8.1 A JV participant may express its intention to provide certain assets or funds to the JV, but there will be no binding commitment to do so unless an agreement is entered into. The JV agreement is a contract and is governed by the ordinary rules of contract. Accordingly a participant (even a participant with the majority voting rights) cannot unilaterally amend the terms of the JV agreement. Unlike the constitutional documents the JV agreement is usually not a public document but some details may be the subject of a request under the Freedom of Information Act (FOIA) 200067 dependent on the context.
8.2 During the private sector partner selection process, the public sector body and its advisers should prepare either a summary of the key terms of the JV agreement or a draft of the JV agreement for circulation to potential participants. This is a key part of the public sector body's consideration of how it believes its desired outcomes can be achieved. In discussions/negotiations with potential participants, however, these draft documents may change and the public sector body should be flexible in its approach while ensuring it secures its requirements.
8.3 The types of commitments which the public sector body should seek from its JV partners, and set out within the JV agreement, are set out in Box 8.A below.
8.4 Note that if the parties wish the JV to be classified to the private sector, it is important that control of the JV is not inadvertently passed back to the public sector through excessive and restrictive veto rights or other obligations included in the JV agreement (see Chapter 5).
Box 8.A: Typical contents and commitments to be set out in the JV agreement • Details of the parties and the Board (partnership) constitution • The initial subscriptions for equity of each JV partner or other funding obligations • Purpose and objectives for the JV including services, scope of business and performance • Business plan (and the requirement to prepare a business plan and budget each year) • Key commercial terms and conditions precedent, including inter alia: • definitions of assets, liabilities, contracts transferring or not transferring • obligation of the parties to execute any subsidiary contracts • any non-compete/conflict of interest provisions and obligations of confidentiality • IP and ownerships rights • funding obligations including each parties intention for future funding commitments • guarantees, warranties and indemnities • distribution policy • restrictions on competing activity • termination, dispute resolution and other material issues • management and operational issues generally • deadlock provisions, veto rights and delegations of authority • Staffing and TUPE issues • Exit strategies and valuation • Obligations of transparency (e.g. access to charging information of private sector partner under secondment agreements or as required for public sector auditing purposes) • Governing law and jurisdiction |
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67 Model FOIA clauses are available from the OGC www.ogc.gov.uk/documents/Model_FOIA_confidentiality_clauses.doc.