Event

Consequence

Comments

Material default by one party

Right to compel the defaulting party to offer its equity nterest for sale (usually to the non-defaulting party under pre-emption rights).

Default events include a material breach of the JV Agreement (usually a breach which is incapable of remedy) or possibly of any other agreement (such as subsidiary contracts) or failure by the private sector party to inject capital into the JV.

Insolvency of a JV partner

Right to purchase insolvent party's equity interest through a "call option."

This default event will only apply to a private sector party. Definition of "insolvency" to be carefully drafted and may need to include parent companies. The mechanism for valuing the share price will also need to be considered.

Change of control of a JV partner

Option to require the party which is subject to a change of control to sell its participation or buy the participation of the other party.

This default event will normally only apply to a private sector party. Need a sensible definition of "change of control", this mechanism allows the party who has not been the subject of a change of control to determine whether or not to continue the JV, and if not on its own terms.

End of licence or end of purpose

Right to compel the JV's winding up.

Useful where an entity has been set up for a specific purpose which has ended or where a regulatory licence has been revoked.

Invalid transfer of equity interest

Provisions which enable the transfer not to be effective and to provide for compulsory purchase of a participation.

This is important to prevent a party from benefiting from acting outside the provisions set out in the JV Agreement or, in the case of a JV, the Articles of Association in relation to transferring shares.