What should be covered during the due diligence phase for a proposed joint venture?
There is no one set scope for the due diligence of a joint venture as this will depend on the existing relationships between the parties and whether there will be a transfer of business and assets.
- The rights of the parties to enter into a joint venture
- Does the transferring party have good title to the assets being transferred?
- Are there any unstated or understated liabilities?
- What is the value of the business and assets being transferred?
- Are any third-party consents required for the transfer of the benefit of any contracts into the venture?
- IT due diligence
- Does the technology work as intended?
- Does the party granting the use of specific technology have the right to do so?
- Are there any restrictions on the use of the technology - i.e. licensing and Intellectual Property rights?
- Do the staff have the necessary skills to operate the technology?
- Who is giving the warranties? This may include gathering information about the status and assets of the parties to the joint venture to ensure that they have the financial standing to meet any warranty obligations in the future.
- Who owns the Intellectual Property?
- Who will benefit from the warranties?
- What will happen in the event a warranty is breached?