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Companies and investors are increasingly going beyond traditional models and strategies when conducting mergers and acquisitions. Registering a joint venture, therefore, may be one way of achieving their short-term & long-term goals. It provides them with a fast and efficient growth mechanism, ensuring easy access to new technologies and markets. 

The question businessmen worldwide are asking themselves is: How do we conclude a JVA in a pandemic? If you are interested in creating a corporate joint venture, you should keep in mind that, paradoxically, COVID-19 contributes to the creation of new management solutions. Let’s take a short look at some of them:

  • A pandemic has negative consequences for those planning to obtain a JV manager license. It also prevents the Boards of Directors from properly maintaining the current management standards. In this situation, appointing a person responsible for monitoring reporting becomes absolutely essential. It is worth noting, though, that senior managers of such an enterprise will be held liable.
  • Transferring assets to a JV under Covid-19 requires taking fast & complex decisions. This is the only way to react to quickly changing realities and ensure further growth. Some JVAs assume that the consent of the director appointed by the shareholders is sufficient to make a decision. However, adopting this kind of attitude can be dangerous for the shareholders who become particularly vulnerable during the crisis period. As the pandemic progresses, strategically important decisions should be taken particularly fast, especially when it comes to devising new business strategies & budgets. 
  • Operating JVAs during a crisis often results in the stakeholders’ inability to jointly resolve problems related to business plans and budgets. Therefore, hiring an effective mediator who could jumpstart negotiations may be a viable solution. Unless the stalemate is resolved, procedure for share repurchase may be initiated. And that can, in turn, lead to a possibility for stakeholders to purchase an additional stake in a joint venture.
  • Securing additional financing for JVs to offset problems with liquidity caused by the pandemic is an absolute must. Reconciling differences among shareholders regarding distribution of capital and continued debt funding may be beneficial. JVAs must also be checked for compliance with funding requirements.
  • Partners of JVs who seek a quick exit in order to secure funding they need for other businesses.
  • Higher default risks caused by breaching the JVA or other mechanisms. The default implications may be different and range from shareholders acquiring a share in the joint venture of the stakeholders who defaulted on obligations, to liquidation of the joint venture.

Legal Advice

By contacting IQ Decision UK employees, you will receive qualified legal assistance in registering a joint venture. You can also hire our experts to get legal advice on the regulation and protection of intellectual property rights in the joint venture.