Joint Venture/Shareholder Agreements

How Your Joint Venture Can Benefit from a Business Lawyer’s Advice

Joint venture agreements are effective tools that allow people to do things together which they probably could not do alone. When two or more parties want to enter into an agreement for a set period of time or complete a project, they will ordinarily enter into what is known as a joint venture agreement.

Despite the benefits of joint venture agreements, they can be incredibly complex. It is critical that you speak with an experienced business lawyer when considering or preparing such an agreement.

The Strategic Nature of Joint Venture Agreements

Joint venture agreements are usually strategic in nature. Parties may want to combine their resources, skills, networks, or funds to undertake a specific project, such as a residential development, which would be difficult if not impossible to accomplish single-handedly.

At the same time, parties in a joint venture agreement do not necessarily form one legal entity; each party is still separate and independent. This ability for parties to cooperate with each other without necessarily merging their structures or entities is one of the key benefits to such an agreement.

The different types of joint ventures include:

  • Incorporated joint ventures: This is where the different parties to a joint venture establish an independent company to be used as the vehicle to carry out its activities.
  • Unincorporated joint ventures: No separate legal entity is formed in this kind of joint venture, which is usually based on a contractual agreement. All rights and liabilities are clearly set out in the contract documents.
  • Partnerships and joint ventures: The defining feature of a partnership is that two or more parties have come together to conduct some business aimed at making profits on an ongoing basis. Partnerships are usually not created for a specific project, but have an intention to operate over a longer term. Joint ventures, however, are usually aimed at specific projects and a specific period of time. They involve two or more parties who contribute different skills or capital, but retain their independence.

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What You Need to Know About Joint Venture Agreements

Joint venture agreements can be tricky, and they must be drafted in such a way to protect the commercial, financial and legal interests of those involved.

Gavel & Page business lawyers take the time to listen to you, understand your project and intentions and deal with the key issues properly. The basic issues that we would discuss with you include:

  • The purpose or objective of the joint venture;
  • The participation and role of each party;
  • The contribution of each party;
  • The responsibilities or duties of each party;
  • Tax and financial management;
  • Dispute resolution processes; and
  • Termination of the agreement.

Our advice is always tailored to your specific venture to ensure that we cover all aspects of the agreement in the relevant documents. The rights, liabilities, legal structure, risks and obligations may vary, so it is crucial to select the most appropriate contractual documents and terms for a specific venture.

What You Need to Know About Shareholder Agreements

Establishing a company can be exciting. But ensuring that all the shareholders share a common vision and agree on the operation and procedures of the company, as well as their own rights and responsibilities, can be tricky.

Shareholder agreements, therefore, are important documents. They set out the rights, responsibilities and procedures for a company’s shareholders. Such agreements enable shareholders to run the company smoothly and efficiently, ensure good lines of communication, clarify expectations and minimise the risk of dispute.

The terms that might be included in a shareholder agreement depend on the nature of the business, the number of shareholders, the risks or concerns that the parties wish to address, the commercial terms or other agreements between shareholders, and many other factors.

Commonly, though, a shareholder agreement will address at least:

  • Decision-making and management: A shareholder agreement will always contain terms that address the position of different shareholders, the management of daily business affairs, who can make decisions about what and which procedures need to be followed when making decisions.

    It will answer questions such as, who is responsible for managing the company? How can we appoint or remove a director? When will meetings be held and how will they be conducted? What powers do the shareholders have? These items are crucial for the proper functioning and management of a company.

  • Buy-sell provisions: Such provisions set out the rights, obligations and procedures associated with buying and selling company shares in different circumstances. Who can buy or sell shares and when? Under what circumstances? How are shares valued? These and other questions are addressed in buy-sell clauses.
  • Contributions: A shareholders agreement will also spell out who is contributing what capital to the company. This wording identifies any privileges certain shareholders might have as a result of their contribution, as well as implications for those who have contributed little or nothing. This may also influence shareholding and other powers.
  • Dispute Resolution: A shareholders agreement will also outline the procedure for addressing and resolving any disputes that might arise. Disputes may not only arise from a breach of the agreement, or confusion as to the meaning of terms, but also in the event of deadlock. This can occur when shareholders are unable to vote on a particular course of action due to lack of majority vote and is particularly important in cases where there are only two shareholders.

Clear Advice on Tricky Subjects

In summary, a shareholder agreement will deal with a great number of things, with the above being merely a sample of some of the considerations and issues to be addressed.

Gavel & Page business lawyers will assist you in drafting a shareholder agreement that reflects your intentions and realises all parties’ vision, while protecting the interests of those involved.

We will advise you on all facets of the shareholder agreement and facilitate productive discussion to ensure all parties understand the implications of such an agreement. We tailor our services to meet shareholders’ specific needs and always explain matters in clear and simple language.

 

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