Deadlock Joint Venture Agreement

A Deadlock provision or Deadlock resolution clause is a contractual clause or series of clauses in a shareholders` agreement or other form of joint venture agreement that sets out how to resolve differences of opinion on key corporate governance issues. Among the most frequent exit measures applied in Joint Undertaking agreements are the following agreements or a combination or variation of those agreements. A joint venture in which two joint ventures each hold 50% of the shares in the joint venture Company (JVC) is sometimes referred to as a blocked or blocked joint venture. In such a joint venture, the parties to the joint venture must agree on all decisions to be taken by the JVC; If they cannot agree on a particular approach, the action will not be taken, i.e. the status quo will be maintained. In this context, the fundamental question arises as to what is the ideal deadlock solution mechanism in the Indian context. Here are some options and suggestions to avoid and/or resolve a dead end. Provision may be made for blockages to be referred to the chairpersons or directors of the parties to the Joint Undertaking concerned. What if the JV agreement was silent and there was a dead end? In such a scenario, especially in the event of a blockage, the relationship between the parties could suffer irreparable damage. Where a part of the JV acts inappropriately or oppressively and/or the blockade is roughly an artificial dead end of ulterior motives, the party on the receiving side should consider approaching the judicial authorities to seek appropriate remedies. The type of relief really depends on the facts and circumstances of each case. In some cases, the Indian judicial authorities have authorized the purchase/sale of shares by one party to the other, or even ordered the liquidation of the JV.

However, it is clear that there is some uncertainty about this option. The structure and management of a 50/50 joint venture usually reinforces the blocking position, for example. B: (d) Liquidation: If neither party is able to buy the other, the voluntary liquidation of the company may be used as a last resort. This is a very drastic measure that should not be undertaken without full and absolute reflection, and care should be taken to ensure that once a shareholder has made certain assets (such as shapes, tools) and intellectual property available to the joint venture, he or she returns them to that shareholder. In addition, it may not be ideal if contracts are concluded, in particular with the government, or in which the joint venture is in good financial health elsewhere. It may be provided that disputes or blockages are referred to an independent third party. This may be an expert in the field concerned, a mediator or an arbitrator. 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 mean that the shareholder would pay a higher premium to buy back the other shareholder, while a low silver price may result in the involuntary exclusion or exit of the shareholder at a lower price. In the case of cross-border joint ventures, the foreign partner should offer beyond the estimated fair market value, determined in accordance with India`s foreign exchange legislation, and the Indian partner will cap the purchase price and will most likely not be able to make a higher bid than its foreign partner, and that`s why the Texas Shoot-out normally works against the Indian shareholder…