Every JV begins with optimism, a trusted partner, a promising market, and a shared vision. But no partnership lasts forever. Markets shift. Strategies diverge. Relationships strain.
In India, the toughest phase is not starting a JV, but exiting one. And yet, most agreements treat exits as an afterthought, left to “mutual consent” or “best efforts.”
Here’s the truth: when emotions run high, those words mean nothing. Without clear pathways, exits descend into stalemate, disputes, and years of litigation.
So what should companies be mindful of when planning exits from Indian JVs?
1. Define Roles and Responsibilities Upfront
Unclear governance creates messy exits. Document who manages compliance, finance, and operations — and specify how breaches trigger consequences.
2. Avoid “Mutual Consent” Deadlocks
Mutual consent sounds cooperative but rarely works in disputes. Exits should be trigger-based (e.g., prolonged default, non-compliance, change in control).
3. Build Put / Call Options, Drag / Tag Rights
Liquidity and protection matter for both majority and minority. Proper structuring ensures enforceability under FDI/FEMA rules.
4. Lock in Valuation Mechanisms Early
Price is the biggest sticking point. Whether EBITDA multiples, audited accounts, or independent appraisals, clarity prevents disputes later.
5. Plan for Deadlocks
Shotgun clauses, Russian roulette, third-party buy-outs, dramatic in name but effective in practice. Better than years of paralysis.
6. Manage Transition and Non-Competes
Exits don’t end with signatures. Plan handovers, customer continuity, employee retention, and enforceable non-competes.
7. Document and Operationalise
Contracts must be backed by mechanisms: monthly compliance trackers, MIS reports, maker-checker banking systems. These keep rights enforceable without disrupting operations.
Practice Pointer
In India, what counts is what is written and operationalised. Oral assurances or vague understandings rarely hold up. Draft exits that are formula-driven, trigger-based, and regulatorily compliant.
The Larger Lesson
Governance isn’t bureaucracy. It’s discipline. And discipline is what ensures trust can survive stress.
The strongest JVs aren’t just those that grow together — but those that can also separate with fairness, clarity, and speed.