The initial decision in setting up a corporate joint venture is to determine which legal entity will be most suitable for your proposed collaboration.
The four most common legal structures are: (I) a private company limited by shares; (ii) a private company limited by guarantee; (iii) a limited liability partnership: and (iv) a general partnership. Once this decision has been made, the next phase in setting up the joint venture is to determine what practical matters need to be considered and evaluated to enable the joint venture to commence trading and include the following:
1. If the joint venture company ("JVC") will be using the intellectual property of any of the founding collaborators, then the parties will need to agree whether the intellectual property is to be assigned (transferred) or alternatively licensed from the founding collaborators. In either case it will be necessary for the parties to enter into a formal agreement which will include the following points: (I) the parties will need to determine if there is to be any consideration or a licence fee payable in relation to the transfer or licensing of the intellectual property; and (ii) it is important to ensure that if the joint venture terminates for whatever reason then in the event of an assignment, the intellectual property can be transferred back to the relevant founding collaborator or alternatively in the case of a licence, that the licence terminates.
2. Will the JVC be sourcing any products or components from any of the founding collaborators? If so then the parties should agree formal arrangements that include provisions such as: (I) price and payment terms; (ii) what happens in the event that the products are defective;(iii) what happens if the defective products cause loss or damage to the JVC; (iv) what happens in the event the joint venture terminates.
3. Will any of the founding collaborators be providing back office support to the JVC? Back office support includes accounting/book keeping support, general administrative support, HR support, IT support etc. If this is the case then the relevant parties will need to agree the terms of a service support agreement which will include: (I) nature and scope of the services to be supplied: (ii) price and payment terms: (iii) what happens in the event that the services are not supplied in accordance with agreed parameters/ service levels.
4. The founding collaborators should consider agreeing the terms of a shareholders agreement. A shareholders agreement is a very important document and it details the rights and obligations of the shareholders. Unlike the Articles of Association of a company which are a matter of public record and are registered with Companies House, a shareholders agreement is a private document and its terms are not in the public domain. I shall consider the main terms of a shareholders agreement in a separate article, however it is very important to consider default provisions in the shareholders agreement which determine what will happen to the JVC in the event that the parties decide to terminate the joint venture.
5. The founding collaborators should also consider registering the trading name/ brand name as a trade mark. In the first instance the parties should undertake a search of the trade marks register at the Intellectual Property Office website to determine if there are any prior registered similar or identical trade marks, registered in relation to similar or identical goods and services. If this is the case then such prior registrations may prevent a successful registration application. You can either make an application via the Intellectual Property Office website or alternatively you can use a solicitor or trade mark agent.
6. You should ensure that the JVC has suitable insurance, including the following policies, where appropriate: (I) Public liability insurance; (ii) Employers liability insurance: (iii) Professional Indemnity insurance; and (iv) Directors and Officers Liability insurance.
About the Author:
The author, Christian Browne is a business solicitor and the Managing Director of Summerfield Browne Solicitors (http://www.summerfieldbrowne.com
). Christian Browne is also a legal advisor with the Institute of Directors in London.