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What is a joint venture

Aug 09, 2013

The term joint venture has no specific meaning in English law. It describes a commercial arrangement between two or more economically independent entities.

Parties may choose to enter into a joint venture to share costs on a significant project or as part of their strategic planning in particular industries or markets. The reasons for establishing a joint venture will vary from case to case.


The parties will need to decide whether to establish a separate legal entity as a vehicle for the joint venture. The four basic legal forms are:

·         Limited liability Company.

·         Limited liability partnership.

·         Partnership (or limited partnership).

·         A purely contractual co-operation agreement.


The corporate structure is often the most appropriate medium through which to conduct a business joint venture. As a separate legal entity, the joint venture can own and deal in assets and contract in its own right.

The main documents required to establish a corporate joint venture will be the joint venture agreement or shareholders' agreement and the company's articles of association. These documents should cover, between them, a number of constitutional aspects of the joint venture company and its day-to-day operations, including:

·         The scope and purpose of the joint venture.

·         How the joint venture is to be managed.

·         The division of power between the parties and the extent of their influence over the management of the joint venture.

·         The capitalization and financing of the company, including the respective contributions of the parties to the venture.

·         The terms on which any party can transfer its shares to a third party.

·         How to deal with disputes and deadlock between the parties.

·         The circumstances in which the joint venture will terminate, including the mechanics and implications of termination.


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