Our specialist solicitors can assist you and your business with the creation, management and exit from joint ventures. We are able to structure and deliver practical and effective solutions to support you and your operational requirements.
Commercial Rationale
A joint venture broadly involves any arrangement where two or more existing businesses agree to co-operate and combine resources to target a specific business project or develop a new business. A joint venture can also spread and dilute risk where the parties typically share the initial investment (including the contribution of finance and/or assets) and share any on-going liability of the project. Inevitably, a joint venture involves a sacrifice of the control and flexibility which otherwise may have applied had a party undertaken a business project independently.
The structure used to conduct the joint venture will usually take the form of a private company, a limited liability partnership (LLP), a partnership or simply a contractual agreement between the parties.
The use of a corporate entity involves the vesting of all the joint venture trading activities in that corporate entity, often called a Special Purpose Vehicle or “SPV”. In such a scenario the parties will typically enter into a joint venture agreement or shareholders’ agreement and the company will adopt a new constitution (articles of association).
On the other hand, in a purely contractual joint venture there may be no pooling of assets and no general sharing of revenues and costs. This type of agreement is often referred to as a co-operation agreement and would suit circumstances where the parties decide to retain their own independence.
Structure
When planning the structure of a joint venture, there are a number of issues to be considered. These include for example:
- That the structure chosen for the joint venture provides the best tax treatment for each of the parties as well as for the joint venture itself;
- Identifying the underlying objectives of the parties;
- The period of time during which it is intended the joint venture will operate;
- Methods of exit at the end of the joint venture, i.e. sale;
- The extraction and pooling of profits;
- The resources that each party will commit (an agreement documenting the transfer of assets and/or licence of intellectual property rights to the joint venture may be required) and decision making;
- Requirements for employees and possibly TUPE;
- Whether “deadlock” provisions are required (whereby in the event of a dispute, either party could buy out the other, the joint venture could be sold, the matter could be referred to arbitration or the joint venture could be put into liquidation);
- Accounting considerations; and
- Regulatory (e.g. competition) issues.
Joint Venture Documentation
The typical documents that may be required in a joint venture are:
- Shareholders/investment/joint venture agreement;
- Articles of association;
- Share sale and purchase agreement (where one party is buying shares from another in the joint venture company);
- Co-operation agreement (where the joint venture is a contractual arrangement);
- Partnership/members agreement (when the joint venture is conducted via a normal partnership or a limited liability partnership);
- Licences of intellectual property rights/software;
- Transfer of assets agreement;
- Service/employment/secondment agreements for those individuals working in the joint venture entity;
- Loan documentation/security documents.
The Corporate Commercial team at Myerson has considerable experience and expertise in this field. Our familiarity with the legal and commercial issues which arise in joint ventures enables us to offer positive and practical assistance at every stage of the transaction.
