Setting up a corporate joint venture—initial considerations
Setting up a corporate joint venture—initial considerations

The following Corporate guidance note provides comprehensive and up to date legal information covering:

  • Setting up a corporate joint venture—initial considerations
  • Initial considerations
  • Structure
  • Parties’ interests in and contributions to the joint venture
  • Parties' returns
  • Accounting and tax treatment
  • Accounting
  • Tax
  • Preliminary legal requirements
  • Preliminary documentation
  • more

The law as set out in this Practice Note may be affected by Brexit. For further details of its impact, see Practice Note: Brexit—impact on corporate joint ventures.

Initial considerations

There are a number of matters that parties to a proposed joint venture should consider before entering into formal legal documentation. These include:

  1. which structure to use for the joint venture

  2. the parties’ respective interests in and contributions to the joint venture (including extraction value)

  3. the accounting and taxation treatment of the joint venture

  4. whether any legal requirements must be complied with before the joint venture can be established

  5. preliminary documentation such as confidentiality agreements, exclusivity agreements, heads of terms and/or business plans, and

  6. due diligence

Structure

There is no particular prescribed structure for a joint venture under English law. Possible joint venture structures include:

  1. corporate joint ventures, ie establishing a separate limited company of which each party is a shareholder

  2. partnerships (general, limited or limited liability), and

  3. joint ventures established entirely via a contractual relationship

The choice of joint venture vehicle will depend on the individual circumstances of the parties.

Please see Practice Notes: Setting up a joint venture—choice of structure and Forms of business vehicle.

If the parties decide to use a limited company for their joint venture (the JVC), they will need to decide whether to:

  1. use an