Joint Ventures

When considering collaboration with another person or business it is important to consider the legal issues and need for a formal agreement to regulate that collaborative process.

The most appropriate structure to be used for any joint venture will inevitably depend on the needs, objectives and roles of the respective parties. However, the most typical joint venture structures are:

• a special purpose vehicle or SPV, which is a company created specifically for the joint venture;
• a partnership or limited liability partnership (LLP), which is another form of business structure but, in the case of a general partnership, is not a separate legal entity; or
• a collaboration agreement, where each party is separate and distinct, but their roles are governed by the agreement.

If you are using an SPV for the joint venture or entering into a partnership, it will be necessary to consider the joint venture business’ equity structure and it will generally be advisable to enter into a shareholders’ agreement or partnership agreement to regulate the relationship between the parties for the duration of the joint venture project.

Another issue to consider will be the ownership of any intellectual property that is created as part of the joint venture. Many joint ventures are formed with the intent of creating or developing technology or software. It is therefore important to set out precise terms on ownership and use of any background intellectual property brought in and any new or foreground intellectual property created as part of the project.

Creating a joint venture partnership will be enhanced by speaking to a legal team who understands the importance of joint venture partnerships and shareholders’ agreements and who has the expertise necessary to advise on and prepare joint venture agreements, tailored to the needs of your business. Having the proper documents in place helps to ensure that all parties are clear on their position and that each party’s interests are protected from the outset.