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Top 3 legal considerations of a joint venture

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What is a joint venture?

A joint venture is a business arrangement where the parties agree to develop – for a prescribed time – a new entity and new assets by contributing equity. They exercise control over the enterprise – and consequently share revenues, expenses and assets. 

Possible forms for a joint venture

The four forms reflect varying degrees of integration of the interests of the parties in the JV. 

  1. A limited liability company.
  2. A limited liability partnership (LLP).
  3. A partnership (or limited partnership).
  4. A purely contractual co-operation agreement

Legal Considerations

No Specific Laws

In England, there is no law relating specifically to joint ventures. The relationships between the parties involved will be subject, depending on the structure chosen, to an amalgam of the general common law rules, the substantive provisions of company and partnership law as well as tax law and competition law amongst others.

Limited Liability 

The most significant advantage of a company is perceived to be the ability of participants to limit their liability in respect of liabilities and losses of the joint venture business.

However, unless the joint venture is creditworthy in its own right it is unlikely that the shareholders will be able to avoid having to support the joint venture through the provision of guarantees or other assurances to third parties.

Directors’ duties 

Directors of a JVC are generally nominated by the participants. Therefore, a director may find himself in situations where he faces a conflict between the interests of the joint venture and those of the particular participant who nominated him.

Call our joint venture agreement specialists  in Manchester 0161 820 8888 or call 0208 889 8888 for our solicitors in London. We will happily provide a free 30-minute consultation on your matter. Give us a call today!

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