Defining a Joint Venture’s Scope of Business: Key Issues

Posted by Eduardo Gallardo, Gibson, Dunn & Crutcher LLP, on Monday September 24, 2012 at 8:56 am
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Editor’s Note: Eduardo Gallardo is a partner focusing on mergers and acquisitions at Gibson, Dunn & Crutcher LLP. This post is based on a Gibson Dunn client alert by Ruth Fisher and Benyamin Ross.

Early in the discussions about whether and how to form a joint venture [1] — perhaps as the very first significant issue to be resolved — the potential joint venture partners [2] will try to agree on the scope of the venture’s business. That definition is usually embodied in one or more of the venture agreements, and may circumscribe the nature of the venture’s business, potential future lines of business into which the venture may expand, geographic areas in which the venture will or may operate, and how deviations from the venture’s scope will be determined and approved by the venture partners.

As partners negotiate the scope of the venture’s business, they also need to focus on the key corollary provisions of the venture arrangement impacted by the agreed-upon scope. The terms of those provisions will in turn inform the discussion about scope. This alert focuses on factors to be considered as the venture partners discuss two of the core issues that arise in conjunction with the discussion about scope: the parameters of the non-compete, if any, to be entered into by the partners for the benefit of the venture, and the application of the corporate opportunity doctrine to the venture and the venture partners.

…continue reading: Defining a Joint Venture’s Scope of Business: Key Issues

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