Deadlock Joint Venture Agreement

Disputes or deadlock may be referred to an independent third party. It may be an expert in the relevant field, a mediator or an arbitrator. One of the biggest challenges shareholders face in any joint venture is decision-making. The inability to reach consensus on key issues will lead to a stalemate that could stop or stop the company`s operations. The corresponding issue in shareholder contracts is to break any blockage between shareholders. What happens if the joint enterprise agreement remains silent and there is a dead end? If the parties have an interest in continuing the cooperation of the project, these divorce measures should only be chosen as a last resort. While these measures allow the company to continue its operations, the withdrawal of a venturer can have serious consequences on the company`s operations and the way it is implemented (. For example, the loss of a stable source of raw materials, financing capacity, expertise or the use of trade names or technologies). It is therefore necessary to consider whether the withdrawal of either party would lead to a total collapse of the company. (i) the first is how to resolve the impasse, which is usually done through consultations or an escalation of the question put to the designated representatives of the joint venture partners (usually the leading management); and a president can get a voice in a deadlock scenario. Often, the development of the deadlock provisions will depend to a large extent on what the parties want to reach consensus.

The most interesting thing about this clause is that each shareholder should carefully evaluate the price to be indicated in the offer, since a high offer price would have the effect of charging the shareholder a higher premium to buy the other shareholder, while a low offer price may result in the exclusion or involuntary exit of the shareholder at a lower price. With respect to cross-border joint ventures, the foreign partner is expected to offer fair value above the estimated fair value established by Indian foreign exchange law, and the Indian partner will have a cap on the purchase price and will likely not be able to offer a higher offer than the foreign partner, and the Texas Shoot-out therefore generally works against the Indian shareholder. Is it questionable whether a joint enterprise agreement has a dispute resolution mechanism, which requires a separate provision on deadlock regulation? To answer this question, it must be understood that an impasse is not a dispute in itself between the parties to a joint enterprise agreement, as there is no violation of representation, guarantee or agreement, as stipulated in the joint enterprise agreement, and that dispute resolution mechanisms provided for by the agreement (i.e. arbitration procedures or legal proceedings, as agreed) can be resolved. Even an arbitrator with the authority to settle a “dispute” may not have the absolute power to resolve a deadlock if there is no clearly defined provision to resolve the blocking solution in the joint enterprise agreement, which provides for the consequences of a deadlock or clearly provides that the blockages must be resolved by arbitration, which is not desirable. A blockage can occur both within the board of directors and at the shareholder level. As a general rule, joint venture agreements provide that a deadlock has occurred when the board of directors or shareholders are unable, if necessary, to make a decision on a reserve matter. At the board level, this would mean either: (i) that the designated director of one of the joint venture partners did not vote in favour of such a reservation, or that the designated director of one of the partners of the joint venture abstained at successive board meetings (two or three); or (ii) in the event of successive board meetings, the quorum is absent.