Joint Venture Agreement

INTRODUCTION

A joint venture agreement (“JV”) is a legal contract between two parties in order to accomplish a particular goal. It is mostly used for short term projects. Usually in such an arrangement the parties agree to pool their resources to achieve a specific activity/project and be collectively responsible for costs, profits and losses arising out of the same. However, this venture is absolutely different and separate from the other businesses of the parties.

PROCESS

1. First, it is important to ensure that all parties are comfortable in working with each other and have a clear communication mechanism.
2. Second, sharing of information particularly financial information is absolutely crucial to success and avoids any potential suspicion by either party.
3. Third, all the parties should agree to the goal of the venture with clearly established indicators for performance to help determine and solve any problems in future.
4. Fourth, it is important to keep such arrangement flexible so that it can be changed over time if need be to further improve the efficiency of the project.
5. Fifth, a dispute resolution clause is absolutely essential in the JV agreement which should also clearly outline the rights and obligations of parties, scope of JV, how it is structured, how it will be managed, staffed & financed, the type of arrangements after the completion of the project and a termination clause. There may also be confidentiality, non-compete clauses and indemnity and force majeure clauses.

ADVANTAGES / FEATURES

1. It is similar to a partnership but has no legal standing and so corporations, partnerships and other types of business can all form joint ventures.
2. It can combine both larger and smaller companies to achieve efficiency and accomplish bigger tasks than each could have done individually.
3. Unlike a partnership, it is a short term relationship only for a particular project or period of time.

DOCUMENTS REQUIRED

The information required would be the details of parties involved, scope of JV, contributions of each party to JV, details on structure of JV, details on ownership of the project, details on management and staffing of the JV.

Documents required for joint venture agreement