Summary. A joint venture is two companies agreeing to do something together that neither will do alone, and the agreement's job is to answer what happens when one of them changes its mind. This guide covers structure — contractual or entity — and what each implies for liability, tax, and financing; the scope and exclusivity provisions defining what the venture is and what each party may still do outside it; contributions, funding obligations, and shortfall consequences; governance including reserved matters and deadlock; IP ownership and licensing, where technology ventures break down; antitrust constraints; transfer and exit mechanics; and termination.

A specialty chemicals manufacturer and a distribution company form a joint venture to serve a market neither can reach alone. The manufacturer contributes formulations and technical staff; the distributor contributes customer relationships, warehouses, and a sales force. Ownership is 50-50. Both are delighted.

Eighteen months in, the venture is behind plan and needs $4 million. The manufacturer's board will fund it. The distributor's will not — its own business has softened, and the venture is not its priority.

Nothing in the agreement addresses this. There is no capital call obligation, no dilution formula, no loan mechanism, and no consequence for declining. The manufacturer can fund the venture and receive nothing for it, or refuse and watch the venture fail, or negotiate from a position with no leverage because the distributor's downside is a write-off of an investment it has already mentally taken.

Meanwhile the venture's product line is built on the manufacturer's formulations under a license nobody drafted carefully, the distributor's sales force has learned the technology, and neither party's non-compete says what happens if the venture ends.

Joint ventures do not fail because the parties disagreed about strategy. They fail because the agreement did not say what happens when one party's commitment changes, and that is the only thing a joint venture agreement is really for.

Structure: contractual or entity

Contractual joint venture. The parties agree by contract to collaborate — sharing revenue, cooperating on a project, or jointly marketing — without forming an entity. Simpler and faster, appropriate for a defined project with a limited term. Risks: the parties may inadvertently create a general partnership at law, with joint and several liability and mutual agency, if their arrangement has the hallmarks of a partnership. Disclaim it expressly ("the parties do not intend to create a partnership, joint venture as a legal entity, or agency relationship"), and structure accordingly — but understand that a court examines substance.

Equity joint venture. The parties form an entity — usually an LLC in the United States — that holds the venture's assets, employs its people, and contracts in its own name. Advantages: limited liability, a clean vessel for financing, a defined ownership structure, and a natural exit mechanism. This is the norm for anything of scale or duration.

Entity choice.

  • LLC — the default. Flexible governance, pass-through taxation, and the ability to allocate economics differently from ownership.
  • Corporation — where outside investment, an eventual IPO, or a foreign parent's tax position favors it.
  • Limited partnership — where one party will be passive.

Tax considerations that drive structure: whether contributions of appreciated assets can be made tax-free under § 721 (partnership) or § 351 (corporation); whether the venture will generate losses the parties want to use, which favors a pass-through; whether a foreign party's treatment favors a corporation; and whether the venture's income will be effectively connected income or generate state tax filing obligations for the parents.

Financing structure. How the venture will be funded — equity, member loans, third-party debt with or without parent guarantees, or a combination — should be decided at the term sheet, because it determines the capital call and dilution provisions.

The term sheet

Negotiate the following before drafting begins. Every one of them is harder after the parties have committed publicly.

  • Purpose and scope — precisely what the venture will do.
  • Territory and field, and whether either is exclusive.
  • Ownership percentages and the economic split, which need not be the same.
  • Contributions — cash, assets, IP, people, and services — and their agreed values.
  • Funding — initial capital, the commitment for future funding, and the consequence of a failure to fund.
  • Governance — board composition, reserved matters, and deadlock.
  • Management — who runs it, whether personnel are seconded or employed by the venture, and how the CEO is selected and removed.
  • IP — what is contributed, what is licensed, who owns what the venture creates, and what happens on exit.
  • Exclusivity and non-compete — during the venture and after.
  • Transfer restrictions and exit — put and call rights, drag and tag, and the deadlock mechanism.
  • Term and termination triggers.
  • Antitrust — whether an HSR filing is required and whether the arrangement raises substantive issues.
  • Conditions — approvals, consents, and regulatory clearances.

Binding provisions in the term sheet should be limited to confidentiality, exclusivity of negotiation, expenses, and governing law. State that the rest is non-binding, and behave consistently.

Scope, exclusivity, and the boundary problem

The most consequential drafting in a joint venture agreement is the boundary between the venture's business and each parent's own business. Get it wrong and the parties will be in conflict continuously.

Define the venture's business with specificity: the products or services, the field of use, the customer segments, the geographic territory, and the channels. Then define what is outside it explicitly, because the negative is what the parties will argue about.

Exclusivity questions to resolve:

  • May a parent compete with the venture inside the defined field and territory? Almost always no during the term.
  • May a parent sell into the territory through its own channels?
  • May a parent serve a customer that is also a venture customer, for products outside the field?
  • What happens to a parent's pre-existing business that overlaps? Carve it out expressly, with a schedule.
  • May a parent acquire a company that competes with the venture? This is the most common and most difficult question. The usual answer is a notice and divestiture or offer mechanism: the acquiring parent must offer the competing business to the venture, or divest it, within a stated period — with a de minimis exception for an acquisition where the competing business is a small percentage of the target.
  • Do the restrictions bind affiliates? Define affiliate carefully, and address what happens if a parent is itself acquired by a competitor of the venture.

Duration. Exclusivity during the term, and a tail afterward — commonly one to three years — with the tail's enforceability turning on reasonableness under the governing state's law and on the antitrust analysis discussed below.

Corporate opportunity. The agreement should state whether opportunities within the venture's field must be presented to the venture, and by whom. Absent a provision, fiduciary duty doctrine supplies an answer the parties may not want.

Contributions and funding

Initial contributions. Schedule each party's contribution with an agreed value, and address:

  • Cash — amount and timing.
  • Assets — with a bill of sale or contribution agreement, warranties of title and condition, and allocation of pre-contribution liabilities.
  • Real property or leases — assigned, subleased, or licensed.
  • Contracts — assigned with any required third-party consents identified as conditions.
  • Employees — seconded (remaining employed by the parent, with a services agreement) or transferred (employed by the venture, with benefits, accrued liabilities, and non-compete assignments addressed).
  • Services — an ongoing transition services or shared services agreement, priced and with a term.
  • Intellectual property — the hardest, addressed below.

For contributions of appreciated property to a partnership-taxed venture, § 704(c) requires allocations accounting for the built-in gain, and the agreement should specify the method.

Future funding is where the opening example failed. Options:

  1. No obligation. Each party may fund or not. Simple and dangerous, because it converts every funding round into a renegotiation.
  2. Committed capital. Each party commits a defined amount, callable on notice, with a stated remedy for failure.
  3. Business plan funding. Each party commits to fund its share of the approved annual budget, with additional funding requiring approval.
  4. Member loans, at a stated rate, repaid before distributions.
  5. Third-party debt, with parent guarantees allocated pro rata, and a mechanism for a party that will not guarantee.

The failure-to-fund remedy is the provision that matters, and it should be graduated:

  • Dilution on a stated formula — pro rata, or punitive at a multiple, which is common and deters strategic non-funding.
  • The funding party may advance the shortfall as a loan at a penalty rate, repaid preferentially.
  • Loss of governance rights below a threshold ownership.
  • Triggering a put or call at a discounted valuation.
  • Default with the non-defaulting party's right to buy out the defaulter.

State the remedy precisely and make it self-executing. An obligation with no remedy is a request.

Governance

The board. Size, composition, appointment and removal rights, and whether seats are proportionate to ownership or fixed. A 50-50 venture typically has an even board, which makes the deadlock mechanism essential. An unequal venture usually gives the majority board control subject to reserved matters.

Chair — whether the position rotates, whether it carries a casting vote (in a 50-50 venture, a casting vote is control, and both parties know it), and who calls meetings.

Meetings — frequency, notice, quorum (including whether a quorum requires at least one director from each party, which is a blocking right), remote participation, and written consent.

Officers and management. Who is the CEO, how are they selected and removed, and to whom do they report. In many ventures the operating parent supplies management, which gives it de facto control regardless of the board's composition — a dynamic the passive parent should recognize and address through reporting requirements and reserved matters rather than through board seats it cannot staff effectively.

Reserved matters are the substance of governance. These require the approval of both parties (or a supermajority), regardless of board control. A working list:

  • Amending the governing documents.
  • Changing the venture's business, field, or territory.
  • The annual business plan and budget, and material deviations from it.
  • Capital expenditures above a threshold.
  • Incurring debt, granting liens, or providing guarantees above a threshold.
  • Issuing equity or admitting a new member.
  • Distributions.
  • Selling or acquiring assets or a business above a threshold.
  • Merger, conversion, dissolution, or bankruptcy filing.
  • Entering, amending, or terminating a related-party agreement with either parent — the most important item on the list, because parent-venture transactions are where value is transferred.
  • Licensing venture IP outside the ordinary course.
  • Hiring and terminating the CEO and senior officers, and their compensation.
  • Commencing or settling litigation above a threshold.
  • Tax elections.
  • Entering a new geographic market.

Calibrate the list. Too many reserved matters produce paralysis; too few give one party unilateral control over things the other cares about. The test for each item is whether the non-controlling party would consider it a fundamental change in the deal it agreed to.

Information rights. Monthly and quarterly financials, an annual audit, access to books and records, the right to attend management meetings, and — for a parent with public reporting or consolidation obligations — data in the form and on the timetable those obligations require. Specify the accounting standards.

Business plan and budget. The venture should operate under an annual plan approved as a reserved matter, with the CEO's authority defined by reference to it and a defined process for interim approvals. Address what happens if the parties cannot agree on the next year's budget — a common and unaddressed deadlock. The usual solution is that the prior year's budget continues, adjusted for inflation, until a new one is approved.

Deadlock. In a 50-50 venture, deadlock is not a risk but a certainty. Options, escalating:

  1. Referral to senior executives of each parent, within a stated period.
  2. Mediation.
  3. A neutral expert for defined technical or financial questions.
  4. A casting vote on specified operational matters only.
  5. Buy-sell mechanisms — the shotgun (one party names a price and the other elects to buy or sell), a sealed-bid auction, or a Dutch auction. These favor the party with liquidity, which is worth naming in the negotiation.
  6. Put and call rights at a formula or appraised value.
  7. Mandatory sale of the venture through an investment bank.
  8. Dissolution as the backstop.

Define the deadlock trigger precisely — a reserved matter unresolved after the escalation process over a stated period — so the mechanism cannot be invoked over an ordinary disagreement.

Intellectual property

IP is where technology joint ventures actually break down, and where the agreement most often defers a decision it should make.

Background IP — what each party owns before the venture and develops outside it. It should remain the parent's, licensed to the venture on defined terms:

  • Scope: field of use, territory, exclusivity, and duration.
  • Sublicense rights, needed if the venture will engage contractors or distributors.
  • Improvements to the background IP — who owns them, and does the parent receive a license back?
  • Royalty or royalty-free, and whether the license survives termination.
  • Maintenance and enforcement — who prosecutes, maintains, and enforces the background IP, and who bears the cost.

Foreground IP — created by or for the venture. The options:

  1. Venture owns it, with licenses back to each parent — the most common and usually the right answer. Define the license-back scope: field, territory, exclusivity, and whether it survives the venture's termination.
  2. Jointly owned by the parents. Avoid this if possible. Under US law each joint owner of a patent may practice and license it without the other's consent and without accounting, and all co-owners must join an infringement suit — a combination that makes joint ownership commercially unworkable and litigation-proof. If joint ownership is unavoidable, contract around the defaults with an express agreement on consent, accounting, and enforcement.
  3. Allocated by category — the venture owns improvements in its field; a parent owns improvements to its own background technology. Workable, and requires precise definitions.

Data. Increasingly the most valuable asset. Address who owns the venture's data, what each parent may do with it, whether it may be used to train models, what happens on termination, and the privacy obligations attached to it.

Trademarks. Whether the venture uses a parent's marks (licensed, with quality control provisions, terminating on exit) or develops its own (owned by the venture, with a transition license on wind-down). A trademark license without genuine quality control is a naked license that can result in abandonment of the mark.

On termination, specify for every category: who owns it, who gets a license, on what terms, for how long, and whether it is exclusive. Parties that defer this question to the exit negotiation discover that the venture's value is entirely bound up in it.

Confidentiality, with each party's confidential information protected, the venture bound, and residuals treated carefully.

Employees and inventors. Confirm that everyone contributing to foreground IP has assigned their rights — venture employees by agreement, seconded employees by an arrangement between the parent and the venture, and contractors by written assignment. Chain of title failures in joint ventures are common because nobody owns the process.

Antitrust

Joint ventures between competitors are lawful and can be procompetitive. They are also scrutinized, and the analysis should be documented before the venture launches.

The framework. A genuine integrative joint venture is analyzed under the rule of reason, not condemned per se. Texaco Inc. v. Dagher, 547 U.S. 1 (2006), held that a lawful joint venture's pricing of its own products is not price fixing, because the venture is a single economic entity as to that decision. American Needle, Inc. v. NFL, 560 U.S. 183 (2010), held that concerted action by separately controlled entities within a joint arrangement remains subject to § 1 scrutiny.

Ancillary restraints. Restrictions accompanying the venture — exclusivity, non-competes, territorial limits, and field restrictions — are analyzed under the rule of reason if they are subordinate and collateral to the venture and reasonably necessary to achieve its procompetitive purpose. A restraint broader than the venture requires, or lasting longer, risks being treated as naked.

Practical steps:

  • Document the procompetitive rationale contemporaneously — what the venture will produce that neither party could alone, and why each restraint is necessary.
  • Limit restraints in scope, field, territory, and duration to what the venture actually needs.
  • Firewall competitively sensitive information. The parents remain competitors outside the venture. Establish a clean team, limit what flows from the venture to each parent, and prohibit the exchange of current pricing, customer-specific terms, costs, and strategic plans outside the venture's needs.
  • Analyze HSR — the formation of a joint venture can be a reportable acquisition of voting securities or non-corporate interests, and contributions of assets can be reportable acquisitions by the venture.
  • Consider the National Cooperative Research and Production Act, which provides rule of reason treatment and, for notified ventures, limits damages to single rather than treble.
  • Assess foreign merger control, which may be triggered by the venture's formation even where HSR is not.

Employee non-solicitation between the parents should be limited to what is ancillary to the venture — restricted to employees involved in the venture, for a defined period — because a broad no-poach agreement between competitors is a per se violation that has been prosecuted criminally.

Transfers and exit

Transfer restrictions. A general prohibition on transferring an interest without consent, with:

  • Permitted transfers to wholly owned affiliates, with the transferor remaining liable and a mechanism requiring retransfer if the affiliate ceases to be wholly owned.
  • Right of first refusal or right of first offer on a third-party transfer.
  • Tag-along rights.
  • Drag-along rights, where one party may compel a sale of the whole venture — heavily negotiated in a 50-50 venture and typically unavailable there.
  • A prohibition on transfers to competitors of the other party, by name or by definition.

Change of control of a parent is the provision most often omitted and most often needed. If one parent is acquired — particularly by a competitor of the other — the venture's premise may be destroyed. Options: a call right allowing the other party to purchase at a defined value; a put right allowing the acquired party's interest to be sold; a termination right; or a suspension of information rights and board participation pending resolution. Decide which, and define change of control precisely.

Exit mechanisms, which should exist from the outset:

  • Put right — a party's right to require the other to buy its interest, exercisable after a lock-up period or on defined triggers. This is the passive party's most important protection.
  • Call right — the other side of the same coin, often held by the operating parent.
  • Deadlock buy-sell — the shotgun or auction mechanisms described above.
  • Term expiration with an option to renew.
  • Mandatory sale after a stated period, or on failure to meet defined milestones.
  • IPO rights, where applicable.

Valuation for any exit mechanism: a formula, an appraisal process with a defined selection mechanism, or a hybrid. Specify the standard of value, whether minority and marketability discounts apply (in a 50-50 venture they usually should not), and who pays for the appraisal. Specify payment terms — cash at closing is often impossible, and a note with security and acceleration is the realistic structure.

Triggers for a forced exit: material breach; insolvency; change of control; failure to fund; a regulatory event making the venture unlawful; and failure to achieve defined milestones.

Termination and unwinding

Termination triggers: expiration of the term; mutual agreement; material breach after notice and a cure period; insolvency of a party; a change of control; a deadlock that the mechanisms fail to resolve; failure to obtain a required approval; and a force majeure event persisting beyond a stated period.

The wind-down provisions determine whether termination is orderly or litigated. Address, in advance:

  • Who winds up — a liquidator, a designated party, or a committee.
  • Sale versus liquidation — whether the venture is marketed as a going concern, sold to one parent, or liquidated.
  • Asset allocation — which assets return to which contributor, and which are sold. Specify the treatment of contributed assets, jointly acquired assets, and improvements.
  • IP — the single most important item. Who owns each category, who receives a license, on what terms, and for how long. This should already be answered in the IP section rather than negotiated at the end.
  • Customers and contracts — who may solicit the venture's customers afterward, and how existing contracts are allocated or assigned.
  • Employees — who has the right to hire them, and whether the non-solicit is suspended.
  • Data — allocation, deletion, and permitted continuing use, consistent with privacy obligations.
  • Liabilities — allocation of known and unknown obligations, and whether either parent's guarantee survives.
  • Distribution of proceeds — the waterfall.
  • Surviving provisions — confidentiality, IP, non-compete tail, indemnity, and dispute resolution.
  • Transition services from either parent to the other, or to a buyer, for a defined period at defined rates.

Post-termination competition. Both parents will be in the market. The tail non-compete, the non-solicit of employees and customers, and the IP licenses together determine what each may do. Negotiate them at formation, when both parties are symmetric — at termination, whichever party wants the business more will pay for the terms it should have had.

Ancillary agreements

A joint venture is a package of documents, and the ancillary agreements frequently carry more economic weight than the JV agreement itself:

  • Contribution agreement for assets and liabilities.
  • IP license agreements — background in, foreground back.
  • Supply agreement, where a parent will supply the venture. Pricing, volumes, quality, and term, negotiated at arm's length and approved as a reserved matter.
  • Distribution agreement, where a parent will distribute the venture's output.
  • Services agreement for shared functions — IT, HR, accounting, legal — with scope, service levels, pricing, and term.
  • Secondment agreement for loaned employees, addressing supervision, cost, benefits, IP assignment, and return.
  • Lease or sublease for facilities.
  • Trademark license with quality control.
  • Guarantees by the parents of venture obligations.
  • Non-disclosure agreement, if not superseded.

Every one of these is a related-party agreement between the venture and a parent, and each should be on arm's-length terms, approved as a reserved matter, and reviewed periodically — because they are the mechanism by which value migrates from the venture to one parent.

A worked example

Return to the chemicals and distribution venture, redone.

Structure. A Delaware LLC, taxed as a partnership. Ownership 50-50; distributions 50-50 after return of capital.

Scope. Defined by product category, customer segment, and a nine-state territory. The manufacturer's pre-existing direct accounts in two of those states are carved out on a schedule. Neither party may sell competing products into the field and territory during the term and for two years after.

Contributions. The manufacturer contributes $2 million and a license to twelve formulations, valued by agreement. The distributor contributes $2 million, a warehouse sublease, and eight seconded sales employees under a secondment agreement.

Funding. Each party commits an additional $3 million, callable on 30 days' notice against the approved budget. Failure to fund permits the funding party to advance the shortfall as a loan at prime plus 6 percent repaid preferentially, or to contribute equity at a 25 percent discount to the most recent agreed valuation, diluting the non-funding party. Below 35 percent ownership, a party loses two of its three board seats and all reserved matter rights except those relating to its contributed IP.

Governance. Six-person board, three from each parent. Chair rotates annually with no casting vote. Twenty-one reserved matters requiring approval of a director from each parent, including all related-party agreements. The CEO is recruited externally and reports to the board.

Budget deadlock. If no budget is approved by December 15, the prior year's budget continues with a 3 percent increase until a new one is approved.

IP. The manufacturer's formulations remain its property, licensed to the venture exclusively in the field and territory, royalty-free, for the term plus a two-year tail. Improvements to those formulations are owned by the manufacturer with an exclusive license back to the venture. All other foreground IP is owned by the venture, with non-exclusive licenses back to each parent outside the field. Customer data is owned by the venture; each parent receives an aggregated, de-identified feed only.

Antitrust. Counsel prepares a contemporaneous memorandum documenting the procompetitive rationale, limits the non-compete to the defined field and territory, restricts the employee non-solicit to venture-involved personnel for eighteen months, establishes an information firewall, and confirms no HSR filing is required.

Deadlock and exit. Escalation to the parents' CEOs, then mediation, then — after 120 days — a shotgun provision, with the offeror required to demonstrate committed financing. Either party may put its interest to the other after year four at appraised fair value without discounts, payable 40 percent at closing and the balance over three years. A change of control of either parent gives the other a call right at appraised value.

Termination. On expiration of the ten-year term, mutual agreement, uncured material breach, insolvency, or an unresolved deadlock. Wind-down provisions specify that formulations return to the manufacturer, customer relationships are allocated by a defined formula, venture employees may be hired by either parent with the non-solicit suspended, and the venture's brand is transferred to the party purchasing the business or retired.

What this agreement does that the original did not: it answers the funding question with a self-executing remedy, it decides the IP allocation before anyone needs it, and it gives each party a defined way out.

Frequently asked questions

Should we form an entity or just contract? Form an entity for anything of scale or duration. Contract for a defined, limited-term project — and disclaim partnership expressly.

What if the other party will not fund? Only what the agreement says. Build a graduated, self-executing remedy: penalty-rate loans, punitive dilution, loss of governance rights, and a buyout trigger.

Who should own what the venture creates? Usually the venture, with licenses back to each parent outside the field. Avoid joint ownership of patents; the statutory defaults make it commercially unworkable.

Can we agree not to compete with each other? Within the venture's field and territory, for a reasonable period, as an ancillary restraint — yes. Broader agreements between competitors, particularly on employees, are dangerous.

How do we break a deadlock? With a mechanism agreed in advance: escalation, mediation, then a shotgun, auction, put and call, or mandatory sale. Without one, the answer is judicial dissolution.

What happens if our partner is acquired by a competitor? Whatever the change of control provision says. If there is none, you may be in a venture with your competitor and no exit.

Do we need an HSR filing? Possibly. Formation of a joint venture can be a reportable acquisition, and asset contributions can be reportable acquisitions by the venture. Analyze it before signing.

What is the most commonly omitted provision? The failure-to-fund remedy, followed closely by post-termination IP allocation. Both are cheap to negotiate at formation and enormously expensive later.

Conclusion

A joint venture agreement is a contract between two parties whose interests are aligned today and will diverge. Its value lies entirely in the provisions that operate when they diverge: what happens if one will not fund, what happens if they cannot agree, what happens if one is acquired, and who owns what when it ends.

Those four questions have obvious, cheap answers at the term sheet stage, when neither party knows which side of them it will be on. They have no good answers later, when both parties know exactly where they stand and the leverage is entirely with whoever needs the venture less.

Draft for the divergence. The alignment does not require a document.

Cross-border joint ventures

Where one party is foreign, or where the venture will operate outside the United States, several additional questions arise early enough to affect the structure.

Local ownership and licensing requirements. A number of jurisdictions restrict foreign ownership in defined sectors, require a local partner above a stated percentage, or condition licenses on local control. Confirm the requirement before agreeing on ownership percentages, because a structure that must be redone after signing is worse than one negotiated around the constraint.

Entity selection abroad. The local vehicle — a limited liability company, a joint stock company, a branch — determines governance flexibility, minimum capital, director residency requirements, and the availability of the reserved matters architecture described above. Several civil law systems constrain contractual governance far more than Delaware does, and provisions that work in a US LLC agreement may be unenforceable in the local entity's charter, requiring a parallel shareholders' agreement with its own enforceability analysis.

Tax. Model the structure before signing: withholding on dividends, interest, and royalties; treaty availability and limitation-on-benefits provisions; permanent establishment risk for seconded personnel; transfer pricing on the parent-venture agreements, which will require contemporaneous documentation; controlled foreign corporation and global intangible low-taxed income consequences for a US parent; and whether a check-the-box election produces a better result.

Governing law and dispute resolution. For cross-border ventures, international arbitration is usually preferable to litigation in either party's home courts — the New York Convention makes awards enforceable in most jurisdictions, whereas a judgment may not be. Specify the institution, seat, language, number of arbitrators, and whether emergency and interim relief are available. Note that the seat determines the supervisory court and the grounds for challenge, and it should be a neutral, arbitration-friendly jurisdiction rather than either party's home.

Anti-corruption. A venture operating in a higher-risk jurisdiction, with a local partner who has government relationships, is the classic FCPA fact pattern. Conduct diligence on the partner and its principals, obtain anti-corruption representations and audit rights, require compliance policies and training at the venture, and reserve the right to terminate for a violation. A US parent can be liable for the venture's conduct through knowledge, conscious avoidance, or the books and records provisions if it is an issuer.

Export controls and sanctions. Contributing technology to a foreign venture, or seconding personnel who will access controlled technology, implicates the deemed export rules and may require licensing. Screen the partner and its owners, and address sanctions compliance in the agreement.

Foreign investment review. CFIUS may review a foreign party's investment in a US venture involving critical technology, critical infrastructure, or sensitive personal data, and many jurisdictions have adopted comparable regimes for inbound investment. Build the review into the closing conditions and the outside date.

Currency, repatriation, and exchange controls, which in several markets determine whether distributions can actually leave the country — a question worth answering before the economics are agreed rather than after the first profitable year.

Related articles

This guide is provided for general informational purposes and does not constitute legal advice. Joint venture structuring involves entity, tax, antitrust, and intellectual property considerations that interact and that vary by jurisdiction. Consult qualified counsel before signing a term sheet.