When can you conclude a Joint Venture Agreement?
If you want to develop new products, gain more knowledge, expand your business, achieve economies of scale or have any other reason to work with one party, you may consider entering into a joint venture agreement with another party. You can of course also be approached by a company that wants to expand its activities by cooperating with you. In either case, you can opt for a joint venture and enter into a joint venture agreement. The joint venture agreement regulates the main points on which the cooperation is based.
Why do you need to enter into a Joint Venture Agreement?
As stated above, a joint venture is a collaboration between two different companies. Usually the parties cooperate because they are mutually dependent on each other. For example, it often happens that one party provides the knowledge and the other party the skills. However, strict agreements must be made about this, such as who ultimately owns the knowledge that is shared (also known as know-how) or how the profits are distributed. Furthermore, it is also very important to establish what the mutual expectations are within the framework of the cooperation. By laying down mutual expectations, the parties know from each other what needs to be met and can take action if the expectations are not met. Because there are no provisions in Dutch law regarding the joint venture agreement, there is no catch-all if the parties do not make any arrangements themselves. Moreover, under a joint venture you enter into a cooperation agreement, as a result of which you no longer have full control. It is therefore important to be able to fall back on something when conflicts arise. That is why it is always wise to involve a lawyer when you decide to start up a joint venture.
Placing a joint venture in a capital company
If the joint venture is incorporated into a capital company (private or public limited liability company), the joint venture agreement will be laid down in a shareholders' agreement, and in the articles of association of the company to be incorporated. If the shareholders of the company to be incorporated do not agree on a dispute, a deadlock situation may arise. It will not be possible to take a decision because the vote leads to a 50/50 ratio. In order to avoid deadlocks, it is of great importance to regulate in the joint venture agreement how deadlock situations can be resolved; deadlock situations can be resolved by making use of so-called escalation arrangements.
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Our legal counsels come up with practical solutions and have a feeling for commercial relationships. If you would like support in drawing up your joint venture agreement, please feel free to contact us.