Transfers and Exit
The exit mechanism in joint venture agreements facilitates the disposal and realisation of assets at the venture’s conclusion, often prohibiting premature interest transfers. Termination clauses address mandatory terminations, such as insolvency, while also allowing for termination in cases of relationship breakdown or serious breaches. Deadlock provisions may trigger under defined circumstances, leading to a transfer or compulsory winding up.
Drag along and tag along rights enhance sale possibilities, ensuring sale of entire interests. In situations where one party wishes to exit, transfer rights vary based on the agreement type, with restrictions common in corporate ventures. Pre-emption rights regulate share transfers, usually initiated by a notice of proposed transfer and price, followed by a buying opportunity for other venturers.
Sale of interest provisions clarify share transfer conditions, with penalties for breaches. Valuation mechanisms determine share prices, often involving independent experts or predetermined formulas. Pre-emption clauses may include exceptions and procedures for challenging valuations. Approving the buyer and put and call options ensure control over share transfers, with regulatory consents sometimes necessary.
Deadlock resolution mechanisms aim to resolve disputes, including winding up, buyout options, and variations like “Russian Roulette” or “Mexican shoot out.” These mechanisms determine who buys out whom and at what price, often through bidding processes or mutual agreements.
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