Joint Ventures Setting Up a Joint Venture – How We Can Help You Do It Right

At Heald Solicitors in Milton Keynes, our corporate and commercial team specializes in advising on joint ventures. We help you draft the right agreements to protect your business interests, while maintaining the flexibility needed for a successful partnership.

We have extensive experience advising clients across various sectors and take the time to understand your specific goals and objectives. This ensures that your joint venture agreement is tailored to support your business needs.

Structuring a joint venture

We’ll help you determine the most appropriate structure for your joint venture. This could be a simple joint venture or collaboration agreement, or it may be more suitable to establish a partnership or limited company.

Common Structures

While joint ventures can be structured as partnerships or consortia, the most common approach is to form a limited company. This structure clearly defines the roles of each party and often involves terms like "shareholders’ agreement" and "joint venture agreement," which can be used interchangeably in this context.

Access to these resources, along with professional legal guidance, will help you navigate the complexities of forming a joint venture and set the stage for a successful partnership.

Key Documents for Establishing a Joint Venture

Setting up a joint venture typically requires several important documents to clarify the terms of the agreement and protect the interests of all parties. These documents help ensure smooth operations and provide legal certainty.

• Non-Disclosure Agreement (NDA)
  A Non-Disclosure Agreement should be one of the first documents signed early in the negotiation phase. As JV partners exchange sensitive business information, the NDA ensures any key information remains protected from misuse. The specifics of the NDA can be negotiated, however, its inclusion is essential for safeguarding the interests of all parties.
• Heads of Terms
  Before drafting detailed agreements, parties often agree to highlight their individual expectations in a Heads of Terms document. Typically this is non-binding, however, this document serves as a foundation for the joint venture by confirming mutual agreement on key terms. To many this document may seem informal, but it is important to involve your legal and financial advisors at this stage. Obtaining tax advice at this stage can be important, especially if the parties are subject to the tax regulations in different countries.
• Joint Venture Agreement (JVA) / Shareholders’ Agreement
  The JVA is the core document that governs the joint venture between the parties. It defines the agreed terms and conditions, details how the JV will operate, and specifies the rights and obligations of each party. It also covers profit-sharing arrangements, exit strategies, and other critical provisions. Although some clauses may not be heavily negotiated (often termed “boilerplate”), it ensures legal certainty on the governing law of the contract.
• Articles of Association
  Often a “joint venture” will be set up as a JV company, and the Articles of Association will govern the company’s internal operations and will be registered at Companies House. The Articles typically address board appointments, director responsibilities, decision-making processes, share transfer restrictions, and dividend policies. These provisions complement the JVA and work together as the governing documents of the JV. The provisions out in the Articles of Association are generally included directly in the JVA if no JV company is formed.
• Ancillary Documents
  In addition to the primary agreements, there are often additional documents that will need to be drafted, such as; board meeting minutes, shareholder resolutions, stock transfer forms, and official filings with Companies House.

Risks of Proceeding Without a Proper Joint Venture Agreement

Without a well-drafted joint venture agreement, several issues can arise, leading to frustrations between the parties. Here are some potential situations to try and avoid:

• Shareholder Disputes and Financial Mismanagement
  Consider what could happen to a rapidly expanding company that took on new partners and issued shares without an effective agreement in place. What if internal conflicts may escalated, compounded by personal disputes? The need for clear terms in place is paramount to resolving conflicts and preventing financial instability and potential legal action.
• Loss of Majority Control
  Consider a majority shareholder who decides to give shares to an employee, unknowingly diluting their own control. Without a formal agreement, this gesture can lead to substantial financial loss and reduced control when the shareholder decides to retire and sell their own shares.
• Challenges in Succession Planning
  What if there were two equal shareholders, and then one of them passes away, especially if there is no buyout or life insurance plan in place. The surviving shareholder may have problems purchasing the deceased partner’s shares, or may be forced to sell the shares below value, or retain them but have no means by which to influence the manner in which the company is operated.

The importance of a well-drafted joint venture agreement is critical to the success of your JV. Without a comprehensive agreement, even small issues can escalate into major financial and legal challenges. Having a solicitor at your disposal that can draft the appropriate documents for your Joint Venture is one of the most important safeguards, that helps protect your interests and ensures the long-term success of your venture, and is why many businesses trust Heald Solicitors to act for them.

If you wish to talk to an expert Joint Venture solicitor, please get in touch and take the next step.