commercial law

What you need to know about joint ventures

What is a joint venture?

A joint venture is a commercial arrangement where parties agree to form a new entity, sharing assets, equity, risk and revenue. It can take many forms, but a Joint Venture is usually a contract between the parties, a joint limited company or a partnership.

Suitable for either short term projects or long term relationships, they are a well-established legal vehicle, common in all walks of life.

What sort of joint venture is right for you?

There are several types of joint venture, each having its own legal and financial implications.

If both parties want to work closely together, a corporate joint venture – when a separate legal entity is created for the purpose of the project – may be the most suitable option. This could take the form of a limited company or a formal partnership.

Other expressions of joint venture include structural joint ventures or full function joint ventures.

While some arrangements will be open ended, or without an ‘end date’, others will be set up for a particular project or to achieve a specific goal – so will have a set deadline and timeframe.

What legal implications need to be considered?

If a separate limited company is going to be set up, both parties will need to consider a number of factors.

As well as ownership, control and financial implications, parties also need to give careful consideration to intellectual property.

What is being provided to the joint venture and is it being licensed or transferred? Who will own the intellectual property for anything created during the course of the joint venture and what will happen to it at the end of the agreement or if it is terminated for any reason?

For many joint ventures, competition law is an issue needing careful thought and legal advice.

If the joint venture meets certain criteria – such as a particular level of market share – then UK and/or EU merger control may apply. Even if merger clearance isn’t required, chances are the joint venture will still be affected by anti-competitive agreements.

And just because issues relating to competition law are sorted at the beginning, it doesn’t mean the parties can then forget the issue – it needs to be monitored throughout the relationship to ensure the joint venture stays compliant.

Will we need a shareholder agreement?

Some people may be reluctant to spend time or money on a shareholder agreement when setting up a joint venture – but it can prove crucial, especially if the parties fall out or the project breaks down.

A shareholder agreement is a private contract between the parties and outlines what will happen in different circumstances, primarily relating to management and control issues.

It should also detail what will happen if the joint venture breaks down or there is a disagreement. Despite everyone’s best intentions, this can be a possibility but if it is considered from the outset then it can save a lot of time, money and stress later on.

A solicitor will be able to advise on a shareholder agreement and explain how it must work with the articles of association of the joint venture company.

How we can help

If you want support setting up a joint venture we can help. Our solicitors have specialist experience and can guide you on the most suitable format for your project, providing you with all the help you need to make it a success.

If you are considering setting up a joint venture or any other commercial arrangement please get in touch with our commercial team - ask for Paul Hughes on 0121 705 7571 or

email: paulhughes@wallacerobinson.co.uk

Further reading:

Business Formation (Commercial Law)

This article is for general information purposes only. It does not constitute technical, financial, legal advice or any other type of professional advice and is no substitute for specific advice based on your individual circumstances. We do not accept responsibility or liability for any actions taken based on the information in this article. For more information, please click here.