Japanese Cos. must conduct multifaceted due diligence before going for Joint Venture in India

Author: Mr. Sunil Tyagi, Managing Partner at ZEUS Law

Published in asiancommunitynews.com on 06th December 2022

Mr. Sunil Tyagi, Managing Partner at Zeus Law Associates, a full service corporate & commercial law and litigation advisory firm head quartered in New Delhi, on his recent trip to Tokyo, Japan, presented at a seminar organized at the Yokohama India Centre on 15.11.2022, along with Kenji Suzuki San, on the topic Joint Venture Companies in India; Formation & Dispute Resolution Mechanism. The seminar was well attended by participants from different business sectors, doing/ planning to do business in or with Indian partners.

At the seminar, Mr. Tyagi discussed and explained the important considerations and concerns of foreign entities seeking to set up business in India with local partnership.

The seminar highlighted the requirement for conducting a multifaceted due diligence exercise of not only the target entity (if any) and the partner company but also of the promoters of the partner company, before entering into a joint venture arrangement, which is often overlooked. The character and reputation of the promoters of the partner company, their other business and assets, legal history and history of disputes, their past joint ventures and analysis of the risks should be assessed before entering into the joint venture arrangement.

The relevance and importance of affirmative rights in a joint venture was discussed at length. By way of affirmative rights, the joint venture partner is able to control decision making on critical matters including change in line of business of the joint venture entity, merger & demerger, appointment of key personnel, future issuance, capital raise, lending and borrowing, etc.

Further, issues related to transfer of shares, right of first offer or right of first refusal, lock-in on exit by joint venture partner, tag along, and drag along rights were discussed.

Considering that litigation in India is very tedious and time consuming, mediation, conciliation and arbitration as preferred alternatives, were stressed upon, for differences arising between joint venture partners, for faster and comparatively cost-effective resolution of disputes.

ZEUS Law Associates is an ISO certified full service corporate commercial law firm with a team of dedicated and experienced lawyers well versed in handling domestic and cross border transactions across sectors, jurisdictions and regulatory landscapes. The firm’s distinct practice areas include Corporate & Commercial Law, Real Estate & Infrastructure, Litigation, Alternate Dispute Resolution, Indirect Tax and NRI Services. The Firm’s collaborative and seamless approach ensures that clients are offered integrated solutions, across legal areas.