How to Write a Joint Venture Agreement
Write a joint venture agreement by defining the JV's purpose and scope, the parties' contributions (capital, IP, services), governance and decision-making structure, profit and loss sharing, deadlock resolution, and exit mechanisms.
Last updated: February 2025
Step-by-Step Guide
Define the JV's purpose and scope
Clearly state what the joint venture will do, its geographic scope, and any activities that are excluded.
- •A narrow, well-defined purpose reduces the risk of future disputes.
Agree contributions and ownership
Set out each party's contributions (cash, IP, personnel, assets) and the resulting ownership split.
- •Value non-cash contributions carefully and document the valuation methodology.
Establish governance and decision-making
Define the management structure, board composition, voting rights, reserved matters requiring unanimous consent, and day-to-day management authority.
- •List reserved matters explicitly (e.g. budgets over a threshold, new contracts, hiring).
Set profit distribution and funding obligations
State how profits and losses are shared, when distributions are made, and how additional funding requirements are handled.
- •Include provisions for what happens if one party cannot or will not fund their share.
Include deadlock resolution and exit mechanisms
Provide for deadlock resolution (escalation, mediation, put/call options) and exit provisions including tag-along, drag-along, pre-emption rights, and dissolution.
- •A 'Russian roulette' or 'Texas shoot-out' clause can resolve deadlocks efficiently.
Address competition restrictions and IP
Include non-compete provisions preventing parties from competing with the JV, and clarify IP ownership (background IP stays with contributors; new IP belongs to the JV).
- •Clearly distinguish background IP from JV-created IP.
Legal Requirements
JV agreements must comply with the Competition Act 1998 and may require CMA notification if turnover thresholds are met. If structured as a separate company, Companies Act 2006 applies. Partnership Act 1890 may apply if no separate entity is formed. Tax structuring should consider corporation tax, VAT, and potential stamp duty implications.
Common Mistakes
Template / Example
When to Get a Solicitor
Always. Joint ventures involve complex company law, tax, competition law, and commercial considerations. Professional advice is essential for both parties.
FAQ
Should a joint venture be a separate company?
Not necessarily. JVs can be structured as a new company, a partnership, or a purely contractual arrangement. A separate company provides limited liability and a clearer governance framework but involves incorporation costs and Companies Act compliance.
What happens if the JV parties cannot agree on a decision?
The JV agreement should include a deadlock resolution mechanism, such as escalation to senior management, mediation, or a buy-sell (put/call) option. Without such provisions, deadlock can effectively paralyse the venture.
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