Business Joint Ventures

Joint ventures (JVs) are collaborative business arrangements between two or more parties to establish and operate a new business venture or project. These arrangements typically involve shared ownership, management, and decision-making responsibilities, with the aim of achieving common objectives and maximising overall benefits for all parties involved.

The most common form of Joint ventures is where the parties set up a new limited company for the project. A shareholder agreement and/or changes to the company's articles of association will be essential in this situation (see below)

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Joint ventures are particularly suitable for businesses that:

• Rely on complementary expertise: JVs can bring together companies with unique skills, technologies, or market knowledge to achieve a common goal.

• Seek to enter new markets: JVs can facilitate entry into new geographic markets or expand into new product segments.

• Facilitate risk sharing: JVs can help to share the financial risks and responsibilities associated with complex projects or ventures, such as a new product, developing IP or a property joint venture.

• Require rapid development: JVs can accelerate the development and launch of new products or services by combining resources and expertise.

Key considerations for a Joint Venture Agreement

Although each JV is unique, the negotiations, legal considerations and work involved will commonly include :-

• Financial contributions - who will contribute what initially to the business financially?

• Future funding - whether the parties are obligated to provide further funding in the future and if so, for what reasons and under what conditions? Also, whether any external 3rd party financing is contemplated and if so, in what situations and on what terms? Consideration of pre-emption or preference rights of the shareholders.

• Financial management - access to the new company’s accounts and compliance records and appointment of auditors and accountants. Borrowing and/or fundraising policy for the new company.

• Exit strategy -  including whether the shareholders have the legal ability to exit the venture early, if so on what conditions? How long will the joint venture last and what will trigger it to end?  Agreement on whether shareholders can transfer shares to another party if they wish to leave early.

• Key employees - roles & responsibilities of key employees.

• Decision making - who has what powers in terms of making appointments, dismissals and on voting on key issues? Who will be on the Board of Directors and what powers and/or limitations on powers will there be for directors?

• Dispute Resolution - how disputes are to be dealt with and if shareholders’ approval is required before important decisions, and if so what decisions?

• Dividend policy.

• Drag along and tag along provisions.

Other items to consider with a JV Agreement

As well as specific items in relation to the various parties’ interests the agreement will also be likely to cover some of the following:

• Any required licenses and consents for the Joint Venture business.

• Restrictions on the shareholders competing with the joint venture company potentially including for a period after exit.

• Due diligence checks.

If you need experienced and cost effective lawyers to advise you on a potential joint venture or collaboration, please do get in contact.