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How to Avoid a Joint Venture Meltdown

Matt Clark, Chief Executive Officer at Cardium Law, comments

Joint venture partnerships face unique challenges in tough economic times, particularly concerning liquidity and project timelines.

A common source of tension is the mismatch between one partner’s desire for an early exit and the other’s commitment to seeing the project through to maximise returns.

This divergence of interests can destabilise even the most carefully planned JV arrangements. Financial distress - whether due to market volatility, changing internal priorities, or unexpected cash flow needs - can lead one party to push for a fast exit, while their counterpart remains focused on long-term gains. The situation becomes even more complex if external events, such as regulatory changes or delays in planning permissions, shift the commercial outlook of the project midway through delivery.

In such scenarios, adjudication proceedings are becoming increasingly common, as JV partners struggle to reconcile diverging objectives and heightened financial pressures. Disagreements over exit terms, valuation or operational responsibilities often escalate quickly, particularly in joint ventures where the underlying agreements lack the flexibility to accommodate changing priorities.

Good legal advice is essential if disputes can’t be resolved internally, but it’s better to have consulted a business lawyer at the outset of the partnership so that the agreement is fully fit for purpose. That can help to avoid the worst-case scenario if something happens to upset the partnership.

Let’s break down this situation and explore some potential strategies to address the mismatch between stakeholders who want to exit the JV early and those who wish to remain invested for the full return. 

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