Commercial Law

Joint Ventures, Partnerships and Shareholder Agreements

A Joint Venture Agreement involves two or more people or entities collaborating on a project, combining their resources to achieve a set goal and once achieved, they share the output/profit of the project. It is effectively a business agreement in which the parties agree, for a finite time, to develop a new entity and/or assets by contributing equity. It differs from a Partnership Agreement in that a Joint Venture has an end date in mind where the parties will realise the profits and then part ways. Often, a large company can decide to form a Joint Venture with a smaller business in order to quickly acquire critical intellectual property, technology, or resources otherwise hard to obtain, even with plenty of cash at their disposal.

A Partnership Agreement is significantly different from a Joint Venture Agreement – although the term “partnership” is used loosely in the business sector, it has a more concise legal definition. A partnership is a business relationship in which the partners are jointly liable for all expenses and legal liabilities undertaken in the project. In a Joint Venture Agreement, the parties are liable for their own debts and share the benefits equally when completed.

There are several forms of partnerships, and although they can be verbal, it is always best to make sure that all agreed terms are in writing and are signed by all the parties included in the partnership.

• A general partnership is one where all partners are equally responsible for the administration of the business, and each party has unlimited liability for the debts and obligations it may incur. This ultimately benefits the organisation as these agreements can bind the shareholders and maintain ongoing share value.
• A limited partnership is one where the liability of one or more partners for the debts and obligations of the business is limited. A limited partnership consists of one or more partners (whose liability is unlimited) and one or more limited partners (whose liability is limited in proportion to their investment). Another branch of a limited partnership is an incorporated limited partnership, which is a distinctive form of limited partnership and is generally utilised in high-risk venture capital projects.

Another collaborative corporate agreement is known as a Shareholder Agreement. Shareholder agreements are contracts between some or all of the shareholders of a company in which they agree to exercise some of their rights as shareholders – these include, but are not limited to: compulsory sell agreements, compulsory buy agreements and compulsory buy/sell agreements. This ultimately benefits the organisation as these agreements can bind the shareholders and maintains ongoing share value.