                           12
                        21.1.1. Will the Joint Venture Corporation be the recipient of confidential information
                        from either party?

                        21.1.2. If so, what types of confidential information is the Joint Venture Corporation
                        likely to receive? For example:

                        Customer information                     Product registrations

                        Drawings                                 Production information

                        Financial data                           Projections

                        Forecasts                                Prototypes

                        Ideas                                    Quality standards

                        Inventions                               Research & development

                        Know-how                                 Samples

                        Marketing information                    Specifications

                        Models                                   Technical information

                        Patent information                       Trade secrets

                        Product information

                        21.1.3. What happens to such confidential information upon the termination of this
                        Agreement? Can the parties then use the confidential information for their own benefit
                        or does the commitment to confidentiality extend for a period of time after termination
                        of the Agreement.




             22. intellectual property

             22.1. Will the Joint Venture Corporation be the recipient of intellectual property from either party?

             22.2. What types of intellectual property is the Joint Venture Corporation likely to receive? For
             example: Patents, trademarks, copyrights, know-how, system designs, etc.

             22.3. What happens to such intellectual property upon the termination of the Agreement?

             22.4. What about intellectual property developed by the Joint Venture Corporation on its own?




             23. restraint of trade

             23.1. Should the Joint Venture Agreement include a reciprocal restraint of trade provision
             preventing each shareholder from competing with the other shareholders or with the joint venture
             corporation?

                        23.1.1. What is the duration of such restraint of trade?

                        23.1.2. What territory does the restraint of trade cover?

     Joint              23.1.3. What types of acts would be deemed competitive?
  Venture
Agreement
 Checklist

 May 2006

                                                                                                             13
             24. term of agreement

             24.1. Is the term limited or perpetual?

                        24.1.1. If limited, any renewal options?




             Prepared by:
             Robert Auerbach
             P.O. Box 34-555
             Birkenhead, Auckland 1330
             New Zealand
             Tel: +64-9-419-2214
             Fax: +64-9-418-3651
             E-mail: robert@auerbach.co.nz
             Website: www.marketnewzealand.com/auerbach



                                                                                                          Disclaimer:
                                                These checklists are provided for information purposes only and are no
                                                      substitute for professional advice, which should be sought prior to
                                                     entering into any transaction. New Zealand Trade and Enterprise
                                                (NZTE) has not verified these checklists and makes no representations
                                                  as to the completeness, correctness, currency, accuracy or fitness for
                                               purpose of the information, or the person that prepared the information.
                                                      Accordingly, NZTE will not be responsible for any damage or loss
                                              suffered by any person arising from the information whether that damage
                                                                             or loss arises from negligence or otherwise.




     Joint
  Venture
Agreement
 Checklist

 May 2006

                                                                                                                   14

				
DOCUMENT INFO
Shared By:
Stats:
views:1745
posted:1/16/2009
language:English
pages:14