Joint ventures

Joint ventures are collaborations between businesses set up with a view to achieving a common commercial goal where the parties bring different skills to the table which the other cannot provide. They often involve property development where developers will come together with the equity funders to develop and market properties. Some joint ventures relate to intellectual property, for example, where a software developer teams up with a hardware producer to develop a new product. Joint ventures will often have an international element where an overseas party will seek to use an existing business in a different country as a route to a new market.

Joint ventures can be conducted through a contractual arrangement where the parties agree to collaborate by providing services, technology and/or goods to each other to further the venture or, alternatively, by setting up a new legal entity (usually a limited company) to conduct the joint venture business. Limited Liability Partnerships can often be used in place of the limited company structure which from a taxation perspective has the attraction that each party’s share of profits is taxed separately.

The success of any joint venture is dependant on each party understanding and performing its agreed role. It is fundamental that any joint venture agreement clearly sets out the roles of each party and what is expected of it. This includes not only in terms of the supply of services, technology and/or goods but also the ownership and management rights and responsibilities of each party.

One of the most important considerations is the resolution of disputes between the parties and what happens if there is a ‘deadlock’ situation where neither party can agree on the way forward. If the relationship breaks down there needs to be a clear framework for winding up the business and distribution of any assets. Where the joint venture results in the use of existing intellectual property and/or creation of new intellectual property rights, there needs to be a mechanism for dealing with those rights so each party knows which rights it can use after the venture finishes.

If you are considering entering a joint venture, we can help you ask the right questions of your future joint venture partner before going ahead and by drafting and/or advising on a joint venture agreement and the appropriate legal entity. If your joint venture is with a French, Spanish or Italian partner our specialist teams of foreign qualified lawyers will be able to advise on any jurisdiction-specific issues.