Important Provisions in Joint Venture Agreements

If you have a company and you’re thinking about entering into a joint venture agreement, be wary—joint ventures can lead to a host of legal problems if they aren’t done correctly. Because a joint venture often entails the sharing of resources, know-how, money, assets, and even trade secrets, you’ll want a joint venture that protects your interest.

Joint Ventures and Partnerships

Unlike a partnership that is designed to go on in perpetuity, a joint venture is a one-time project that two parties agree to collaborate on. The project can be long term, but it has a definitive goal, and when the goal is met, the joint venture is over.

Joint venturers don’t work for each other the way that partners might in partnership, and although they may be in business together for the purpose of the venture, they are not ongoing business partners the way they would be in a partnership.

Problems Faced by Joint Ventures

There are a few very common legal issues that arise in joint ventures, and which should be thoroughly addressed in any joint venture contract.

Management disputes – often, a joint venture involves two companies or people coming together to work on one project.

Joint venturers often don’t want to cede any control or authority to the other.

Both of the venturers may be used to being the “top dog” at their respective companies, but now that they are working together, there can be disputes over who has final say over what issues in the venture.

Intellectual property – Your joint venture may involve the creation of intellectual property—for example if you and another company are working together to create a new product that may have its own logo, slogan or graphics.

When the joint venture is over, who owns that intellectual property—including the right to profit from it? Ownership can be divided, but however you do it, make sure that your venture agreement spells out what happens to the intellectual property.

Dispute resolution – During the course of the venture, there will be disputes. Those disputes may involve the direction and decisions of the venture, but could also involve disputes over the joint venture agreement itself. Disputes that don’t get resolved, can end up destroying the project.

A good joint venture agreement should have provisions for alternative dispute resolution–mediation or arbitration—that can allow you to solve these problems quickly and efficiently, without stalemating the entire project.

Individual corporate documents – if two or more companies are coming together to work on a joint venture with each other, each company’s corporate documents may need to be reviewed, to ensure that the companies have the legal ability and authority to enter into the joint venture.

Whatever the formal approval processes are to enter into the venture should be followed by all companies. You don’t want a venturer trying to invalidate your agreement because they didn’t follow the corporate formalities on their end to have the joint venture formally approved by their board of directors, partners, or managing members.

Call the West Palm Beach commercial litigation lawyers at Pike & Lustig today to make sure your joint venture is being done properly, and to avoid problems later on down the road.

Source:

bloomberglaw.com/external/document/X76AU4AC000000/m-a-overview-joint-ventures-definitions-legal-issues