When you bring two entities together to operate jointly, there are several difficult issues to analyze. For the U.S. company operating under the FCPA, there must be an adequate business justification for a JV with a specific partner, all in writing and approved by an appropriate level of the organization. This is where the due diligence process comes into play. The due diligence process should be built on principles similar to those involving third-parties. The procedure should be robust, documented and address all potential risks involved. A company should use its due diligence review of the JV partner to properly assess and uncover any corruption risk. Using this due diligence and its evaluation, you can then move to contractual clauses, certifications, representations and warranties from a JV partner or insist on other remedial measures to minimize its risk exposure.
In addition to asking for all of this information, you must take care to document the entire process that your company goes through in the investigation and creating a foreign JV. (“Document, Document, and Document”) It is equally important to remember that obtaining this information is only one step. A company must evaluate the information and follow up if responses to such inquiries warrant such action. A paper program is simply not good enough and can lead to serious consequences if red flags are not reviewed and cleared. This evaluation should also be documented so that if a regulator ever comes knocking you can demonstrate what you asked for, why, the response, your follow up and the details of your evaluation.
Finally, never forget the human factor. It is important to perform an in-person interview of your proposed JV partner. It is important that you meet them, see their facilities and assess them up close and personal. A U.S. business looking to engage a JV partner must consider the people who make up its JV partner. As you will have to mesh what may be two very different cultures and understandings of compliance, it is important to assess how your potential JV partner will take these obligations before, rather than after you ink the JV agreement.
Three key takeaways: 

JV due diligence must focus on the unique risks.

Ask for a detailed list of information from your potential JV partner.

Be sure to do onsite investigation of your potential JV partner.


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