10.3 Third Party as a Source of Remuneration 363strictions on the unilateral disposal of shares and other unilateral action and pro-
vide for a joint exit process.
Exit by one party. The success of two-party business ventures depends on the
contribution of both parties, but one of the parties may want an exit whereas the
other may not yet want this.
The parties will normally regulate this question in advance. The joint-venture
agreement can contain a termination clause. In addition, the parties will need to
decide what will happen on termination. The business venture can either continue
as a going concern or be liquidated. The parties will have continuing obligations
that will survive the expiry of the contract or no such obligations. A party can
have a right to sell its interests to a third party or to the other party (a sell-out
right). Typically, the other party will prefer to be protected by a long notice pe-
riod.
The term and termination of the joint-venture agreement must be distinguished
from the existence of the joint-venture as a separate business entity and the termi-
nation of that business entity. For example, where the joint-venture has been in-
corporated as a limited-liability company, the termination of the joint-venture
agreement between its shareholders does not mean the liquidation of the company.
The liquidation of the company typically requires an internal decision by the com-
pany. Where a business entity is based on a contract between its shareholders, the
termination of that contract can nevertheless mean the liquidation of the business
entity. For example, the contract founding a GmbH under German law can provide
that a shareholder can terminate the contract by notice and cause the GmbH to be
liquidated.^155
Removal of the other party. In some business ventures, each party wants to re-
move the other party and keep the whole business venture and change the nature
of its investment. The contractual regulation of the removal of the other party is
legally complicated, because neither party wants to be removed.
First, there must be a contractual mechanism that protects the aggrieved party
in the event of breach of contract by the other party. For example, the agreement
may provide that the aggrieved party may acquire the other party’s shares in the
joint-venture company at a fair market value following material breach of contract
by the other party.
Second, there must be an exit mechanism that does not require breach of con-
tract by the other party. The parties often choose a “Russian roulette clause” or a
“Texas shoot-out clause”.
A “Russian roulette” clause means that either party can serve notice on the
other offering either to buy the other’s shares or to sell its own shares to the other
party at a specified price. The offer must be accepted. Failure to accept the offer
means that the party is obliged to sell all its own joint venture shares to the offeror
at that price.
Alternatively, the parties may agree on a “Texas shoot-out”. A Texas shoot-out
is most common in a 50:50 joint venture. A Texas shoot-out means that both par-
(^155) § 60(2) GmbHG: “Im Gesellschaftsvertrag können weitere Auflösungsgründe festge-
setzt werden.”