Joint ventures are arrangements where two parties (or, sometimes, more) come to an agreement to pool their resources to achieve a specific outcome. It could be a project, long-term partnership, or simply a way of providing customers with a service they want, or have come to expect.
Joint ventures exist as an alternative to business mergers or acquisitions, are often time-sensitive and always governed by contractual agreement. Where they succeed, contractual obligations denote the proportion of profit each party enjoys and where they fail, a joint venture agreement clearly outlines the latitude for loss each is obliged to absorb.
All partnerships and companies with multiple distinct shareholders or members technically qualify as joint ventures (they signal collaboration between two or more legal or natural persons with the aim of conducting a shared business). In each case the purpose is to maximise the opportunity for growth while also helping de-risk the return on their investment.
There are, however, many risks in establishing joint ventures. One of the key concerns relates to the sharing of confidential and commercially sensitive information and business secrets among joint venture partners who are often competitors.
To find out more about de-risking, structural considerations and how they operate in practice, please click on the links below:
Reproduced with permission from Law Business Research Ltd. Getting the Deal Through: Joint Ventures 2019, (published in December 2018; contributing editors: Gavin Williams and James Farrell, Herbert Smith Freehills) For further information please visit gettingthedealthrough.com