Whilst setting up a joint-venture, emphasis should be given on the decision to determine the legal recourse suitable for your proposed collaboration.
The founding members have the option to choose between four legal entities, including: (I) a private company limited by shares; (ii) a private company limited by guarantee; (iii) a limited liability partnership: and (iv) a general partnership. This decision is followed by the steps required to turn this proposed venture to commence trading and include the following:
1. In case the venture (Hereby referred to as the JVC Joint Venture Company) relies on the intellectual property of any of the partners, the parties should decide whether the ownership of this intellectual property be transferred or licensed to each collaborator. Either decision requires the parties to sign a formal agreement covering the following: (I) Whether the parties need to adhere to certain conditions or pay a set amount to the owner of the intellectual property (ii) The recourse to opt for to ensure the smooth transfer of the intellectual property back to the original owner in the event of the joint venture terminating. In case the property was licensed, then the license should be terminated.
2. Whether the JVC would require the transfer of resources between the collaborators, in which case they should enter a formal agreement covering the following: (I) price and payment terms; (ii) Recourse to opt for in case the requisite products are defective or not as described (iii) Recourse to opt for in case the products cause damage (financial or otherwise) to the JVC (iv) The events set in motion in case the JVC terminates.
3. Whether the founding partners would contribute to the workforce of the JVC in form of: accounting/book keeping support, general administrative support, HR support, IT support etc. In case of such a situation, the parties must be binded by a service support agreement that would cover: (I) The type and scope of services to be provided (ii) Price, payment and general terms (iii) Recourse to opt for in case the services provided do not adhere to the conditions set prior to the agreement
4. While it is not necessary, it is recommended that the parties enter into a shareholders agreement, which is a legal document that covers the rights and responsibilities of the shareholders. It looks into resources and procedures to follow in case a dispute arises or if the JVC terminates. A shareholders agreement is different from the Articles of Association, which is required to register a JVC. Unlike the Articles of Association, the shareholder’s agreement’s terms are not public and these terms are only referred to in case any dispute occurs. The shareholder’s agreement warrants a separate article, and I would be focusing more on it in my next article.
5. It is strongly recommended that the founding partners officially register the name of the JVC as a trademark, else it leaves the JVC open to legal disputes arising from other companies having similar names. Before registering the trademark, the parties should ensure that the trademark in question (or any identical trademark) has not been registered. This task can be achieved through a search of registered trademarks on the Intellectual Property Office website. This is done to ensure the smooth processing of a registration application. The trademark can be registered either through the Intellectual Property Website or by outsourcing it through a solicitor / trademark agent.
6. The JVC should have the necessary insurance policies in place to avoid any problems (financial or otherwise) in the future: (I) Public liability insurance; (ii) Employers liability insurance: (iii) Professional Indemnity insurance; and (iv) Directors and Officers Liability insurance.