UK regulations already allow for further scrutiny of mergers or joint ventures involving companies that offer military/dual-use technologies, software and quantum technologies. These rules are being revised to allow for a similar review of mergers or joint ventures that involve additional technology sectors, including artificial intelligence, authentication cryptographic technology and advanced materials. The implementation of due diligence for the preparation of a joint venture transaction has different dimensions than those typically occurring in private M&A transactions. The focus is not only on the company itself, its justification and its commercial pilots, but also on the partners of the JV, because the importance of choosing the right partners is of the utmost importance in every joint venture agreement and all the more so in the current conditions. Assuming that the shares held by the shareholders do not have preferential dividend rights, it would be customary to define the joint venture`s policy with regard to the date and amount of dividends paid. This must be subject to compliance with any external financing agreements and, under current market conditions, it may be necessary to recognise the likely inability of the company to pay income returns for a significant period of time. If the joint venture has a majority shareholder, that shareholder may demand the right to be financed by the loan of JV and to finance the share of a defaulting minority shareholder in that financing (ideally on pre-agreed terms) if this is necessary to preserve the financial situation of JV. Most joint venture agreements will identify a number of potential failure events. Structural remedies may be prescribed when such an event occurs.
This may include the right to buy back the defaulting shareholder or, in certain circumstances (most often in cases where there are two or a small number of shareholders), to require the defaulting party to buy its co-shareholders. With regard to the proposed new projects, should the parties consider how the transaction is managed in practice – is the active participation of shareholders necessary or will there be an existing or selected operational management team? With respect to existing joint ventures, the parties should consider the need to amend existing agreements to facilitate agile decision-making, whether temporary or permanent. We have experience in assisting companies, investors and entrepreneurs in structuring, designing and negotiating their joint venture agreements, including defining the precise obligations and responsibilities of each party and developing Deadlock rules. For joint ventures currently under planning, financing considerations will also be a central theme. .