Governance

Someone needs to be in charge of the project or the JV. For instance, it has to be decided who will be in charge of management decisions. If there are two venturers, then often both will have equal say in management. Then you need to have a deadlock provision in case they do not agree. Will there be a board or any committees? Who appoints them?

Everyone needs to be forward-looking when these decisions are made. Who has the authority to hire or remove officers?

Quite often a JV will have a “management board.” Both sides need to agree on how to appoint people to this board. One method is to have all board members subject to a vote. Okay, how many votes per side? If instead the board members are appointed, who appoints? Maybe each side gets to appoint a certain number and maybe they vote or approve a member so that if there is deadlock, presumably that person will be able to be the deciding vote. If there is a management board, what is it in charge of? What things does it need to approve?

How money is going to be spent is usually a hot topic in these arrangements. The management board often governs expenditures over a certain dollar amount. They also approve budgets.