A joint venture is a commercial arrangement between two or more economically independent entities whereby parties look to share costs on specific projects or to collaborate in order to improve their access to markets.
Structure
The parties either establish a separate legal entity, such as a limited liability company or a limited liability partnership, as a joint venture vehicle or they operate as a simple partnership or on a purely contractual basis. The corporate entity is often viewed as the most appropriate medium as it can then own and deal in assets and contract in its own right.
Documentation
The main documents that detail and regulate the joint venture are a shareholders' agreement and the company's articles of association which should cover both constitutional and day-to-day operational issues, including the aims, management, ownership, capitalisation and financing of the company, as well as setting out the terms on which shares can be transferred, how profit can be extracted, how disputes and deadlock are dealt with and the mechanics and implications of termination.
Depending on the circumstances other documentation required may include a management agreement, distribution and marketing agreements, contracts for the supply of goods and services, service and secondment agreement, intellectual property licenses and assignments, confidentiality agreements and loan note instruments.
Other issues
The parties will also need to address a number of other issues that may be relevant, such as EU and UK competition law, regulatory issues, intellectual property (both existing IP and that generated by the new vehicle), employment considerations, pensions and share schemes. In particular, the parties will need to decide whether the structure chosen is the most tax efficient for their purposes.
