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A Joint venture (JV) may be for a fix term or open ended until a specific event occurs. If the JV is for a fixed term the transfer provisions are likely to be more restrictive as the parties will not want the distraction of going through a transfer process engaging with new parties.
The parties will have taken a lot of time and consideration in choosing to partner with each other and a change in one of the parties may undermine the viability of the venture, especially where one of the parties is providing services to the JV.
If transfers are allowed there will typically be restrictions so that the continuing party has a degree of control over who is coming in order to protect the future viability of the JV.
Key areas to consider around transfers include:
In basic terms:
Depending on the number of parties to a joint venture and the size of their respective interests, it may not be appropriate for all parties to benefit from both drag-along and tag-along rights. Consideration will also need to be given to the nature of the JV and the extent to which it relies on the assets or skills of one or more of the parties being involved.
The above is a summary of transfer considerations. For details on other key considerations when entering into a joint venture please refer to our guide 'Joint ventures: what are the key considerations when entering into a Joint Venture'.
If you have any questions or would like support with your approach to joint ventures, please get in touch.