Joint Ventures 2025 Comparisons

Over the past 12 months, there has been an increase in joint ventures (JV) in certain economic sectors, while other (JV-oriented) areas have remained robust. Above all, there has been a particular increase in the pooling of resources and exchange of expertise in the defence, armaments, raw materials and military-related sectors (such as coating and communication), to leverage financial strength and (proprietary) know-how and share risks in development, and also in capital-intensive areas.

It seems reasonable to assume that the geopolitical situation (most notably the wars in Ukraine and Gaza, as well as the US withdrawal) is a key – if not the primary – driver behind the increase in JVs in these sectors in Germany.

Domestically, the shift in policy priorities towards greater security through deterrence, the readiness of Germany's own armed forces and the assumption of greater responsibility within NATO as well as the provision of considerable financial resources by the German government, which are to be invested in the defence industry and infrastructure over the next few years, provide planning security and make business models in these sectors economically more attractive, but also more appealing for private investors as well. As a result, there has been a noticeable increase in available private capital and a strengthening of investment activities (including through the establishment of JVs and the pooling of private equity by setting up investment funds with a clear investment focus towards these areas, among other methods). This increase will certainly continue and extend into 2026.

Certain German industries have been significantly more active in forming JVs – a trend directly attributable to the monumental capital requirements and technological shifts driven by the national and EU-wide digital and sustainable transformation (Doppelte Transformation). The automotive sector is highly active due to the urgent need to electrify, exemplified by the long-term JV formed by BMW and Rimac to co-develop high-voltage battery systems. Similarly, the energy sector is a hotspot for partnerships aimed at building the hydrogen economy and decarbonising industry. This surge in JV activity is ultimately down to the strategic necessity of sharing immense risks, pooling resources and combining expertise to navigate profound technological disruption and stringent new regulations.

Emerging technologies are shifting JVs in Germany from simple risk-sharing vehicles into highly regulated structures, making it imperative to integrate critical regulatory frameworks from the outset. The EU AI Act mandates strict compliance and liability for high-risk AI systems, directly impacting a JV's risk profile and operational costs. Simultaneously, the General Data Protection Regulation (GDPR) and data localisation rules dictate cross-border data flows, necessitating built-in governance for how data is shared, particularly with non-EU partners. Furthermore, intellectual property ownership for AI-generated output remains legally uncertain in Germany under the traditional “human inventor” principle, forcing JV parties to contractually define these rights to mitigate legal risk. Finally, the new EU Product Liability Directive expands strict liability to software and AI, compelling JV parties to pre-allocate financial responsibilities for defects, recalls and monitoring. Ultimately, these regulations require JVs to pre-emptively address novel liability risks and embed rigorous technological compliance into their very foundation to ensure viability.

Preferred Legal Forms for Equity Joint Ventures in Germany

Commonly used structures

Equity JVs in Germany are most frequently structured in the following forms:

• a private limited liability company (Gesellschaft mit beschränkter Haftung – GmbH), which is the most flexible and widely used form;
• a stock corporation (Aktiengesellschaft – AG), which is suited for larger ventures or capital market access;
• a limited partnership with a corporate general partner (GmbH & Co KG), offering a hybrid between partnership and corporate benefits; or
• a European company (Societas Europaea – SE), which is typically chosen for cross-border ventures within the EU.

Key factors driving the choice of vehicle

• Commercial objectives: smaller ventures often opt for simpler structures, whereas large-scale or complex projects require more robust governance.
• Liability protection: GmbH, AG and SE all provide limited liability for shareholders.
• Tax efficiency: partnerships (especially GmbH & Co KG) offer a check-the-box tax option and save investors from complicated withholding tax refund procedures.
• Governance and flexibility: a GmbH allows tailor-made governance structures, whereas an AG is more regulated but aligns with capital market standards.

Distinct advantages of each form

• GmbHs are highly flexible, with low minimum capital of EUR25,000 or even less in the form of an Unternehmergesellschaft (haftungsbeschränkt), which can be considered to be a GmbH “light”, and strong shareholder influence over management. They also offer tax exemption for capital gains on disinvestment from corporate subsidiaries.
• GmbH & Co KGs combine limited liability with partnership-style tax treatment and contractual flexibility, and offer less formalism compared to GmbHs, AGs and SEs. They offer a check-the-box tax option and save investors from complicated withholding tax refund procedures.
• AGs are best suited for ventures considering public offerings or requiring a rigid governance framework. They offer a capital gains tax exemption (see GmbHs).
• SEs enhance mobility and harmonisation in cross-border EU contexts. They offer a capital gains tax exemption (see GmbHs).

Other considerations

Sector-specific regulations and the nature of the JV parties (eg, listed companies, foreign investors) can influence the choice of structure.

The reasons and motives for establishing a JV are diverse and, in some cases, depend on the industry sector in question. One of the main motives is the pooling of resources or the merging of capital with product and/or service ideas or research initiatives (ie, know-how). However, aspects such as market entry or risk distribution, economies of scale and cost reduction, liability limitations, tax relief, exchange of experience, competitive advantages or certain legal and/or regulatory requirements in a specific market environment may also be reasons for choosing to establish a JV (incorporated or unincorporated).

The planning of a specific exit strategy may be another driving factor for the establishment of a JV. In this way, the JV parties can “carve out” sub-divisions of their undertakings to combine them in a JV for better commercialisation and to achieve synergy effects. After a certain period, the JV can then be sold once it has successfully positioned itself on the market – an option that would not have been possible (or at least not in this form) if it had remained as a sub-division within the respective undertakings of the JV parties.

Regulatory Bodies

Key regulatory oversight comes from several authorities, as follows:

• the Federal Cartel Office (Bundeskartellamt) enforces merger control and antitrust rules under the German Act against Restraints of Competition (GWB), requiring notification for JVs meeting certain turnover thresholds;
• the Federal Ministry for Economic Affairs and Climate Action (BMWK) screens investments under the German Foreign Trade and Payments Act/Regulation (AWG/AWV) for JVs involving non-EU investors in sensitive sectors such as defence or critical infrastructure;
• Data Protection Authorities (DPAs), led by the Federal Commissioner for Data Protection and Freedom of Information (BfDI), enforce strict compliance with the GDPR and the German Federal Data Protection Act (BDSG), and oversee virtually all JVs that process personal data; and
• sector-specific bodies are also relevant, such as the Federal Financial Supervisory Authority (BaFin) for finance, the Federal Institute for Drugs and Medical Devices (BfArM) for pharma and medical devices, the Federal Office for Motor Vehicles (KBA) for automotive and the Federal Network Agency (BNetzA) for energy and telecommunications.

Legal Framework

Germany’s legal framework for JVs is not contained in a single law, but rather is a combination of corporate, competition and regulatory statutes. Beyond those enforced by specific regulators, core statutory foundations include general corporate and commercial law. The German Limited Liability Companies Act (GmbHG) provides the flexible structural basis for most incorporated JV vehicles, governing their formation and governance. For partnership-style JVs, the German Commercial Code (HGB) may serve as the statutory basis. Furthermore, the German Works Constitution Act (BetrVG) mandates employee co-determination through works councils, directly influencing JV governance and operations where employees are present in Germany, even though it lacks a single national enforcement regulator.

Germany’s anti-money laundering (AML) framework is built mainly on the German Money Laundering Act (GwG) and several sector-specific regulations.

General compliance obligations include verifying the identity of customers and their beneficial owners; this includes, for example, checks on whether politically exposed persons are involved. JVs must assess the purpose and intended nature of the business relationship. This information must be continuously monitored and updated, and all available information must be incorporated into a consolidated risk analysis. If the risk of money laundering is increased according to the risk analysis, JVs must observe special due diligence obligations where necessary, such as special justification for maintaining business relationships and closer monitoring.

JVs must establish clear internal responsibility for AML compliance (due to shared ownership in a typical JV), including appointing an AML officer and defining internal reporting lines.

Restrictions on Co-Operation With Joint Venture Partners in Germany

The German FDI regime only applies to transactions involving the acquisition of shares or assets of a German company. Therefore, only the incorporation of a JV involving the contribution of assets forming the essential operating resources of a German company or a separable part of a German company may fall within the scope of German FDI control. Germany is considering broadening the scope of investment control to cover greenfield investments, including JVs that do not involve the contribution of assets.

For transactions falling within the scope of German FDI control, restrictions on co-operation with JV parties may be imposed, particularly when national security or foreign policy considerations are at stake. The BMWK has the authority to prohibit or impose conditions on a foreign investment if it is deemed to pose a threat to public order or national security. This includes cases where one of the JV parties is linked to a state or entity that is subject to international sanctions.

National Security Regulations and Foreign Investment

Germany has a strict regulatory framework for national security, which also applies to the creation of JVs involving foreign investors. Any acquisition reaching certain thresholds (10%, 20% or 25% of voting rights) must be notified to the BMWK, particularly in sensitive sectors such as defence, cybersecurity or critical infrastructure.

Restrictions on Foreign Participation in Joint Ventures

In certain circumstances, foreign participation in a JV may be subject to restrictions. For instance, restrictions may apply if the threshold of 25% of voting rights is exceeded, or according to specific thresholds (10% or 20%), depending on the sector.

The BMWK also monitors investors established in the EU when they are suspected of circumventing the rules via a European subsidiary controlled by a company from a third country. The BMWK has the authority to approve or decline transactions, including those involving JVs. It may also instigate an ex officio review procedure up to five years after the JV agreement has been signed, even in the absence of prior notification. Notification obligations are the sole responsibility of the investor, including in the case of JVs.

Sectors Subject to Specific Restrictions and Requirements

Sensitive sectors subject to specific requirements in terms of foreign investment control include:

• defence;
• critical infrastructure (energy, telecoms, health, transport);
• sensitive technologies (AI, semiconductors, cloud computing, autonomous vehicles, satellites);
• critical raw materials;
• influential media; and
• large-scale agriculture.

Any JV involving foreign investment in these areas may be subject to a review procedure.

The BMWK is planning to expand the list of sensitive sectors to include cybersecurity and strategic raw materials, while lowering thresholds and strengthening requirements in sensitive cases.

Antitrust Regulations Applicable to Joint Ventures

German antitrust regulations do not differentiate between full-function and non-full-function JVs. According to Section 37(4) of the German Act against Restraints on Competition (GWB), any combination of undertakings that enables one or several undertakings to directly or indirectly exercise a material competitive influence on another undertaking is considered a concentration.

In addition, the German merger control regime is applicable to any acquisition of joint control over an existing undertaking. Joint control is defined as the ability for two or more entities to exert significant influence over the operations of a company. This control can be established de jure or de facto through veto rights on strategic business decisions relating to the company under joint control.

German merger control also applies to the acquisition of minority shareholdings of 25% or more of the capital or voting rights of a company, even if such holdings do not confer significant influence over the company.

JVs are subject to a dual regime: merger control and control of anti-competitive agreements. Section 1 of the GWB establishes the rules for evaluating anti-competitive agreements, which are pertinent to the assessment of the collaborative aspects of a JV. The collusive effects of co-ordination between JV parties are particularly emphasised in this regard.

Notification or Approval Requirements

A JV may be subject to prior notification if it constitutes a concentration as defined in Section 37 of the GWB and if the following thresholds are met:

• the combined worldwide turnover of the undertakings concerned exceeds EUR500 million;
• one of the undertakings concerned must have achieved a turnover of more than EUR50 million in Germany; or
• another undertaking concerned must have achieved a turnover of more than EUR17.5 million in Germany.

Even if the EUR17.5 million German threshold is not met, a transaction may be subject to prior notification if it exceeds the EUR400 million transaction value threshold, provided that the target has significant operations in Germany.

However, if a concentration falls within the scope of EU merger control, German merger control does not apply. If the JV has no national effects (ie, no impact on the German market), notification may not be required.

In Germany, publicly listed companies engaging in JVs must adhere to specific disclosure obligations to ensure transparency and maintain investor confidence. These obligations are primarily governed by the German Securities Trading Act (WpHG), the German Securities Acquisition and Takeover Act, the EU Market Abuse Regulation (MAR) and the German Stock Corporation Act.

Under the WpHG, shareholders of listed companies are required to notify the issuer and BaFin whenever their voting rights reach, exceed or fall below thresholds of 3%, 5%, 10%, 15%, 20%, 25%, 30%, 50% and 75%. This includes both direct holdings and those held indirectly, such as through financial instruments or derivative positions. The disclosure must be made promptly to the company and BaFin, and at the latest within four trading days. Failure to comply can result in sanctions, including the suspension of voting rights. The issuer must in turn publish these notifications without undue delay.

The German Securities Acquisition and Takeover Act mandates that investors intending to acquire control over a listed company must make a public takeover offer. This requirement ensures that all shareholders have an equal opportunity to participate in the offer and receive fair treatment. In addition, the MAR obliges issuers to immediately disclose any inside information that directly concerns them, which typically includes the formation or material amendment of a JV or JV agreement, unless a temporary delay is justified.

The German Stock Corporation Act further stipulates that any significant changes in shareholding or control structures must be disclosed to the JV and, in some cases, to the public. This is to prevent market manipulation and ensure that all stakeholders are informed of developments that could affect the company's governance or financial stability.

In summary, listed companies in Germany must navigate a complex regulatory landscape when entering into JVs. Adhering to these disclosure requirements is crucial for maintaining legal compliance and upholding market integrity.

Ownership structures are disclosed by registering the ultimate beneficial owners (UBOs) with the transparency register (Transparenzregister), which has been introduced in Germany based on the GwG. The general requirements for the identification and registration of the UBO also apply for JVs, regardless of their respective legal form.

UBOs can only be natural persons and are only considered to be UBOs if they directly or indirectly hold more than 25% of the capital shares or the voting rights in a legal entity, or exercise control in a comparable manner on a legal entity. Since shareholders of a JV are usually at least two legal entities themselves, no direct UBO exists. However, if at least one of those legal entities directly holds more than 25% of the capital or voting rights in the JV, any natural person controlling that legal entity in turn (ie, holding more than 50% of the capital or voting rights in the legal entity being the shareholder of the JV) is considered to be the indirect UBO of the JV and, therefore, must be filed with the transparency register. If no natural person qualifies as a UBO at all, the managing director(s) of the JV must be filed as the UBO with the transparency register as the so-called fictional UBO.

The name, date of birth, place and country of residence, citizenship, and the type and scope of the economic interest of the UBO must be filed with the transparency register. This information will be accessible to courts and public services. Other so-called “obliged parties” (eg, banks, lawyers) pursuant to the GwG only have access on a case-by-case basis and to the extent required to fulfil their legal obligations under the GwG. Any other third party must prove a legitimate interest.

During the past three years, German statutory and case law have significantly shaped the structuring and governance of JVs. The most relevant developments can be grouped as follows.

Corporate Reorganisation

The Act implementing the Conversion Directive (UmRUG) now permits cross-border demergers and conversions (eg, a German GmbH into a Dutch B.V. or a Luxembourg S.à r.l.), providing more flexibility for cross-border JV structures.

Partnership Law (Gesetz zur Modernisierung der Personengesellschaftsrecht – MoPeG)

Since January 2024, JVs structured as civil law partnerships (GbR) must register as an “eGbR” in the new Partnership Register to retain legal capacity for holding real estate or company participations.

Deadlock and Governance

In a January 2023 case (II ZR 76/21), the Federal Court of Justice (Bundesgerichtshof – BGH) held that even partners barred from voting count towards quorum.

In a July 2024 case (II ZR 71/23 – Hannover 96), the BGH held that shareholder resolutions are not void merely because of third-party voting agreements, provided the core powers of the shareholders' meeting are respected.

Exclusion and Exit

In a July 2023 case (II ZR 116/21), the BGH held that the exclusion of a shareholder in two-tier GmbHs takes effect once the judgment is final, irrespective of compensation payment.

Dispute Resolution

In a June 2024 case, the Bavarian Higher Regional Court (BayObLG) held that the law governing an arbitration clause may differ from that used in the main contract.

In a January 2025 case (I ZB 48/24), the BGH reaffirmed the pro-enforcement approach, maintaining arbitration as the most reliable forum for JV disputes.

Financing and Insolvency

In an April 2024 case (IX ZR 129/22), the BGH held that third-party loans may be treated as shareholder loans if contractual rights resemble membership, raising subordination risks.

Competition Law

In a March 2022 case (XXXLutz/Tessner), confirmed by the BGH in 2023, the Higher Regional Court of Düsseldorf (Oberlandesgericht Düsseldorf)confirmed a high evidentiary threshold for proving anti-competitive effects, allowing greater leeway for incorporated JVs.

In the German market, preliminary negotiations for a JV typically involve several standard instruments designed to structure discussions, protect confidential information and set the framework for potential future agreements. A commonly used starting point is a mutual non-disclosure agreement (NDA), which ensures that both parties can exchange sensitive commercial, financial and technical information without risking public disclosure or misuse. NDAs often include standard provisions regarding the definition of confidential information, permitted use, the duration of confidentiality, and exceptions for legal obligations.

Unlike in some common law markets, a formal Due Diligence Questionnaire is not market standard in Germany; due diligence is usually conducted via a structured data room and Q&A process.

During advanced negotiations, parties typically exchange term sheets, which are non-binding but set out the intended structure, key commercial terms, governance arrangements, equity split, capital and/or other contributions to the JV, and initial operational guidelines for the JV. In Germany, term sheets often include indicative timelines, exclusivity periods and conditions precedent for entering into the definitive JV agreement. Exclusivity is dealt with either in the term sheet itself or in a separate exclusivity agreement, preventing parallel negotiations for a defined period. This secures the investment of time and resources in the transaction and prevents competitive interference.

Market practice also expects preliminary agreements to address regulatory compliance (eg, antitrust filings if the JV exceeds thresholds under the GWB), intellectual property rights and a framework for dispute resolution or escalation procedures during negotiations.

In sum, German JV negotiations are structured around NDAs, term sheets and exclusivity deeds, with market-standard provisions focusing on confidentiality, exclusivity, governance principles, regulatory compliance and dispute management, aligning expectations and providing a disciplined path toward the formal JV agreement.

Regulatory Filing Requirements

In Germany, public disclosure is not required at the early negotiation stage or when signing a letter of intent (LOI) or memorandum of understanding (MOU). However, certain regulatory filings must be considered before implementing a JV, including the following.

• Merger control clearance under the GWB is required if the combined turnover of the JV parties exceeds national thresholds. Notifications must be submitted before closing.
• EU-level clearance under the EU Merger Regulation (FKVO) as amended by the Implementing Regulation (EU) 2023/914 applies when EU turnover thresholds are met. The JV cannot be implemented until approval is obtained.
• Assessment of timing and sequencing: filings must be planned carefully to avoid delays in implementing the JV.
• Consideration of national and EU requirements together is particularly relevant in cross-border JVs, to ensure compliance with all applicable jurisdictions.
• The scope of information required in filings includes details on the parties, the JV structure and the projected commercial impact.
• Legal consequences of non-compliance: failure to submit the required filings or obtaining clearance prematurely can lead to fines or restrictions on implementing the JV.

These measures ensure that the JV is legally compliant before operations commence, and help to prevent regulatory risks.

Corporate Disclosure

After incorporation, the JV must be registered with the German Commercial Register, including the registration of:

• the shareholders and managing directors of the JV;
• the articles of association (GmbH and AG), but not the JV agreement (if any) itself; and
• the share capital and legal form.

This information is publicly accessible.

Capital Markets and Ad Hoc Obligations

If a party to the JV is a listed company, disclosure obligations arise under both MAR and the WpHG, as follows:

• inside information affecting share price must be disclosed without undue delay, potentially as early as the signing of binding agreements;
• limited deferral of disclosure is possible under MAR and its delegated/implementing regulations; and
• the EU Listing Act package (Regulation (EU) 2024/2809, Directive (EU) 2024/2810, Directive (EU) 2024/2811) further refines disclosure rules to balance market integrity with capital market access, particularly for smaller issuers.

Non-compliance with these regulations can result in substantial fines and reputational damage.

Other Sector-Specific Notifications

Certain regulated industries may require additional filings or licences, particularly:

• banking and financial services;
• insurance; and
• energy and utilities.

These obligations typically apply prior to or shortly after establishing the JV and must be assessed on a case-by-case basis.

In Germany, JV agreements typically include conditions precedent (CPs) that must be satisfied before the transaction is closed. These CPs commonly cover regulatory approvals, particularly antitrust clearance under the GWB or notifications to sector-specific authorities if the JV operates in regulated industries. Another frequent CP is corporate approvals, such as board or shareholder resolutions, confirming the parties' internal authorisation to enter into the JV (agreement). Financial CPs, including proof of funding or payment of capital contributions, are also standard. Due diligence findings can serve as a CP, with the parties reserving the right to terminate if material risks or liabilities are identified.

German JV agreements also often address Material Adverse Change (MAC) clauses, allowing a party to withdraw or renegotiate terms if a significant negative event occurs between signing and closing that fundamentally affects the JV's business or value. A MAC typically encompasses events such as substantial financial deterioration, loss of key customers or licences, or significant litigation, but must be narrowly defined to avoid disputes over its applicability and permissibility. Courts in Germany tend to interpret MAC clauses strictly, emphasising that routine business fluctuations do not justify termination.

Force majeure events (ie, unforeseeable and uncontrollable events like natural disasters, war, pandemics or government actions) are usually included in German JV agreements as reasons to suspend obligations, extend deadlines or adjust performance requirements. Force majeure provisions typically specify notice obligations, mitigation duties and the consequences if the event persists, such as termination rights or the renegotiation of terms.

In practice, CPs and MAC and force majeure clauses are critical for balancing risk allocation and providing flexibility in the period between signing and closing. The parties usually negotiate MAC and force majeure clauses carefully, linking them to CPs, financial exposure and governance arrangements, ensuring clarity on rights and remedies in extraordinary circumstances.

The way a JV is established in Germany depends largely on the specific legal form chosen for the JV, with different forms having different requirements regarding the presence, absence and scope of minimum capital requirements, for example, as well as organisational issues such as the existence and composition of mandatorily required corporate bodies.

However, for all JVs, it must first be examined whether the establishment of a JV is the right form of co-operation for the prospective parties. If so, the essential framework conditions must be clarified – ie, legal form, ownership structure (often preceded by heated discussions about the value of the individual contributions) and spheres of influence and areas of responsibility of the JV parties.

At this stage, it is important to work with experienced advisers who can outline the legally possible framework and identify options for structuring the JV in line with the individual ideas and expectations of the JV parties. This often leads to “good solutions” for the contractual structure and/or corporate governance underlying the JV.

Generally, it is advisable to precede the establishment of a JV with the conclusion of an LOI or MOU in which the JV parties have already outlined the essential aspects (albeit possibly only in broad terms). It is then customary to regulate the rights and obligations relating to the structure of the co-operation in a separate JV agreement (or shareholders' agreement) in addition to the JV's articles of association and founding documentation. The reason for this is that, unlike the articles of association, a JV agreement or shareholders' agreement is not publicly accessible (see 5.2 Disclosure Obligations).

Finally, if foreign parties are to become shareholders in a JV, provisions of the German Foreign Trade and Payments Act (AWG) and other FDI provisions must also be considered in advance and based on the purpose of the JV.

The documentation of a JV depends on the legal form of the JV, among other matters. In Germany, most corporate JVs are structured as a GmbH, which offers considerable flexibility in governance and liability. Larger or listed JVs may exceptionally use an AG, although this is rare due to its rigid statutory regime and mandatory supervisory board. The GmbH requires notarised articles of association under the GmbHG, addressing statutory matters such as share capital, shareholders, corporate purpose and management. In practice, however, the core arrangements between the JV parties are contained in a separate shareholders’ agreement (JV agreement), which complements the articles of association and governs the contractual relationship of the JV parties.

The JV agreement typically defines the scope and business purpose of the JV, and regulates capital and/or other contributions and funding obligations, including equity injections, transfers of assets or intellectual property and future financing commitments. It establishes governance structures by determining:

• the composition and powers of management and boards;
• the allocation of decision-making authority;
• the catalogue of reserved matters requiring unanimous or qualified consent; and
• protections for minority shareholders.

It further sets out financial terms, including budgeting, profit distribution, accounting and audit rights, and it contains detailed provisions on transfer restrictions and exit mechanisms, such as pre-emption rights, tag-along and drag-along rights, or put and call options. Deadlock resolution is usually addressed through escalation procedures and, if necessary, buy-sell mechanisms, while termination and dissolution are dealt with by reference to specific triggers agreed by the JV parties.

In addition, market practice requires clauses on confidentiality, non-compete undertakings, intellectual property ownership, compliance obligations and dispute resolution, often via arbitration consistent with market practice in order to preserve confidentiality. Overall, the documentation integrates mandatory corporate law requirements into a contractual framework that allocates governance, risks and economic rights between the JV parties.

Governance and decision-making within a JV depend on the chosen vehicle but follow consistent principles structured through a combination of shareholder-level and board-level governance mechanisms. In corporate JVs, the management body is responsible for day-to-day business, acting within the limits of statutory law, the articles of association and the JV agreement. To safeguard the shareholders’ interests, its powers are typically restricted by a catalogue of reserved matters requiring higher-level consent, such as material acquisitions or disposals, financing exceeding certain pre-defined thresholds, entry into significant contracts or any deviation from the approved business plan. These reserved matters are usually incorporated in rules of procedure for the management or in the respective service agreement concluded with the respective member of the management.

Strategic authority rests with the owners' assembly, whether shareholders' meetings in a GmbH or general meetings in an AG. German law provides that ordinary resolutions in a GmbH require a simple majority of the votes cast, but it also prescribes qualified majorities for certain fundamental matters. In particular, the following all require a majority of at least three-quarters of the votes cast:

• amendments to the articles of association, including capital increases or reductions;
• transformations such as mergers, demergers or conversions; and
• a resolution to dissolve the company.

JV agreements often go further by contractually requiring supermajority or unanimous consent for additional matters, thereby strengthening minority protection through veto rights on key business issues.

JV parties frequently introduce an advisory or supervisory board to provide an additional governance layer and to act as an intermediate decision-making forum. To mitigate deadlocks, JV agreements commonly provide escalation procedures and, if unresolved, mechanisms such as mediation, expert determination or buyout options. In some cases, a rotating chairperson or weighted voting scheme is used to ensure fairness. This framework ensures operational efficiency while safeguarding minority interests, and remains fully consistent with German corporate law requirements.

In Germany, JVs are typically funded through both equity contributions and debt financing (and occasionally also mezzanine financing), particularly those structured as GmbHs. At formation, each JV party usually subscribes to a defined portion of the stated share capital, as reflected in the articles of association, which may include initial cash contributions or, in some cases, contributions in kind such as intellectual property, technology or tangible assets. The initial equity establishes ownership percentages and voting rights.

Beyond initial funding, JV agreements often provide for future funding obligations, either as optional contributions or as pre-agreed mandatory capital calls. Capital increases require a three-quarters majority under the GmbHG and, unless agreed otherwise, all shareholders have statutory pro rata subscription rights to maintain their percentage participation. The respective provisions in the JV agreements are designed to maintain the JV’s financial health while protecting shareholders from disproportionate dilution. Typically, if a shareholder elects not to participate in a capital increase, their ownership is diluted according to the terms set out in the JV agreement. Some agreements include anti-dilution protections or pre-emptive rights – the former designed to prevent the disproportionate dilution of a shareholder, and the latter designed to have certain control over the shareholder structure of the JV.

Debt financing can be arranged either on the JV entity level or via shareholder loans. Shareholder loans are common in German JVs and are usually structured with agreed terms on interest (reflective of the risk taken by the disbursing lender), repayment and subordination, often ranking behind external debt. In some cases, JV agreements include covenants requiring unanimous or supermajority approval for taking on additional debt, particularly if such debt exceeds a threshold or materially affects the balance sheet.

When future equity funding occurs, the JV agreement must clearly define the valuation methodology, the issuance of new shares, and the adjustment of governance rights. This ensures transparency, maintains fairness between shareholders, and avoids deadlocks. Market practice emphasises pre-agreed rules for both voluntary and mandatory funding, ensuring financial flexibility and adequate capitalisation without undermining the strategic balance or minority protections.

In German JVs, deadlocks between the board and the JV parties are a critical risk and must be addressed explicitly in the JV agreement to ensure business continuity. Deadlocks typically arise in two contexts:

• disagreements on operational decisions requiring board approval; or
• shareholder-level disputes over strategic or extraordinary matters.

A common approach is to distinguish between day-to-day operational deadlocks and major strategic deadlocks. For operational issues, the JV agreement may provide for pre-agreed escalation procedures, such as referral to an advisory or supervisory board for recommendation, granting one JV party a casting vote in narrowly defined areas, or elevating the matter to senior executives or parent company boards for further negotiation. In practice, the advisory or supervisory board can act as a mediator without altering the balance of power, by requiring its approval for significant operational measures.

For shareholder-level deadlocks, German market practice often employs “Russian Roulette” or “Texas Shoot-Out” clauses. In a Russian Roulette mechanism, one JV party offers to buy the other’s shares at a defined price, and the other JV party must either sell or buy at that price. A Texas Shoot-Out allows each JV party to submit a sealed bid to buy the other’s shares, with the higher bidder acquiring the stake. These mechanisms are usually reserved for deadlocks over material decisions, such as capital increases, strategic disposals or termination of the JV.

Other solutions include defined pauses in discussions to allow the JV parties to reassess their positions, independent expert valuation, mediation or temporary neutral management appointments. The objective is to provide a clear, enforceable procedure that ensures the JV can continue operating and that the JV parties have defined exit or buyout options without resorting to court intervention.

The contractual framework usually extends beyond the articles of association and the JV agreement to include a set of ancillary contracts tailored to the transaction.

A central category consists of intellectual property agreements, in the form of either licences or assignments, which regulate the use of pre-existing rights contributed by the JV parties and define ownership of improvements, scope of use and termination rights.

Asset transfer agreements are equally common, covering the sale or contribution of tangible and intangible assets such as equipment, contracts, customer relationships or know-how. Any liabilities or warranties associated with transferred assets are also typically addressed. Where assets are contributed as consideration for shares in a GmbH, statutory requirements on contributions in kind and notarial formalities must be observed.

Confidentiality is usually addressed through non-disclosure agreements, often signed at the negotiation stage and sometimes reconfirmed at closing to cover ongoing data exchange. In addition, service and supply agreements are frequently put in place if one JV party will continue to provide management support, back-office functions or material inputs. Employment or secondment agreements for key staff are also common, requiring careful alignment with German labour law.

Further ancillary documents may include shareholder loan agreements and intercreditor arrangements, especially if the JV is highly leveraged, as well as regulatory or permit-related agreements in cross-border structures. Where foreign investors are involved, filings under the German foreign trade regime may be required.

Across all categories, the overarching principle of German JV practice is to ensure consistency: provisions on ownership, funding or governance contained in ancillary agreements must align with the JV agreement and the articles of association to avoid conflicts and secure enforceability.

From a tax perspective, it is of particular importance when transferring assets that their valuation and the consideration (in particular the resulting special rights or the number of shares) received by the contributing JV party are properly documented.

In a German JV structured as a GmbH, the rights and obligations of the JV parties are typically governed by the articles of association, the JV agreement and applicable law. Key rights include:

• participation in profits;
• voting rights in the shareholders' meeting;
• appointment rights for managing directors and advisory board members;
• access to books, records and operational information; and
• approval rights over major transactions or strategic decisions.

Obligations include:

• the contribution of capital or assets;
• compliance with the articles of association and JV agreement;
• ongoing co-operation in managing the JV; and
• adherence to confidentiality and non-compete clauses as negotiated.

Profit and loss allocation is generally proportional to the JV parties’ shareholding, unless agreed otherwise. While the GmbHG allows flexibility in deviating from proportional distribution, the JV agreement must explicitly specify any alternative allocation. It has to be noted that tax law imposes special requirements for the recognition of such a deviating profit distribution. Losses are typically shared in the same proportion as the capital contributions, ensuring that JV parties bear economic risk in line with their ownership. There are no statutory minimum profit distributions, but distributions must respect the provisions of Section 30 of the GmbHG (no distributions if the GmbH's capital is insufficient). In accordance with the concept of transparency, for tax purposes profits and losses from a JV structured as a partnership (GmbH & Co KG) are allocated directly to the partners, regardless of distribution decisions agreed upon by the JV parties or the actual withdrawals.

The liability of JV parties is generally limited to the amount of their subscribed capital in the GmbH. As a separate legal entity, the JV itself is responsible for its debts and obligations, protecting the JV parties' personal assets. Exceptions arise if JV parties act beyond their authority, provide personal guarantees, or commit fraud or gross negligence. In practice, additional contractual indemnities may be agreed to allocate risk for specific obligations, such as contingent liabilities from pre-existing contracts or warranties for asset contributions.

These rights and obligations are critical for ensuring operational clarity, risk allocation and a balanced governance structure in German JV practice.

In German JVs, minority protection is a key element to ensure that JV parties with a smaller interest in the JV retain meaningful influence and protect their investment. Statutory rights under the GmbHG already provide certain safeguards, including the requirement of a qualified three-quarters majority for amendments to the articles of association, capital increases or reductions, mergers and transformations, and the dissolution of the company. Minority shareholders are further entitled to request information and access documents, and to convene extraordinary shareholders' meetings, thereby maintaining a minimum level of oversight.

Beyond these statutory rights, market practice relies heavily on contractual protections in the articles of association and the JV agreement. Typical mechanisms include veto or consent rights over reserved matters such as:

• acquisitions and disposals;
• capital expenditures above a threshold;
• the incurrence of material debt;
• related-party transactions;
• dividend policy; and
• the appointment or removal of directors or advisory board members.

In addition, minority shareholders are commonly granted tag-along rights in case of a majority exit, and sometimes anti-dilution protection to preserve their economic position.

In international JVs, minority protections are often reinforced by contractual reporting obligations, audit and inspection rights, and the requirement that key operational decisions – such as approval of budgets or business plans – be jointly agreed. A supervisory or advisory board may provide an institutionalised forum for minority participation. Taken together, statutory and contractual protections secure a balance between effective minority influence and the operational flexibility necessary for the venture’s success.

JV agreements (and explicitly not the JV's articles of association, which are subject to German law) may be governed by and construed in accordance with foreign substantial law. However, even if the JV agreement is governed by foreign substantial law, it still has to consider mandatory German (corporate law) provisions. For this reason, among others, JV parties often keep German substantial law as the governing law of the JV agreement.

By default, and in the absence of deviating agreements, disputes in JVs are subject to the jurisdiction of German state courts. As an alternative, JV agreements may also be made subject to arbitration clauses.

Germany is a signatory to the Hague Service Convention (1965) and the Hague Evidence Convention (1970). Germany does not allow international pre-trial discovery proceedings within German borders. Germany is also party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958). Foreign arbitral awards are enforced after the completion of exequatur proceedings. Foreign judgments are recognised on the basis of international agreements. Other than that, German courts grant exequatur to judgments of states in which German judgments are also recognised (principle of reciprocity) but excluding cases where the foreign court asserted a jurisdiction that is considered excessive under German rules.

Germany is also subject to various EU regulations that provide for easements when enforcing judgments from other EU member states, on the service of court documents and regarding the gathering of evidence in other EU member states.

In German JVs organised as a GmbH, management is exercised by one or more managing directors rather than a formal board of directors as in an AG, whereas the managing directors are, by default, appointed by the shareholders of the JV in shareholders' meetings. The articles of association and the JV agreement usually determine the number of managing directors, their appointment and removal rights, their scope of authority and decision-making rules. It is common for each JV party to have the right to nominate one or more managing directors, thereby ensuring balanced representation. However, it is also possible for each JV party to appoint managing directors in proportion to its respective equity stake. In more complex or highly regulated JVs, the JV parties may appoint independent or neutral managing directors to ensure balanced decision-making and compliance with legal or governance requirements.

In stock corporations, the board of directors is appointed by the stock corporation’s supervisory board, which in turn is appointed by the general meeting. Unlike the managing directors of a GmbH, the board members of an AG enjoy extensive freedom in their decisions and are not bound by instructions – ie, they are not obliged to follow instructions from the supervisory board and/or the general meeting.

Regarding the managers or board members themselves, there are generally no nationality or residency restrictions, so foreign individuals may serve as managing directors or board members. In fact, all managing directors may live abroad; German law imposes no residency requirement. The only conditions are that managing directors must be able to properly fulfil their duties and must not be legally excluded from assuming the office of managing director or member of the board of directors.

In practice, however, important tax and corporate considerations arise. While the GmbH’s statutory seat must remain in Germany, the place of effective management (Ort der Geschäftsleitung) is decisive for tax residence. If all managing directors operate permanently from abroad, the GmbH risks losing its German tax residency, potentially triggering double taxation or immediate taxation of hidden reserves. For this reason, practitioners often recommend appointing at least one managing director with strong ties to Germany and ensuring that key management decisions demonstrably take place in Germany.

The articles of association and JV agreement can also provide for protective measures such as joint decision-making for certain transactions, veto rights or super-majority requirements to safeguard the interests of minority shareholders. This ensures that management decisions – especially strategic or capital-intensive ones – cannot be taken unilaterally. Such structures are standard in international JVs to balance control and operational flexibility.

In Germany, managing directors of a GmbH owe fiduciary duties primarily to the JV itself as well as its creditors, and not directly to the shareholders who appointed them. These duties include the duty of care (Sorgfaltspflicht) and the duty of loyalty (Treuepflicht), requiring managing directors to act in the best interests of the JV, avoid conflicts of interest and exercise proper business judgement. They must ensure compliance with laws, proper accounting and prudent management, and may, as an exception, be held personally liable for violations of these duties, particularly in cases of gross negligence or wilful misconduct. In corporations (Kapitalgesellschaften), managing directors are also obliged to ensure that the JV has sufficient capital resources. Principles such as capital raising (Kapitalaufbringung) and capital maintenance (Kapitalerhaltung), which are intended to prevent a loss of value from the JV that would disadvantage creditors, also address the conduct of the management.

Conflicts can arise if a managing director has obligations toward the appointing JV party. German law generally requires managing directors to prioritise the interests of the JV over the interests of the appointing shareholder, although contractual arrangements can clarify reporting obligations or require consent from the shareholder for certain actions. These arrangements, however, cannot legally override statutory duties towards the JV, and managing directors must avoid transactions that would constitute self-dealing or harm the JV.

Delegation of functions is permissible within the management framework. Day-to-day responsibilities may be allocated to individual directors, subcommittees or, in certain cases, external service providers. However, material matters of strategic, financial and/or corporate structure-related importance are typically reserved to the full board of managing directors and, in many cases, to the shareholders' meeting. The articles of association and any JV agreement typically define which powers are delegable and which require collective or shareholder approval, ensuring minority protection and alignment with agreed governance structures.

Conflicts of interest for managing directors of a JV are managed on the basis that managing directors owe their duties primarily to the JV itself rather than to the shareholder who nominated them. This means that managing directors must exercise independent judgement, act in the best interests of the JV, and avoid favouring the interests of their appointing shareholder or their own personal interests. Conflicts typically arise in situations such as participation in competing businesses or involvement in related-party transactions, or when commercial decisions disproportionately benefit the appointing shareholder.

To manage such situations, good practice requires full disclosure of the conflict to the other managing directors or, where relevant, to the shareholders’ meeting. The conflicted managing director may be required to abstain from voting or from participating in discussions on the matter, and certain transactions may need prior shareholder approval. JV agreements often reinforce these principles by including specific conflict-of-interest provisions, setting out disclosure requirements and approval processes to ensure transparency and mitigate risks.

It can be inappropriate for an individual to take a board seat if their position within a JV party creates a structural conflict that makes it impossible for them to act independently in the interests of the JV. For example, if the individual’s role within the JV party obliges them to always prioritise that JV party’s interests, this would undermine the individual’s fiduciary duties toward the JV. While contractual mechanisms such as consent rights or reserved matters can help balance the interests of the shareholders (ie, the JV parties), they cannot replace the requirement for managing directors to act autonomously in the JV’s best interests. Accordingly, suitability for board positions should be assessed carefully to ensure that managing directors can genuinely fulfil their duties to the JV.

Key IP Issues

Under German law, there are no specific statutory provisions governing the treatment of IP rights in JVs. JV parties must identify their pre-existing IP that might be relevant for the JV and clearly delineate which IP assets each party contributes into the JV, including specifying ownership and usage rights.

Foreground IP created during the operation of the JV may be owned jointly by all JV parties or assigned to a particular JV party. The JV agreement should define who holds the ownership in the IP rights, and outline the terms of use and commercialisation.

German law on employee inventions provides specific challenges. Inventions made by employees are subject to this legislation, and the employer must file a patent covering Germany, unless agreed otherwise between the employee and the employer. This might cause issues when employees of several JV parties are involved in the creation of foreground IP, particularly where foreign national law requires a first filing in a foreign country.

Key IP Issues in Contractual Collaborations

Fundamentally, JVs involve questions regarding granting access to the JV parties’ background IP and the allocation of foreground IP developed during the collaboration.

In addition, JVs often involve the sharing of sensitive information, necessitating stringent confidentiality provisions. These must continue to operate after the termination of the JV, in order to protect proprietary know-how, trade secrets and confidential business strategies.

Upon termination, the JV parties may need to ensure that all confidential material is returned or destroyed, and that any IP arising from the JV’s use of this information is appropriately addressed.

Treatment of IP Issues in JV Agreements

The JV agreement should specify how IP rights (both pre-existing and newly created) will be handled during the JV and upon termination thereof. Such provisions may govern whether:

• licences to use pre-existing IP will survive the termination;
• foreground IP reverts to one or more of the JV parties; and
• JV parties will have a perpetual cross-licence.

JV agreements may also outline whether any joint ownership needs to be dissolved upon termination and how this should be handled. The IP is usually allocated to the JV parties based on their respective field of business.

Foreground IP will typically only be used for the benefit of the JV. However, the JV parties might gain a licence to use the foreground IP for other fields of use on arm’s length terms.

Restrictions on how IP generated or used in the JV can be deployed in other, potentially competing ventures after termination may be necessary. These provisions often cover:

• restrictions on using IP to prevent the JV parties from directly competing with each other; or
• limitations on deploying knowledge or technology developed during the JV.

Specific Considerations for Cross-Border IP Transfers

Cross-border issues arise in relation to German employee invention law requirements in particular. When employees of several JV parties are involved in the creation of foreground IP and foreign national law requires a first filing in a foreign country, this conflicts with German law requirements. The JV parties should address such issues in the JV agreement.

The choice between the licensing and assignment of IP rights should be determined by strategic considerations, including the JV’s objectives and the JV parties’ activities outside the JV, as well as the specific nature of the IP rights involved, rather than following a universal one-size-fits-all approach.

Background IP Considerations

Licensing arrangements typically provide optimal flexibility for pre-existing (background) IP, allowing the JV parties to maintain underlying ownership whilst granting necessary usage rights to the JV. This approach preserves each JV parties’ fundamental IP assets whilst enabling effective collaboration.

Foreground IP Treatment

Foreground IP created during JV operations permits more varied treatment approaches. Joint ownership or assignment to specific JV parties may prove appropriate based on strategic business considerations. Typically, foreground IP is used only for the benefit of the JV, although the JV parties might obtain a licence to use such IP (eg, for other fields of use). Upon termination of the JV, provisions may determine whether foreground IP reverts to one or more of the JV parties or whether JV parties receive perpetual cross-licences.

Statutory and Cross-Border Considerations

Regardless of whether licensing or assignment is selected, German employment invention law requirements must be satisfied, and cross-border patent filing obligations may influence the optimal structure. Jurisdictional differences in IP protection and filing requirements may favour specific approaches depending on the JV’s international scope.

German law’s contractual flexibility enables JV agreements to reflect participating JV parties’ strategic objectives whilst ensuring operational efficiency and protecting the respective JV parties’ interests throughout the JV’s life cycle and beyond termination.

Regulatory Context

ESG has become a central compliance and governance factor for JVs in Germany and the EU, and its importance will continue to grow. ESG is no longer a short-term trend – it has become a fundamental driver of corporate sustainability. Initiatives such as the European Green Deal, the EU Taxonomy Regulation and related measures – including the Sustainable Finance Disclosure Regulation (SFDR) and Corporate Sustainability Reporting Directive (CSDR) – have created a rapidly evolving regulatory environment that is expected to tighten and expand further. Aligning with ESG principles at an early stage can help avoid significant risks for a JV and capture long-term value.

Why ESG Matters

• Compliance risk: non-compliance can result in substantial fines and reputational damage. While Germany does not recognise corporate criminal liability in the same way as, for example, France, monetary penalties remain a serious concern.
• Value creation: adhering to ESG standards can enhance enterprise value and strengthen a JV’s market position.
• Tailored obligations: requirements vary based on the JV’s sector and activities.

Key Legal Requirements

National level

• Environmental: regulation is advanced in real estate, with laws such as the German Building Energy Act (GEG), the German Carbon Dioxide Cost Allocation Act (CO2KostAufG) and the German Building Electric Mobility Infrastructure Act (GEIG).
• Social and Governance: the German Supply Chain Due Diligence Act (LkSG) applies to larger enterprises, mandating human rights and environmental standards across supply chains. The German Whistleblower Protection Act (HinSchG) requires internal reporting mechanisms to protect whistle-blowers.

European level

EU-wide rules impose additional obligations in certain sectors to ensure responsible sourcing and supply chain due diligence (eg, the Conflict Minerals Regulation).

JV agreements in Germany may terminate in several ways:

• automatically upon expiry of a fixed term;
• by mutual agreement of the JV parties; or
• upon the occurrence of specific termination events such as material breach, insolvency or failure to meet critical conditions precedent.

In a corporate JV (for example, a GmbH), termination usually triggers the dissolution and liquidation of the company, unless one JV party acquires the other JV party’s shares and continues the business.

Key matters to address upon termination include the following.

• Winding-up and liquidation: the JV agreement should outline the procedures for liquidating assets, settling liabilities and distributing any surplus among the JV parties to ensure an orderly process and creditor protection.
• Exit rights and buyout mechanisms: pre-agreed valuation methods (eg, fair market value, discounted cash flow or expert appraisal) are often used to determine the price for a departing JV party’s shares. Put and call options, mandatory buyouts or other exit tools help avoid disputes.
• Allocation of profits and losses: the JV parties should agree how accumulated profits, losses or contingent obligations up to termination are calculated and distributed, including the handling of ongoing contracts and outstanding liabilities.
• Treatment of IP, licences and know-how: the JV agreement should regulate whether intellectual property and technology are transferred, licensed back or withdrawn, ensuring clarity on post-termination use.
• Confidentiality and non-compete obligations: restrictions on the use of confidential information and competitive activities typically survive termination to safeguard business value.
• Dispute resolution: as termination often raises valuation or transfer issues, arbitration or mediation mechanisms are commonly included to provide a binding and efficient resolution process.
• Continuity arrangements: where one JV party continues the business, transitional provisions covering employees, contracts and operations should be clearly set out to avoid disruption.
• Taxation: depending on the legal structure of the JV, capital gains are tax exempt in the case of a GmbH, AG or SE. In the case of a partnership (GmbH & Co KG), they are taxed at the ordinary tax rate (15.8% for non-domiciled corporate shareholders; up to 45% for individuals based on the progressive tax rate).

Overall, a well-structured termination regime protects both JV parties, ensures compliance with German corporate law, provides clear procedures for asset distribution, liabilities and post-exit obligations, and preserves business value beyond the JV.

When dealing with asset redistribution and transfers in a German JV, careful attention must be paid to the origin, ownership and legal treatment of the assets, and also to the contractual and statutory obligations of the JV.

Assets contributed by JV parties may include cash, equipment, technology or intellectual property contributed at the outset. The JV agreement should specify ownership, valuation and conditions for return or buyback. Unless title in assets was formally transferred to the JV, ownership often remains with the contributing JV party, although corporate and contractual restrictions may apply. Any retransfer may require valuation mechanisms to avoid disputes and must not undermine creditor protection.

Assets generated by the JV include reserves, newly developed intellectual property, receivables or inventory created in the course of business. Such assets are legally owned by the JV or collectively by the JV parties and cannot be unilaterally withdrawn by a JV party. Their distribution requires compliance with corporate law and the JV agreement, including approval by shareholders or governing bodies, and the observance of capital maintenance rules to safeguard creditors.

Key considerations for any transfer include:

• the valuation methodology (eg, book value, fair market value, discounted cash flow);
• consent and approval requirements at shareholder or board level;
• legal formalities for specific asset classes such as real estate or registered IP;
• the allocation of liabilities associated with the assets; and
• continuity of contracts and employee relationships linked to transferred business units.

Clear distinction between contributed and JV-generated assets is essential to avoid disputes, ensure creditor protection and align with German corporate law requirements.

In Germany, the mechanics of a JV party’s exit from a JV are largely matters of contract: JV parties enjoy broad freedom to agree on transfer restrictions, buyout mechanisms and valuation methods in the JV agreement. However, that contractual freedom is subject to overriding legal constraints and practical limits:

• corporate law imposes capital maintenance and formal procedure requirements;
• certain transactions may require shareholder approvals or changes to the articles of association; and
• regulatory clearances (antitrust, foreign investment review, sectoral licences) or contractual third-party consents can restrict or delay exits.

In practice, JV agreements therefore combine bespoke exit rules with statutory safeguards to ensure enforceability and creditor protection. Typical contractual provisions regulate consent requirements for share transfers, pre-emption arrangements for existing JV parties, valuation formulas or expert appraisal procedures for buyouts, and the circumstances in which put/call rights, redemption or compulsory buyouts may be triggered. Where a JV involves a listed entity, takeover rules and mandatory offer obligations may also be relevant if control changes. Tax, employment and contract-assignment issues (including supplier and customer consents) should be considered early in the process, since they frequently determine the practical feasibility and timing of any exit. Finally, dispute resolution and valuation processes (often arbitration with a clear valuation mechanism) are commonly built into exit provisions, in order to minimise litigation and preserve confidentiality.

Common exit mechanisms used in German JVs include:

• tag-along and drag-along rights to protect minority holders or enable a co-ordinated sale;
• put and call options granting JV parties the contractual right to force a sale or to require purchase under agreed terms;
• buy-sell/shoot-out mechanisms (eg, Russian Roulette, sealed-bid procedures) to resolve intractable deadlocks;
• rights of first refusal/pre-emption in favour of co-shareholders;
• sale to third parties (trade sale or sale to financial investors);
• co-shareholder buyouts;
• company redemption or structured wind-up; and
• occasionally IPOs for larger JVs.

Exits generally occur through a sale of shares to other JV parties or a third party, redemption or repurchase by the JV itself, or termination of the JV with a proportional or contractually defined distribution of assets. While statutory principles ensure basic fairness and proper corporate procedure, the detailed exit strategy is primarily a matter for contractual design, reflecting the strategic, financial and operational objectives of the JV parties. In any case, an exit is a taxable event, whereby the consequences depend on the legal form of the JV and the peculiarities of the exit scenario.