Guide

Joint ventures and business partnerships

Create a joint venture agreement

When you decide to create a joint venture, you should set out the terms and conditions in a written agreement. This agreement may help prevent any misunderstandings once the venture is up and running.

Joint venture agreement: key clauses

A written joint venture agreement should outline the issues surrounding the formation of the joint venture, and the legal rights and obligations between the parties.

The joint venture agreement should cover:

  • the structure of the venture, eg if it will be a separate business in its own right
  • the name and objectives of the joint venture
  • the term of the venture and any possible extensions to the duration
  • the capital contributions you will each make, such as cash or property
  • circumstances where withdrawal of capital may be permitted, with or without consent
  • the assets or employees you may transfer to the joint venture
  • ownership of intellectual property created by the joint venture
  • management and control duties, eg responsibilities and processes both parties will have to follow
  • the distribution of profits through dividends or cash payments
  • the distribution of losses and liabilities
  • how any disputes between the partners will be resolved
  • an exit strategy for dissolution and liquidation of the joint venture - see more on ending a joint venture

You may also need to agree on other issues, such as:

  • confidentiality - to protect any commercial secrets you disclose (see non-disclosure agreements)
  • insurance - against loss where reasonable and especially if it is standard practice in the industry
  • indemnification for both parties in the venture

Multi-party joint venture agreements

Multi-party joint ventures are generally very complex, particularly around corporate governance, supermajority requirements, dilution and exit rights.

Whether you are entering into a two-way joint venture or a multi-party agreement, it is essential to get independent legal expert advice before you take any final decisions on your joint venture. See how to choose and work with a solicitor.