Joint Venture Agreement

This legal contract can be used by two or more businesses to form a joint venture to achieve a particular business goal. Each business retains their own legal identity and the relationship is for a fixed duration. For use by a business based in the UK.

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Further Information

A Joint Venture Agreement is a legal agreement in which two or more business, who agree to work together for a specific purpose, set out the terms and conditions of their relationship.

Why form a joint venture?

There are many reasons why businesses form joint ventures but often it is to gain access to resources, new markets, expertise and/or production capacity. Joint ventures might be a way to grow your business without having to borrow or seek outside investment. A joint venture (jv) partner may be able to give you access to their existing customer base and you may achieve economies of scale in purchasing, research, marketing and development.

A joint venture can be very flexible. For example, a jv can have a limited life span and only cover part of a business' operations, thereby limiting the commitment for both parties and the their exposure.

The potential benefits of a successful joint undertaking include:

Legal structures for working together

There are several business structures that can be used to set up a joint venture. The most flexible is a jv agreement where the businesses involved retain their own legal identities but enter into a legal agreement to work together, for a specific period of time, towards a particular goal. Such an agreement would typically set out:

A joint venture contract is a legally binding agreement. It is the simplest, cheapest and most flexible way to set up a joint venture since it does not involve any structural changes and the businesses involved retain their own identities and autonomy. Each participant is liable on its own share of profit and gets the direct benefit of any tax reliefs. A joint venture contract is sometimes also called a co-venture agreement, joint undertaking or jv agreement.

Another way to set up a co-venture is to form an entirely separate business entity e.g. a new limited liability company, business partnership or limited liability partnership. Forming a new business entity involves structural and legal changes to each party in the venture.

Planning for success

The cost of forming a jv can be relatively low. The key to a successful relationship is in the planning. These are some of the key areas to be aware of and consider before entering into an agreement:

Choosing a partner

If you're thinking about forming a joint venture, then it would be wise to spend some time thinking about your business and what you need in a partner. Be aware of your strengths and weaknesses: know what you can bring to the venture and know what you want from a joint venture partner. You might want to perform a SWOT (strengths, weaknesses, opportunities and threats) analysis to discover whether the potential partners are a good fit.

When assessing a potential partner you should carry out some basic checks, including:

Choosing an appropriate partner for your joint venture is very important. You need a partner that complements the strengths and weaknesses of your business and is trustworthy. A good cultural fit is also important, especially if you are entering in to a joint venture with a partner in a different country.

Collaborating with competitors

In general, you can form a jv with any other business, even competitors. Competition law, however, aims to stop collaborations that reduce competition. This applies if you and your joint venture partner(s) would enjoy substantial market power over a long period. Certain types of collaboration such as price-fixing and cartels are not allowed.

The penalties for breaking competition law include:

If in doubt, seek legal advice before entering into an jv agreement.

A simple joint venture contract

The Clickdocs Joint Venture Agreement is suitable for the simplest form of joint venture where there are no structural changes and the parties remain independent legal entities. Their co-operation is based entirely upon the written contract. Each partner contributes resources to the joint venture, has a specific role and takes a share of the profits.

The venture is for a specific project, for a specific time period. Any party to the agreement can end the joint venture by giving appropriate notice to the other(s). The agreement will also end, automatically, if certain events occur. For example: one of the parties goes into liquidation or administration.

A confidentiality, or non-disclosure agreement, may also be useful if either party will be sharing commercial secrets.

Sample

You can view a sample online of a completed jv agreement by following this link: View Sample

Features

This draft contract is suitable for use in the England, Scotland and Wales by two or more parties wishing to form a business venture. It includes the following clauses:

This document is available individually or as part of a Commercial Annual Subscription (£39.10 own use), a Business Annual Subscription (£99 own use) or Full Annual Subscription (£199) - giving you access to wide range of documents, packages and forms for a single annual fee.

A non-disclosure, or confidentiality agreement may also be useful to protect commercial secrets:


 
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