"๐๐ซ๐จ, ๐ญ๐ก๐ ๐๐๐ ๐ฃ๐ฎ๐ฌ๐ญ ๐ง๐๐๐๐ฌ ๐ญ๐จ ๐๐ ๐ ๐๐๐๐๐๐ ๐จ๐ง๐. ๐ ๐ค๐ง๐จ๐ฐ ๐ญ๐ก๐ ๐จ๐ญ๐ก๐๐ซ ๐ฉ๐๐ซ๐ญ๐ฒ, ๐ฐ๐ ๐ ๐จ ๐ฐ๐๐ฒ ๐๐๐๐ค"
- Rajvin Singh Gill
- 5 days ago
- 2 min read
Sounds familiar?
Joint ventures are built on trust, but they are sustained by documentation.
Recently, we assisted a corporate client in the plantation sector who navigated a complex litigation matter. Our client, a minority shareholder (40%) with the operational expertise to grow and harvest, entered into a joint venture where the majority partner provided the land.
The Joint Venture Agreement (JVA) was personally drafted by the clientโs leadership at the time. While the intent was mutual benefit, the document lacked the critical "salient protections" required to safeguard a minority stake.
The missing pieces were devastating. Amongst others:
โ ๏ธ ๐๐จ๐ฏ๐๐ซ๐ง๐๐ง๐๐ ๐๐ฆ๐๐๐ฅ๐๐ง๐๐ - A board of 5 directors (3 from the majority, 2 from our client) with a quorum requirement of ๐ข๐ฏ๐บ 3 directors. Effectively, decisions could be made without our client even being in the room.
โ ๏ธ ๐๐ฉ๐๐ซ๐๐ญ๐ข๐จ๐ง๐๐ฅ ๐๐ข๐ฅ๐๐ง๐๐: No specific provisions on bank account mandates or signing authority for company documentation.
โ ๏ธ ๐๐จ ๐๐๐ฅ๐๐ญ๐๐-๐๐๐ซ๐ญ๐ฒ ๐ ๐ข๐ฅ๐ญ๐๐ซ๐ฌ: No oversight on contracts between the JV and the majority shareholderโs other interests.
The Resulting Crisis:
The majority shareholder caused the JV company to sell produce to their own related parties at inflated prices and enter into land tenancies far above market rates. To tighten the grip, they attempted to remove our client as an authorised signatory, replacing them with their own nominees.
Our client instructed us to proceed with a shareholder derivative action and breach of contract claims.
It was a long, messy road - one that could have been entirely avoided with a well-tailored Shareholdersโ Agreement/JVA.
A "handshake deal" or a self-drafted JVA might save on legal fees today, but it can cost you the entire business tomorrow. If you are a minority shareholder, you must ensure your agreement includes (at the very least):
โ ๐๐๐ฌ๐๐ซ๐ฏ๐๐ ๐๐๐ญ๐ญ๐๐ซ๐ฌ: Veto rights for key decisions (loans, asset sales, related-party deals).
โ ๐๐ฎ๐จ๐ซ๐ฎ๐ฆ ๐๐ซ๐จ๐ญ๐๐๐ญ๐ข๐จ๐ง๐ฌ: Requiring at least one director from each party to be present.
โ ๐๐ญ๐ซ๐ข๐๐ญ ๐ ๐ข๐ง๐๐ง๐๐ข๐๐ฅ ๐๐๐ง๐๐๐ญ๐๐ฌ: Joint "Maker/Checker" authorities that cannot be unilaterally altered.
Protect your investment from the start. Once the dispute starts, the JVA may be the only shield you have.
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