Joint ventures and business partnerships

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.