Before you sign
A joint venture agreement sets out how two or more businesses (or individuals) will work together on a shared project. It usually covers what each of you puts in, who makes which decisions, how profits and losses are shared, who owns what the venture creates, whether you can compete with it, and how it ends. The venture might run through a new company that you each hold shares in, or simply under a contract between you. Either way, the agreement is where those answers are fixed.
Most JV problems come from things that were assumed rather than agreed. The partner putting in cash tends to expect control in proportion to it, while the partner bringing know-how or customers expects to be treated as an equal. One side assumes it is free to run competing projects, the other assumes the venture is exclusive. And in a 50:50 venture, nobody has worked out what happens when you disagree on something important and neither of you can outvote the other.
The review reads your agreement from your side and rates each clause: governance and reserved matters, contributions and funding, profit share, IP, restrictions on competing, deadlock and exit. It flags what’s missing and suggests wording you can send back. The full report is £49 + VAT.
Why it’s worth checking
Joint ventures are usually agreed when everyone is at their most optimistic, which is when nobody wants to raise the awkward questions. The agreement is where those questions get answered, and it’s far easier to answer them before money has gone in than once a disagreement has started.
Take a hypothetical. Say two companies set up a 50:50 JV company to bid for contracts. One brings the client relationships, the other the funding and an operations team. Eighteen months in, the funder wants to expand into a new region and the other side doesn’t. If expansion needs both shareholders’ consent and the agreement has no deadlock procedure, nothing happens: the board can’t decide, the shareholders can’t decide, and the way out is a negotiated buyout or, at worst, an application to court to wind the company up. A deadlock clause agreed at the start (escalation to senior people, then mediation, then a buy-sell mechanism) gives both sides a route through.
IP is the other big one. If the agreement doesn’t say who owns what the venture develops, ownership follows the general law, which usually means whoever created it or their employer. That may not be the result either of you expected. Joint ownership isn’t the easy answer it looks like either: under English law a joint owner of a patent, copyright or registered trade mark generally can’t license it to a third party without the other owners’ consent, so you can end up with IP that neither of you can exploit properly once the venture is over. The agreement should deal separately with background IP (what each party brings in) and foreground IP (what the venture creates), and say what licences each side gets during the venture and afterwards.
Contributions need pinning down in the same way. Cash is easy to value; staff time, equipment, introductions and know-how are not. If the agreement says what each party must contribute, by when, and what happens if someone falls short, you avoid a later argument about who has pulled their weight. It should also say who funds the venture if it needs more money, because a partner who can’t or won’t put more in may be diluted, or the venture may stall.
Structure matters too. If you don’t set the venture up as a company or LLP and you are in fact carrying on a business together with a view to profit, the law may treat you as partners under the Partnership Act 1890, whatever you call the arrangement. Partners can bind each other and are personally liable for the partnership’s debts. A clause saying the agreement doesn’t create a partnership helps, but it doesn’t settle the question on its own; what you actually do counts as well.
Finally, exit. A venture with no exit route can leave a partner stuck in something that isn’t working. Look for what triggers an exit (a fixed term, completion of the project, material breach, a change of control of one partner, insolvency), who has the right or the obligation to buy the outgoing party’s stake, and how the price is worked out.
Key terms to look for
Purpose and scope
What the venture is for and what falls inside it. A tight definition matters, because exclusivity, non-compete and profit share usually hang off it.
Contributions
What each party must put in (cash, staff, equipment, customers, know-how), by when, how non-cash contributions are valued, and what happens if someone doesn’t deliver.
Profit and loss sharing
How profits are shared and when they are paid out, how losses are borne, and who funds the venture if it needs more money.
Governance and decision-making
Who runs the venture day to day, who appoints the board, and which reserved matters need every party’s consent.
Intellectual property
Who owns the IP each party brings in, who owns what the venture creates, and what licences each side has during the venture and after it ends.
Exclusivity and non-compete
Whether the parties can run competing businesses during the venture and for how long afterwards. Restrictions must be reasonable to be enforceable.
Exit and termination
What ends the venture or lets a party leave, who can buy whose stake, how the price is set, and how assets and liabilities are dealt with on a wind-down.
Dispute resolution
Escalation, mediation or expert determination before anyone goes to court or arbitration, and a separate procedure for deadlock.
Common mistakes
No clear governance structure or decision-making authority
If the agreement doesn’t say who can decide what, one partner will eventually commit the venture to something the other didn’t agree to. The agreement should list the reserved matters that need everyone’s consent (new borrowing, big contracts, changes to the business plan, bringing in new partners) and leave the rest to whoever runs the venture day to day.
Undefined or unfair contribution valuations
When one party brings cash and another brings people, customers or know-how, the relative value needs agreeing at the start, along with how it translates into ownership and profit share. Otherwise resentment builds, and there’s nothing in writing to settle whether each side has done what it promised.
No deadlock resolution mechanism
In a 50:50 venture, or wherever each side has a veto, a disagreement on a reserved matter can freeze the business. Common fixes are escalation to senior management, mediation, expert determination for technical questions, a chair’s casting vote (which hands one side control), or a buy-sell clause where one party names a price and the other must either buy or sell at it.
Unclear IP ownership and rights
Silence leaves ownership to the general law, which may not match what either side expected. Joint ownership is often worse than it sounds, because a joint owner generally can’t license the IP to a third party without the other owners’ consent. The agreement should say who owns background and foreground IP and what each party can do with it during and after the venture.
No clear exit mechanism or wind-down provisions
Without an exit route, a partner may be stuck in a venture that isn’t working, or the other side may be left with a departing partner’s stake held by someone they didn’t choose. The agreement should cover how a party can leave, what happens to its stake and at what price, and how assets, IP, contracts and liabilities are dealt with if the venture ends.
Best practice
Before signing, make sure the agreement records exactly what each party is contributing and by when, how non-cash contributions are valued, and how all of that translates into ownership and profit share. Say who provides further funding if the venture needs it and what happens to a party that doesn’t.
Agree the governance before you start. List the reserved matters that need everyone’s consent, say who runs the venture day to day, and include a deadlock procedure that ends somewhere, whether that is a buy-sell clause, a sale of the venture or a managed wind-down. Deal with IP properly: who owns what each party brings in, who owns what the venture creates, and what licences each side keeps once it ends.
Be clear on exclusivity. If partners mustn’t compete, say what counts as competing, where, and for how long, and keep it to what is reasonable to protect the venture, because an unreasonably wide restriction may not be enforceable. Finally, set out the exit routes, how a departing party’s stake is valued, and a dispute process that starts with escalation or mediation before anyone reaches for litigation.
Questions
What is the difference between a joint venture and a partnership?+
“Joint venture” isn’t a legal structure in English law; it just describes businesses collaborating on something. A JV can be run through a jointly owned company, an LLP, or simply a contract. A partnership, by contrast, has a legal meaning: under the Partnership Act 1890 it exists wherever people carry on a business in common with a view to profit, whether or not they intend it. That matters because partners can bind each other and are personally liable for the partnership’s debts. If your JV isn’t a company or LLP, check that the agreement and the way you actually operate don’t turn it into a partnership by accident.
Who owns intellectual property created during a joint venture?+
Whatever the agreement says. Common arrangements are that each party keeps its own background IP and licenses it to the venture, and that new IP belongs to the JV company, to the party that created it, or to both jointly. If the agreement is silent, ownership follows the general law, which usually means whoever created it or their employer. Joint ownership can be awkward, because a joint owner generally can’t license the IP to a third party without the others’ consent, so the agreement should spell out what each party can do with it during and after the venture.
What happens if one partner wants to leave the joint venture?+
That depends on the agreement. Some allow a party to leave on notice; others lock everyone in for a fixed term or until the project is finished. Where the venture is a company, a departing party’s shares may have to be offered to the others first (pre-emption), may be sold to an outsider only with consent, or may be subject to compulsory sale on events such as breach or insolvency. The agreement should say how the price is set, for example by an independent valuer. Without clear exit terms, a partner who wants out may be stuck, or may leave in a way that damages the venture.
What if two equal partners cannot agree on a decision?+
That is a deadlock, and the agreement should say what happens. Typical steps are referral to senior management of each party, then mediation, and for technical or valuation questions, an independent expert. If that fails, the agreement might give the chair a casting vote, allow one party to trigger a buy-sell process where one side buys the other out, or provide for the venture to be sold or wound up. Without a mechanism, an equal venture can be stuck until the partners negotiate a way out, and for a JV company the last resort may be asking the court to wind it up.