Negotiation Aspects in Joint Ventures

Aspect to negotiate

Detailed Negotiation points w. r. t

AA-Technical Aspects

1.Technology for -Designs, Drawings & specifications for End Products -(specific models)

1.1 End products

1.2 Bill of materials for each assembly/sub-assembly

1.3 Assembly operations sequence

1.4 Assembling equipment & tools, jigs, fixtures

1.5 Inspection & testing equipment & gauges

1.6 Quality assurance plans,

1.7 Quality Standards  

1.8 inspection checklists for end products

1.9 Software package/solution for layouts/assembling

2. Technology for -Designs, Drawings & specifications for: Manufacturing & Engineering Processes (for specific models)

2.1 Inhouse manufactured  assemblies, and items

2.2 Bill of materials for each assembly/sub-assembly

      including consumables

2.3 Aggregates & Parts manufacturing process sheets

      Including  bought out parts

2.4 Manufacturing equipment, & tools, jigs, fixtures

2.5 Inspection & testing equipment & gauges for

      aggregates and BOM/Parts

2.6 Quality assurance plans,

2.7 Quality Standards  and

2.8 Inspection Checklists or aggregates and parts

2.9 Software package/solution for manufacturing

3. Technology for -Designs, Drawings & specifications for : After-sale service support (specific models) 

3.1 After-sale service  parts as per supply conditions

3.2 After-sale service manuals with videos, and images for dismantling and reassembly

3.3 Spares manuals

3.4 Service tools

3.5 Software package/solution

3.6 Standard hours or minutes for rendering service

3.7 Software package/solution for rendering after sale service

4.Language in Design, drawings and specifications

English or any other

5. Scope of JV-Access to Market:

·      Overseas market /country restrictions 

·      Use of sales & distribution network of JV partner

6.Scope of JV -Access to Supply chain:

·      Overseas suppliers, Contractors, and service providers.

·      Covenants on brand names

·      Covenants on sourcing of BOM parts etc.

7.Scope- of Supply of SKD, CKD, BOM parts and spares by JV to Indian partner

·      Lists ,Year wise overall Plans for supplying Quantities  of sets and values ,duration.

·      Covenants /Period up to which SKD/CKD must be procured from JV

8.Scope of JV -Supply of Equipment For manufacturing & Quality control, Jigs, fixtures, gauges  etc by JV

·      Lists ,Year wise overall Plans for Quantities/values  & duration

BB Financial & commercials

1.Lump sum knowhow Fee as per scope  on Design, drawings & specifications for:       

·      End Products

·      Manufacturing & Engineering

·      After-sale service  parts

·      Complete package

2.Pricing -Supply of -Inhouse produced or assembled by JV -% mark up above costs  or Methodology/logic/Algorithm

·      SKD/CKD/BOM Parts, Spares

·      Equipment, Jigs/fixtures, Gauges

·      Software solutions

3.Pricing -supply by JV of -Bought out material-

% mark up above costs incurred by overseas JV partner

·      SKD/CKD/BOM Parts, Spares

·      Equipment, Jigs/fixtures, Gauge

·      After sale spares

·      Sales promotion materials

4.Free Trainings overseas /India

·      Scope/Types 

·      No of persons

·      Duration/man-days

5. Taxes & Imports duty

·      Imports duty including IGST

·      Withholding taxes

·      Any taxes overseas

6. Royalty

·      % Of Net sales (Net of localised items)

·      Duration

·      When due or Frequency of payment

7. Expatriate  emoluments 

·      Function wise-positions or levels and durations, reimbursements

8.Payment remittance methods( for each type of remittance):

·      LC 

·      Document through bank or

·      On line

·      And so on

9. Payment terms for different remittances:

·      Lumpsum fee

·      Royalty

·      Imports of SKD/CKD/BOM Parts, Spares

·      Imports of Equipment, Jigs/fixtures, Gauges

·      Imports of After sale spares

·      Imports of Sales promotion materials

10.Currency

·      USD or as applicable

11. Trainings

·      Free and chargeable rates ,duration, location, India vs overseas

12. Man day rate beyond-free training days:

·      Level wise rates /emoluments & stay charges

13. Funding: Participation Plans

·      Capital

·      Working capital,

·      Expenses

CC Management & Control

1. Equity participation

·      % of total equity or

·      Capital to be inducted into the country by potential JV

2. Organisation structure of JV post signing 

·      No of Board members

·      Key positions to be manned by whom: MD, CEO, CFO, COO, Chief of sales/marketing, Chief of Purchase, HR Chief  and so on

3. Pricing formula for export to JV from Indian partner:

-% mark up above costs  or Methodology/logic/Algorithm

·      End Products

·      Aggregates, sub -assemblies of bill of materials/parts manufactured by Indian partner & exported to JV

·      After-sale service spares  as above

·      Tools, jigs, fixtures, service tools etc

4.Exports -to JV from Indian partner-Covenants/restrictions:

·      End products or

·      Aggregates or BOM Parts

·       Countries

5. Schedule of activities:

·      Pert chart/Timelines starting from MOU/JV signing till 1^st product roll out and sale.

6.  Warranty terms:

·      Duration,

·      Excluded items,

·      Payment credit or FOC (free of cost) replacement,

·      Replacement time-free or against fresh purchase order in case of credit

7 IT & system support:

Hardware & software solutions to be acquired vis a vis.

·      Network design and security ,cloud

·      Technical aspects

·      Financial & commercial aspects

·      Management & control aspects

·      Legal aspects

8. Processes for Settlement of claims: related to defective  or short supplied or debit notes

·      Bought out  material

·      SKD/CKD/BOM Parts, Spares

·      Equipment, Jigs/fixtures, Gauge

·      After-sale spares

·      Sales promotion materials

DD-Legal aspects

1a) Statutory approvals & regulations in India

·      The Companies Act 2013  

·      0r LLP Act 2008)

·      FEMA,1999

·      RBI Regulations

·      Foreign trade policy

·      The foreign corrupt practices Act’1977

·      SEZ related(if applicable)

·      Labour laws (several of these)

1b) Overseas related regulations

·      JV Formation & JV Operations- Liabilities of the shareholders, Approval from the board, shareholders, or both, appointing directors, auditors etc

·      Types of permitted capital, Debt-equity etc

·      Profits/dividend repatriation- Limits, documentation, taxation

·      Copyrights, trademarks, IPRS

·      Acquisition& transfer of assets, Repatriation of funds

·      Minimum capital requirements from JV foreign investors, Time frame for Paid-up Capital for foreign investor

·      Pricing of shares- Guidelines for equity, compulsory convertible preferential shares, other instruments

·      Reporting requirements

·      Imports & Exports related

2. Agreements to be signed:

Drafts & finer points

·      JV agreement

·      IP transfer agreement

·      Share purchase agreement

·      Employment agreement

3.Warranties

Details to be worked out in consultation with legal team/consultants

4. Notice period

As above

5.Jurisdiction

As above

6. Laws of the country

As above

7  Exit clause

As above

8. Conflict  resolution mechanism

As above

9. Covenants

As above

10. Remedies for breach

As above

11. Confidentiality

As above

12 Dissolution

As above

13. Changes to Agreements to be signed by

As above

14. Duration of JV: Years from the date of MOU or Agreement signing

As above

15 and so on Any other points

As above

JV aspect

Few descriptions applicable for JV financial  control

Transactions

·      Creating, editing, editing, Viewing JV

·      Posting Account documents of JV e.g. Journal entries, Revenue distribution, costs allocation

·      Displaying JV Accounting documents

·      Reports related to JV

Configuration tables

·      JV Company codes

·      JV Account categories

·      JV Account types

Master data tables

·      Profit center for JV

·      Company code assignment for JV

Authorisation Objects for controlled Access

·      Joint operations -account assignment

·      Joint operation Budgets

·      Joint operation actuals

Important Fields

·      Equity group for JV

·      GL accounts used for JV