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CS Executive · Setting Up of Business, Industrial and Labour Laws · Business Collaborations

Ravi Pharma Ltd is negotiating a joint venture agreement with a foreign partner. Ravi wants to ensure that important decisions, such as changing the business plan or issuing new shares, cannot be taken without its consent even though it holds only 40%. Which clause should the agreement include?

A reserved matters, or affirmative voting rights, clause should be included. It lists key decisions that need the minority partner's approval, protecting its interests despite 40% holding. Force majeure, lock-in and arbitration clauses do not give a veto over such decisions.

  1. AReserved matters (affirmative voting rights) clauseCorrect
  2. BForce majeure clause
  3. CLock-in clause only for the foreign partner
  4. DArbitration seat clause

Explanation

A reserved matters clause lists decisions needing consent of specified partners, protecting a minority partner. Force majeure covers unforeseeable events, a lock-in restricts share transfers, and an arbitration clause only decides how disputes are resolved, not who must approve decisions.

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