From a lot of cases we have observed,
I think, very critical issue is from
the early stage before you were
even when you start to discussing
joint venture structure for China,
you have to consider future exit,
or kind of that, for both parties.
And because for joint venture, normally
for the short term will be beneficial,
will create a win-win situation
for both parties.
However, in the long-term, you know,
with the development of the market
under the joint venture,
their shareholders or the partners,
they may have different thinking.
Either the foreign company or the
Chinese company, you know, that they
may not have strong incentive to stay
with the joint venture.
Then we have observed quite
regular thing often happened.
So, you do have to consider, you know,
the one situation is the joint venture
would go on for very long-term like
20 or even 80 or longer years.
On the other hand, you have to consider
joint-venture doesn’t work at
a certain point. You have to terminate
the joint venture. And each party should
reserve their option to, you know, buy out
shares or exit from the joint adventure.
We have seen some cases, you know,
when they join partner, when they want
to get married, they were very happy.
They never consider when they broke up,
what will happen.
And then a few years later, you know,
they'll have some problems, serious problem
in connection with the operation of the
joint venture. When there is no
stipulation in that contract, they are
fighting with each other and a lot of
staffing, labor and asset issue.
That is, you know, it's really muddy water.
So, they have to consider the
long-term goal of the joint venture.
And also after the formation of the
joint venture, I think, for the
multi-national companies, it’s very
critical for them to get real involvement
in the operation of the joint venture.
So, in the JV Agreement, we really
advise our client to have authority to
send the general manager, you know,
who has daily supervision roles to
supervise operation of the JV,
to ensure that the development of
joint venture just, you know, track with
the initially designed target.
And also to which degree you're going to
transfer your IP to the joint venture.
And also for the jointly made intellectual
property, who is to own the ownership.
That is another big issue. All has to be
delicately designed and then considered
before the formation of the joint venture.