The joint-venture term checklist
A joint venture is easy to enter and hard to leave. The terms that matter most are the ones that govern the leaving, and they have to be written at the start, when neither party knows which of them will want out first. These are the nine we work through with founders before they sign.
A joint venture is a shared entity, or a shared contractual arrangement, where two or more parties combine capital, technology, market access or people to pursue something neither would do alone. The appeal is obvious. The risk is that “shared” is doing a lot of work in that sentence, and the sharing has to be defined precisely or it becomes a fight. Run each term below before signature, not after.
The vehicle
Decide what the venture legally is before negotiating anything inside it.
- Incorporated joint venture (a new company both parties hold) or a purely contractual arrangement? The governance toolkit, the tax treatment and the exit mechanics differ completely between the two.
- If incorporated: which jurisdiction does the entity sit in, and does that choice survive tax, foreign-investment rules and where the work will actually happen? The logic is the same as for a holding company.
- If a foreign partner takes equity in an Indian vehicle: check whether the sector sits on the automatic route or needs approval before any money moves.
Control and governance
Equal ownership does not have to mean equal control over every decision, and pretending otherwise builds in paralysis.
- Board composition: who appoints how many directors, who chairs, and does the chair carry a casting vote?
- Write two lists: decisions a simple majority carries, and reserved matters that need both parties. Keep the reserved list short enough that the venture can actually operate day to day.
- Quorum: if a valid meeting requires both sides present, a partner can freeze the venture by not turning up. Decide what happens on the second missed meeting.
- Management: who appoints the CEO or manager, and which decisions are theirs alone without board reference?
Contributions and what they are worth
The most common joint-venture grievance is the feeling that one partner is carrying the other. The schedule prevents it.
- Write down exactly what each party delivers: cash, technology, licences, customer access, people, and by when. Vague contributions become disputed contributions.
- Agree the value of non-cash contributions at signing, not in the middle of a fight. If a foreign partner receives shares in an Indian vehicle against non-cash consideration, FEMA adds its own valuation and reporting requirements.
- Fix the consequence of a missed contribution in advance: dilution, suspension of rights, or a call option over the defaulter’s stake. Pick one and write it down.
IP in, and IP out
A venture that improves your technology and then dies without an IP-exit clause leaves your own improvements trapped.
- Background IP each party brings in: usually licensed to the venture, rarely assigned. Fix the scope, territory, duration and whether the licence survives that party’s exit.
- Foreground IP the venture creates: owned by the venture or by a contributing partner? Improvements made to one partner’s background technology are the classic fight; decide their ownership explicitly.
- The exit clause: on termination, who keeps the foreground IP, who receives a licence back, and at what price? Answer it while both parties still want the venture to work.
Exclusivity and non-compete
Whether the partners may compete with their own venture, and for how long.
- Scope the restraint precisely: which business, which territory, for how long, and does it survive a partner’s exit?
- Carve out each partner’s existing businesses expressly, or the restraint reaches things neither side intended.
- Enforceability is jurisdiction-specific, and courts read restraints between contracting parties differently from restraints on individuals. Draft to the venue you fixed in the governing-law clause, not to hope.
Deadlock
Fifty-fifty feels fair and is often a trap. The tie-break has to be chosen while nobody needs it yet.
- Escalation first: named senior executives, then mediation, each with a time limit, so a disagreement cannot idle for months.
- Then a real mechanism: a casting vote on defined matters, a buy-sell (one side names a price, the other must buy or sell at it), or a sale of the whole venture. Each shifts power differently when one partner has deeper pockets, so choose deliberately.
- A clause that ends at “the parties shall discuss in good faith” is not a mechanism. It is a postponed fight.
Exit and transfer
A joint venture with no exit mechanism is a marriage with no divorce law. Those end in court.
- Lock-in first, then the transfer controls: right of first refusal or first offer, and whether a partner can ever sell to a competitor of the other.
- Put and call options: which events trigger them (default, deadlock, change of control of a partner), and a valuation method fixed in advance, not negotiated during the divorce.
- Cross-border India note: exit pricing between residents and non-residents runs into FEMA’s pricing guidelines, and an option held by a foreign partner cannot promise an assured return. An exit clause drafted without this can be unenforceable exactly as written.
- Change of control: if your partner is acquired, especially by your competitor, does the other side get a call option or an exit?
Money across the border
Every rupee, dirham and dollar that crosses a border in either direction has a compliance path it must follow.
- Equity in: the investment route, entry pricing and the filings that follow. Our FEMA and FC-GPR checklist covers the India-inbound sequence.
- Equity out: an Indian partner investing into a foreign venture runs through the overseas-investment framework, with its own approvals and annual reporting.
- Profits home: dividend flows, withholding tax, and the treaty relief actually available between the two countries. Model the after-tax number before agreeing the profit split.
- Dealings between a partner and the venture are related-party transactions: keep transfer-pricing documentation from day one.
Governing law and the dispute forum
A joint venture agreement that ignores this clause is one where a disagreement has nowhere sensible to go.
- Pick the governing law of the agreement deliberately, and know it need not match the law of the entity’s home jurisdiction. The mismatch is workable only if it is intentional.
- For cross-border ventures, institutional arbitration usually beats court litigation and ad hoc arbitration. Fix the seat, the institution, the language and the number of arbitrators. The seat decides which courts supervise the arbitration.
- Check the path to interim relief: if the venture is misusing your IP today, you need a court that can stop it this month, not an award in two years.
Every term on this list except the second and third exists to govern the ending: deadlock, exit, IP-out, the forum where a fight happens. That is not pessimism, it is sequencing. The only moment both parties will negotiate the divorce fairly is before the wedding, when neither side knows which of them will want out first. If a partner resists writing the exit terms at the start, that reluctance is itself information.
Entering a joint venture, especially across borders?
Send us the draft term sheet, or just the outline of who brings what. We will map the control, IP and exit terms against this checklist, and the FEMA and tax path if the partners sit in different countries, before anything is signed.
Want this as a PDF in your inbox?
Email us and we will send the current version, and the updated one each time the law moves. Or print the page: it is built for paper.
This checklist is general information for founders, not legal advice for your specific venture or transaction. The right terms depend on the parties, the sectors, and the jurisdictions involved. Related reading: the SHA exit-rights checklist covers the same discipline for shareholder agreements. Have your joint-venture documents reviewed before you rely on any of the above.
Prepared by Infinilex Consultancy · infinilex.io · Verified as of 25 July 2026. Printed copies date; check infinilex.io/resources/ for the current version.