In an everchanging business landscape, forming strategic collaboration through a joint venture (JV) has become a common path for success.

Unlike mergers or acquisitions, JVs allow companies to retain their distinct identities while working together on shared goals. JVs can be temporary, for a particular project, or more permanent, for ongoing business operations.

Several successful JVs illustrate the potential benefits of this business model. For example, the partnership between BMW and Toyota on hydrogen fuel cell technology combines their expertise to advance sustainable automotive technology. Another notable JV is the collaboration between GlaxoSmithKline and Pfizer, creating a consumer healthcare giant by pooling their over-the-counter businesses.

A joint venture agreement (JVA) lays the groundwork for such collaborations, providing a structured approach to mutual goals, resource sharing, and profit distribution.

This comprehensive guide aims to elucidate the intricacies of JVAs, their key components, and the legal considerations under English law.

Ashley Cooper

Ashley Cooper

Solicitor | Corporate

079 1846 3238

Explore our joint venture legal services

Our team of experienced joint venture solicitors provide expert legal advice and support to clients in all aspects of these complex and dynamic areas of business.

Find out more

Understanding joint venture agreements

A JVA is a legal contract between two or more parties who agree to combine their resources and expertise to achieve a specific business objective. It outlines the terms of the partnership, including contributions, governance, profit sharing, and responsibilities. JVs can be established as separate legal entities or operate on a contractual basis, without forming a new entity.

While JVAs might sometimes be formed through verbal arrangements, seeking specialised legal guidance and creating a comprehensive written agreement is highly recommended. This document should clearly outline the duties and rights of each party, including provisions for modifying these rights.

A meticulously crafted JVA aims to pre-emptively address and mitigate potential sources of conflict through detailed and thoughtful drafting.

Key components of a joint venture agreement

  • Objective and scope: Clearly defines the project’s aims, scope of activities, and duration of JV.
  • Contributions: Details each party’s capital contributions, assets, expertise and knowledge, and resources.
  • Governance and management: Establishes the structure for decision-making structure, roles and responsibilities, operation policies and management.
  • Profit sharing and losses: Outlines how profits and losses are divided. Dealing with profit allocation, loss sharing and financial reporting.
  • Intellectual property rights: Specifies the ownership and use of intellectual property.
  • Dispute resolution: Sets forth mechanisms for resolving disagreements
  • Termination clauses: Describes conditions under which the JV can be dissolved, exit strategies and post-termination obligations.

Structuring a joint venture

The legal framework for a JV does not adhere to a one-size-fits-all model. This flexibility allows your business collaboration to adopt a structure that aligns best with your current operations and the specifics of the project at hand. There are principally two ways a JV can be formed:

Contractual JV

This type avoids the creation of a separate legal entity; instead, the terms governing the JV are encapsulated within a contractual agreement between the parties, such as each party’s rights, obligations, and contributions.

Separate JV entity

This structure establishes a separate legal entity for the purpose of the joint venture. The various forms a joint venture entity can take include:

  • Limited Liability Company: A JV can be structured as a separate company specifically formed company to fulfil the JV’s objectives. Each party holding shares in the new company and the shareholder’s liability is limited to the unpaid amount on shares. This structure provides clear governance and operational guidelines through the company’s articles of association.
  • Partnership: Partners in a JV may choose to form a general or limited partnership. A traditional partnership arrangement which involves shared responsibilities and profits but may expose partners to unlimited liability.
  • Limited Liability Partnership (LLP): This offers a flexible partnership structure with limited liability for the partners.

Given the diversity of legal structures a joint venture can embody consulting with a solicitor to determine the most suitable setup for your venture is advisable.

You might also be interested in…

Guide to joint ventures


Benefits of joint ventures

JVs offer a myriad of benefits, including access to new markets, shared resources, and enhanced capabilities. They enable companies to combine strengths, mitigate risks, and capitalise on new opportunities with shared investment and costs.

Steps to forming a joint venture

  • Identify objectives: Clearly define the goals and objectives of the JV.
  • Select the right party: Look for complementary skills, resources, and objectives.
  • Due diligence: Conduct thorough checks to evaluate potential risks and benefits, of financial health, reputation, and capabilities.
  • Negotiate terms: Agree on contributions, roles, profit sharing, exit strategies and governance.
  • Draft the agreement: Ensure it comprehensively covers all critical aspects.
  • Implementation: Set up the necessary structures and processes to commence operations.

What should be included in a joint venture agreement?

A comprehensive JVA is crucial for the success and clarity of the collaboration. It should meticulously outline all aspects of the venture, covering the obligations, expectations, and contributions of all parties involved. Key elements to include are:

Objectives of the joint venture

Clearly define the purpose, goals, and scope of the JV, ensuring all parties share a common understanding of its intended outcomes.

Contributions from each party

Detail the contributions of each party, which could include capital, assets, resources, expertise, or other valuable inputs, and specify the timing and conditions of these contributions.

Ownership and equity shares

Specify the ownership structure, including how equity is divided among the parties. This should usually reflect each party’s contribution and commitment to the JV.

Management and governance

Outline the governance structure of the JV, including the formation of any management committees or boards, their roles and responsibilities, and decision-making processes.

Profit sharing and financial arrangements

Mechanisms for sharing profits and losses, and financial arrangements such as capital contributions and funding. Include details on financial management, accounting practices, and audit arrangements.

Intellectual property

Address the ownership, usage rights, management, and protection of intellectual property created or used within the JV, including how IP contributions are valued.

Duration and termination

Define the duration of the JV, whether it’s for a specific project or an ongoing relationship and include terms under which the TV can be terminated.

Dispute resolution

Procedures for resolving disputes between the parties, including arbitration, mediation, and legal recourse options.

Roles and responsibilities

Detail the roles and responsibilities of each party, including operational roles, reporting obligations, and contributions to the JV’s success.

Confidentiality and non-disclosure

Include clauses that protect the confidential information of the JV and the parties involved, specifying what is considered confidential and the conditions under which information can be shared.

Exit strategy

The terms, conditions and processes for a party to exit the JV, including buyout clauses, sale conditions, and how assets will be divided upon dissolution.

Regulatory and legal compliance

Ensure the JVA addresses compliance with relevant laws and regulations, including any industry-specific requirements.

We are here to help

Discover how our expert corporate lawyers can help you and your business.

Contact us

Legal considerations

Creating a JV is a complex process that requires careful consideration and, often, legal advice to ensure that all potential issues are addressed in a JVA and that the agreement is in line with the strategic objectives of each party.

  • Contractual obligations: Clearly define the obligations of each party to avoid future disputes.
  • Intellectual property: Protect IP rights through appropriate registrations and agreements.
  • Employment law: Comply with employment regulations if the JV involves employees.
  • Competition law: Ensure that the JV complies with UK and EU competition laws to avoid anti-competitive practices.
  • Regulatory compliance: Obtain necessary approvals from regulatory bodies, such as the Financial Conduct Authority for financial services JVs.
  • Tax implications: Understand the tax obligations for the JV and parties.
  • Liability and risk management: Clearly delineate liabilities and establish risk mitigation strategies.

Exiting a joint venture

Planning for the eventual exit is crucial. The agreement should include termination provisions, detailing the process for winding down the JV, transferring assets, and handling liabilities.

How Moore Barlow can help

A well-structured Joint Venture Agreement can be a powerful tool for businesses looking to collaborate and achieve shared goals. By understanding the key elements and legal considerations, businesses can navigate the complexities of JVs, fostering collaborations that drive mutual success.

With the right approach, JVs can unlock new opportunities, combining the strengths of each party to achieve shared objectives and scale new heights.

Moore Barlow have vast experience in creating JVAs for our clients. We are here to guide you through every step of the process, ensuring that your JV is built on a strong legal foundation and positioned for long-term success.

Contact us to learn how we can help you

We are here to help

Discover how our expert corporate lawyers can help you and your business.

Contact us

Explore our joint venture legal services

Our team of experienced joint venture solicitors provide expert legal advice and support to clients in all aspects of these complex and dynamic areas of business.

Find out more