Joint Venture Due Diligence Checklist: Reviewing Unincorporated Joint Venture Agreements

Conducting due diligence on a target company involved in an unincorporated joint venture? Our comprehensive checklist guides you through the critical review process. Learn key factors to assess, including ownership structure, profit sharing, management rights, and exit clauses. Essential tool for M&A professionals, corporate lawyers, and business executives evaluating joint venture risks and opportunities.

1. Parties

   • Identify the parties to the joint venture agreement (Joint Venturers).

   • Determine if the target company (or any of its affiliates) is a party to the agreement.

   • Check if the parties are related, and if so, assess the nature of their relationship.

   • Verify if the agreement is on commercial, arm's length terms.

2. Joint Venture Particulars

   • Note the name, purpose, and assets of the joint venture.

   • Identify the operator (or manager) of the joint venture.

3. Joint Venturers' Interests and Governance

   • Review the participating interests of each Joint Venturer.

   • Check the number of representatives each Joint Venturer can appoint to the operating (or management) committee.

   • Verify if the committee voting rights are equivalent to the participating interests. If not, make a note of this.

4. Transfer Restrictions

   • Carefully review any restrictions on changes or transfers of ownership of a Joint Venturer.

   • Identify if there are restrictions on assigning or transferring a Joint Venturer's rights and obligations under the agreement.

   • Determine if the proposed acquisition triggers any of these restrictions.

   • Understand the exceptions to the restrictions, if any.

5. Security

   • Check if any member of the target company's group is required to provide security under the agreement.

   • Note the type and purpose of the security.

6. Operator

   • If the target company (or any of its affiliates) is the operator, review the provisions pertaining to the operator's liability.

7. Decision-making

   • Understand the decision-making process, including the composition and voting rights of the operating (or management) committee.

8. Governing Law

   • Note the governing law of the agreement.

9. Effective Date and Expiration

   • Verify the effective date of the agreement.

   • Check if the agreement has an expiration date or a term.

   • Confirm that the agreement is currently in force and legally binding.

10. Amendments or Modifications

    • Identify if the agreement has been amended or modified since its execution.

    • Review any amendments or modifications to understand their impact.

11. Consistency with Other Documents

    • Cross-check the information and provisions in the Joint Venture Agreement with other relevant documents, such as the target company's articles of association or bylaws.

    • Ensure consistency and identify any potential conflicts or discrepancies.

12. Impact on the Proposed Acquisition

    • Assess the overall impact of the Joint Venture Agreement on the proposed acquisition.

    • Identify any potential roadblocks, risks, or issues that may need to be addressed or negotiated.

    • Determine if any provisions need to be amended or renegotiated to facilitate the acquisition.