Corporate joint ventures are a popular way to explore a business idea and/or to provide for funding and can be an alternative to an acquisition or sale. When two businesses combine for a common purpose getting the framework right and ensuring that a full agreement on investment, profit and exit is secured will make all the difference to a successful project.
Our experience is that those joint ventures which clearly identify what each party is going to bring to the venture and what they will do afterwards are the most successful. We have worked on advising on and drafting joint venture business plans, which should be commercial but enforceable, as well as the joint venture agreement itself, which should deal with the legal requirements for each party. Joint ventures will essentially fall in one of two categories: structural joint ventures, where a distinct entity is set up through which the joint venture business is run; and commercial joint ventures, where the parties co-ordinate and co-operate in a designated business venture without the formation of a stand-alone vehicle. As well as drafting and advising on the joint venture documentation itself, we can also advise on the suitability and the advantages and disadvantages of the different options for the structure of a joint venture.
Where a special purpose vehicle is to be used for a joint venture, then you will need to consider a range of issues relating to ownership, decision-making process, funding, distribution policy and exit. Many of these issues will also be relevant to commercial joint ventures as well. The respective obligations of the joint venture parties will also need to be clearly set out and careful consideration given to ensure that the exit by one party will not destroy the business as a variable proposition. Many joint venture companies are 50/50 owned and are therefore, by their very nature, prone to deadlock. Strict and timely dispute resolution provisions are, therefore, essential and, ultimately, if deadlock continues, it is essential that a mechanism exists which can resolve this satisfactorily - normally this would involve a process enabling one party to buy-out the other.
If you would like to speak to someone about joint ventures please contact:-
Yavan Brar in our Wokingham office on 0118 977 4045 or email yavan.brar@herrington-carmichael.com or Nick Hothersall in our Camberley office on 01276 686222 or email nick.hothersall@herrington-carmichael.com