What Is Included In A Joint Venture Agreemen...

Joint venture agreements are for use when a group of individuals or a group of companies want to collaborate on a project, or form an entirely new company together, but also want to retain a separation legally to continue with other business activities separately, making a partnership inappropriate.

Each joint venture agreement will be different, tailored to the requirements of the parties and the objective of the venture, which is why it is important to have a professional and experienced corporate expert to sit down and asses your needs for a JVA that supports the venture and covers the necessary items.

Although each JVA is unique, we have compiled below a guide on some of the features of a joint venture agreement that will be covered and the various formats of the agreement available.

Items Covered Within A Joint Venture Agreement

Finance

The agreement will cover items specific relating to funding but also to the physical accounting involved such as;

Specific requirements of the parties in terms of compliance, auditing and accounting
Access to the new company’s accounts and compliance records
The individuals responsible for the company’s accounts, auditing and compliance checks
Direction on anticipated accounting and consolidation issues

Management

The joint venture agreement will cover various aspects as to the management of the company being set up, or management of the project undertaken by the various parties.

The majority of joint venture agreements are put in place for the formation of a new company by multiple parties and it is in this case that it will cover some of the following;

The employees of the agreement and their roles & responsibilities (if it is the case that the company formed will be taking on its own employees)
The powers of those involved in the agreement in terms of making appointments, dismissals and votes etc
Any specific requirements of the parties in terms of management, communication, meetings etc
How disputes are to be dealt with and if shareholders’ approval is required before processing important decisions
Voting rights and casting votes at meetings should they be unable to reach an agreement.
The structure of the board

Shares

Items relating to shares will also form a large part of the joint venture agreement, covering some of the following items;

The dividend policy
Shareholders liability as to the company debts and obligations
Borrowing policy of the new company
Items relating to funding, initial funding of the venture and shareholders funding
Company budgets and business plans
The equity held between the parties
Shareholders powers

Tax

The agreement will also briefly cover taxation issues and if necessary go into more detail regarding tax such as;

If there are any special requirements from the involved parties in terms of tax
The individual providing tax advice and responsible tax management

Exit strategy

The joint venture agreement will always cover:

An exit strategy for all parties and provide guidance as to the distribution of the capital and profit in the event of the sale of the company
How long will the joint venture last, and any fixed terms
If the shareholders have the ability to exit the venture early
The ability of the shareholder to transfer shares to another party if they wish to leave early
Drag along and tag along rights of the shareholders
Any pre-emption rights of the shareholders

Other items

As well as specific items in relation to the various parties’ interests the agreement will also be likely to cover some of the following;