Joint venture agreement

curl -X POST https://dealroom.todo.law/api/v1/agent/contracts \
  -H "Authorization: Bearer drk_YOUR_KEY" \
  -H "Content-Type: application/json" \
  -H "Idempotency-Key: $(uuidgen)" \
  -d '{
    "contractType": "JOINT_VENTURE",
    "governingLaw": "ENGLAND_WALES",
    "language": "en",
    "party": {
      "legalName": "Your company"
    },
    "counterparty": {
      "legalName": "The other company"
    },
    "terms": {
      "jv-name": "<jv-name>",
      "jv-purpose": "<jv-purpose>"
    },
    "inline": "md"
  }'

What it is and when it is used

A joint venture agreement is used when two businesses decide to pursue a business purpose together, sharing contributions, control and results, while each remains an independent business. Typical cases are project consortia in construction, engineering and public tenders; a new company set up to house a joint business; research or specialisation cooperation between actual or potential competitors; and market entry by partners with complementary assets.

The agreement fixes the venture's purpose and territory from the start and governs it until it is wound up. Where the venture is a company, its constitutional documents and any shareholders' agreement should follow the same terms; see the shareholders agreement.

Who signs it and in which role

Two partners sign:

• The Lead JV Partner (party A).
• The Co-JV Partner (party B).

The parties give the venture a name and describe its purpose (both required), and may add each partner's initial capital contribution, the ownership split (50/50 by default), the initial term in years (5 by default) and the territory.

Key clauses

JV structure

A purely contractual joint venture with no new entity, each partner acting in its own name; a new limited liability company (an LLC in California, a private limited company in England and Wales, a sociedad limitada in Spain); a general partnership with shared management and unlimited joint liability; or, in Spain only, a UTE, which has no legal personality of its own and whose members answer jointly and without limit to third parties.

Capital contributions

Equal cash contributions, contributions in proportion to each partner's agreed ownership, or contributions in kind (intellectual property, assets or services) valued at an agreed amount.

Management and governance

Equal votes on all management decisions whatever the ownership split, day-to-day control by the partner with the larger stake subject to matters reserved to both, or a board of managers with equal representation and an independent chair.

Profit and loss sharing

In proportion to ownership, partly by performance measured against agreed indicators, or a preferred return on one partner's capital before profits are split, followed by a catch-up.

Major decision thresholds

Unanimity for major decisions, a 75% supermajority (which in a two-partner venture means both unless one holds more than 75%), or decisions by both partners with a structured escalation and deadlock-breaking mechanism.

IP contributions

Each partner licenses its intellectual property to the venture for the venture's purpose only and keeps ownership; the partners assign their contributed IP to the venture entity; or the IP is licensed to the venture exclusively and reverts to the contributing partner on dissolution or the other partner's exit.

Non-compete

A full non-compete during the term with a 12-month tail after it, a non-compete limited to the field of the venture's purpose, or no restriction. The skill marks the tail as going beyond the EU safe harbour for ancillary restraints.

Exit mechanisms

A buy-sell (shotgun) clause, put and call options (a put for the minority partner and a call for the majority partner), or a right of first refusal.

Term and dissolution

A fixed term with renewal only by agreement, an indefinite term until a partner gives notice of exit, or a term that ends when the project or objective is completed.

Dispute resolution

Binding arbitration, mediation followed by arbitration, or the exclusive jurisdiction of designated courts.

The standard terms also cover good faith and fiduciary duties, books and records, insurance, tax matters and anti-corruption compliance.

What the two sides usually negotiate

In this skill most options are close to neutral, because a joint venture is a partnership of equals more than a buyer and a seller. The real differences lie in control and economics. The lead partner generally prefers majority control of day-to-day management, a preferred return on its capital, a contractual structure and a supermajority threshold it can reach. The co-partner generally prefers equal voting, unanimity for major decisions and a general partnership with shared management.

When the two sides disagree, Dealroom proposes the balanced positions in the skill:

• Structure: a new limited liability company (or the UTE, in Spain).
• Capital: equal or proportional cash contributions.
• Governance: an independent board with equal representation.
• Profits: pro rata to ownership, or performance-based.
• Decisions: the structured deadlock mechanism.
• IP: a licence to the venture, each partner keeping ownership.
• Exit: the buy-sell clause.

The term and dispute resolution options are all neutral, so the choice depends on the project. On non-compete, the full restriction is the option with neutral weighting, but the skill flags its 12-month tail for competition law review; the field-limited non-compete is the safer middle.

Jurisdictions and languages Dealroom supports for it

Dealroom drafts this agreement under the law of California, England and Wales and Spain, in English or Spanish.

• California: an entity venture is formed as a California LLC; the partners' fiduciary duties may be shaped but not eliminated; disputes go to the courts of San Francisco County. Restrictions between businesses during the term are judged by a rule of reason, but a post-term restriction must never limit an individual's profession.
• England and Wales: an entity venture is a private limited company with a separate shareholders' agreement on the same terms; a partnership follows the Partnership Act 1890; liability for fraud is never excluded. Non-competes are tested under competition law and the common-law rule on restraint of trade.
• Spain: the agreement applies the Civil Code and, where relevant, the Capital Companies Law. A sociedad limitada is backed by a pacto de socios; contributions in kind need no expert report, but the partners answer jointly for their valuation. A UTE is formed by public deed, registered with the tax authority, has no legal personality and lasts only as long as its project, within a statutory maximum. Any non-compete must comply with EU and Spanish competition law, or it is void. Disputes go to the courts of the venture's registered office or, failing that, the lead partner's.

Common mistakes

• A post-term non-compete between the partners with no competition-law analysis. In the EU and the United Kingdom it needs its own justification and can be void.
• Forgetting the UTE for a Spanish project consortium, or using it outside Spain. It exists only under Spanish law.
• Combining a UTE with an indefinite term. The law ties its duration to the project; choose a project-based or fixed term.
• Leaving jointly owned new IP to the default rules. The defaults differ between the United States, the United Kingdom and Spain; regulate exploitation expressly.
• Ignoring inadvertent partnership. A purely contractual venture can be treated as a partnership by conduct, with joint liability.
• Citing the expert-report rule for in-kind contributions to a sociedad limitada. That rule applies to a sociedad anónima; in a sociedad limitada the partners answer jointly for the valuation.