![]() Even if the respective jurisdiction acknowledges a deadlock clause, the clause must be drafted as precisely and pragmatically as possible because the relationship of trust between joint venture partners in a deadlock situation is usually shaken. ![]() Such clauses should be drafted carefully, as some jurisdictions may not acknowledge them. Joint venture contracts usually also contain deadlock clauses, which provide a remedy by defining a deadlock situation and stipulating a share transfer mechanism as well as the termination of the joint venture relationship. Here, for example, the allocation of shares and the respective voting rights as well as dispute resolution mechanisms should be considered. In the joint venture contract and, as far as possible, in the articles of association of the joint venture company, a deadlock should be addressed to avoid its occurrence in the first place. ![]() The risk of a deadlock should be considered already when setting up a joint venture company. However, in many cases the statutory provisions do not lead to a satisfactory result. Depending on the applicable law, the liquidation of the company or, if possible, the redemption of shares of a joint venture partner are to be considered. Without corresponding provisions in joint venture contracts, deadlock can only be resolved based on legal regulations, which are sometimes quite vague, especially in developing and emerging countries. Legal difficulties can also arise if, for example, the company is no longer able to meet its reporting and publication obligations due to the deadlock. If, for example, the shareholders cannot agree on financing issues, the company may be threatened with insolvency. Insights M&A Vocabulary – Understanding Experts: DeadlockĪ deadlock between the joint venture partners can threaten the existence of the joint venture company.
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