Design, Bargaining, and the Law
Post-contract bargaining includes monitoring and renegotiation by and between partners. After a joint venture has been established, each partner monitors whether the other partner has contributed resources to the joint venture as promised. If one partner discovers a material fact contrary to the other partner’s representations or warranties, that partner may claim damages against the other partner. During the operational stage, JV partners should utilize prior notification duties, consent rights, after-the-fact reporting duties, and audit rights to monitor the performance of the other partner and the joint venture. Using these tools, partners can acquire the information necessary to effectively exercise their veto rights. In order to implement the joint venture agreement, the JV partners create various internal regulations for the JV company, such as standards for setting directors’ meeting agendas, corporate decision-making and approval rules, rules regarding when policy matters require a parent company’s prior consent or notification, and employment contracts. When JV partners appoint officers to their JV company, they typically also enter into a voting agreement with shareholders to ensure that the control-sharing arrangements contained in the joint venture agreement are not at odds with corporate law requirements for institutional decision-making processes. Even after entering into a joint venture agreement, JV partners need to engage in two types of renegotiation.
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