At BBS Law, we frequently advise clients who are planning to enter into a joint venture.
In general terms, a joint venture is a commercial arrangement under which two or more independent businesses collaborate with each other to achieve a common business goal. It can be structured in a number of ways, the most common structures being:
- a limited liability company – this involves the parties establishing a company as a vehicle through which the joint venture business will be conducted and which will be owned by the joint venture parties
- a partnership or limited liability partnership (“LLP”)
- a collaboration agreement – this is a purely contractual arrangement under which no separate business is set up and there may be no pooling of assets and no general sharing of revenues and costs.
Often tax considerations strongly influence the structure and we will work on a collaborative basis with your tax advisers to determine which structure is most appropriate for your joint venture. However, other factors, such as your commercial and financial objectives and the level of integration to which you wish to commit, are also influential in determining the structure and the shape of the documentation and we will always take the time fully to understand your reasons for entering into the joint venture and what you wish to achieve from it.
The documentation involved with a joint venture will vary dependent upon the structure of the joint venture but will typically address:
- the objectives and scope of the joint venture
- what each party will bring to the joint venture, including financial contributions and assets (for example, intellectual property rights) and how these will be owned
- the period of time that it is envisaged the joint venture will operate
- decision making
- any restrictive covenants and confidentiality obligations to be imposed on the parties
- the sharing of liabilities, profits and losses
- the handling of deadlock situations
- the exit strategy and methods of exit
- accounting and tax considerations
- regulatory issues (if relevant to the particular joint venture)
- external financing arrangements
- the operation of the joint venture business, including whether the joint venture (depending upon its structure) will have its own employees or whether the parties will second employees to work for the business.