I run a small IT firm in Noida, I have a question regarding equity based partnership between 2 companies. Let us say there are 2 companies, A & B. Both the companies are registered Pvt Ltd. companies. Company A wants to become technology partner with B whose business is in some other domain. A will get 15% stake in company B in return, no direct cash involved. A will only provide all technology support for business, all other investments like marketing, recruitment, and all other costs will be borne by B. My question is more about the exit clause. What should the exit clause be in case company A or B wants to exit the partnership. How can company A get payout in case of exit? Since B is non-listed, there is no real valuation of the company.
First answer received in 10 minutes.
Lawyers are available now to answer your questions.
A registered agreement needs to be executed between the partners wherein all the conditions as well as profit sharing, liabilities, exit clause etc
As the company is not valued, A would be eligible to claim 15 percent of the net assets of the company, but the other side would also want a lock in period, during which the agreement cannot be terminated.
Hello,
A specific clause to this effect can be added by you in the terms of the MoU that is being entered with B.
Specifically B will get a lock in period during which A can not take an exit from the said agreement.
Amount to be taken by A at the time of exit can be specifically added, since as the company is not valued.
Regards
There should be clause that in event A wants to exit the company valuation of shares would be done by company auditors
Sir to make the transaction safe for the company a bank guarantee can be taken from the company and same can be mentioned in the exit clause that in case the company exits it has to pay damages for tune of RS, _____/- same can taken by liquidating the bank guarantee.
or at least liquidated damages can be mentioned know only at time of agreement in the clause.
Dear Client,
Exit clause shall be common like in any other partnership firm.
Partnership shall dissolve and any dues pending towards the partners shall be settle first, failure to which other partner entitle to recover payment from the sale proceed of B company assets.
for purpose of exit, valuation of B is not needed
the exit and distribution of assets will be as per the agreed sharing ration in profit and loss
the valuation of either company as at the date of the exit will not affect the profit and loss sharing ratio of the partnership
A joint venture (JV) is a tactical partnership where two or more people or companies agree to put in goods, services and/or capital to a uniform commercial project. For any successful joint venture in India, compatibility between the contracting parties is key.
An incorporated joint venture is one that uses a company established for the purpose of the joint venture, with the ventures acquiring shares in the company. ... All incorporated joint ventures in India are domestic companies, and are governed by the provisions of the Companies Act, 1956.
Since the joint venture is not a legal entity, it does not enter into contracts, hire employees, or have its own tax liabilities. These activities and obligations are handled through the co-ventures directly and are governed by contract law.
Joint venture - benefits and risks
access to new markets and distribution networks.
increased capacity.
sharing of risks and costs (i.e., liability) with a partner.
access to greater resources, including specialized staff, technology and finance.
The most common types of joint venture are:
Limited co-operation. This is when you agree to collaborate with another business in a limited and specific way. ...
Separate joint venture business. ...
Business partnerships.
You may choose for joint venture agreement incorporating all the mutually agreed terms and conditions as per your prevailing situation.
