If you are considering setting up a joint venture there are many factors to consider to ensure that the venture has the best possible chance of succeeding.
If this is to be a corporate joint venture as opposed to a commercial collaboration (which is based on a commercial arrangement such as a collaboration agreement), then you will need to determine the corporate structure of the joint venture. You will need to determine whether the vehicle will be an existing company such as an existing subsidiary of one of the parties, or specially created. In either case the options are:
1. a limited company or unlimited company;
2. a limited liability partnership, partnership or limited partnership; or
3. an unincorporated association.
In general the entity structure will be determined by a number of factors including tax, limitation of liability, whether the structure suits the nature of the proposed collaboration and industry expectations as to the nature of entities conducting business in that sector.
You will need to consider how to finance the corporate joint venture including:
1. Whether any finance (including initial finance) will be provided by the parties, and if so in what proportions.
2. Whether there will be any third party funding, and if so, whether this will be debt and/ or equity funding, and whether any security will need to be provided in connection with the lending.
3. What arrangements will there be for funding on a continuing basis including ongoing working capital requirements and development and expansion costs.
You will also need to consider who will contribute assets and/ or services to the venture and more specifically:
1. Whether any specific assets, whether tangible or intangible (such as intellectual property) will be provided by any party.
2. If the answer to point 1 is yes, the terms upon which the assets will be contributed including outright transfer/ assignment, or a lease or licence to the venture for a fixed or indefinite term.
3. Whether any consideration or licence fee should be payable in relation to the contribution of the assets and if so the amount of such fee.
4. The tax implications of contributing such assets.
5. If appropriate in the circumstances, what due diligence investigations will need to be conducted in relation to the assets being contributed, and what warranties and indemnities will be given in this regard and to which parties.
You will also need to consider whether any of the collaborators, or alternatively any third party will be providing “back office” services to the joint venture. Such services may include general administrative services, financial/ accounting services and HR services. You should consult with your corporate solicitor to determine the scope and terms of the back office support agreement.
The parties will need to determine the terms upon which such services will be supplied, including the consideration for the provision of the services, and once agreed in principle, the terms should be included in a Services Supply Agreement.
Summerfield Browne Solicitors have offices in London, Birmingham, Oxford, Cambridge, Northampton and Leicestershire.
