Purpose of a Joint Venture or Shareholders Agreement
Joint Venture and Shareholders’ Agreements are important legal documents that detail the terms and conditions, conduct, and the sharing of risk and reward for shareholders or owners of an entity. They are crucial documents governing the relationship of shareholders to be set out before the formation of a company or a joint venture. They provide exit strategies and remedies in case the relationship between the parties deteriorates.
Joint Ventures
A joint venture can be between individuals, companies, or individuals and companies. Typically, the participants in a joint venture decide to work together, but want to remain as separate entities, as they may have other business interests unrelated to the joint venture. The participants can form a private limited company to be used as a special purpose vehicle for the collaboration.
Such joint ventures structures are increasingly popular, as players try to realize the efficiencies of complementary strengths and reduction in costs and risks. Companies consider such arrangements as a viable option to gain market access in a new country or market. The scope of cooperation might be time-bound, or project-based, for example, being partners in a consortium for a construction project.
A joint venture agreement would have provisions relating to the participants’ financial contribution and profit and revenue sharing arrangements. In addition, a joint venture agreement also details the manner in which know-how, resources, and intellectual property are to be exchanged between the participants.
Yuen Law can help structure a joint venture that works for all parties. Our expertise includes solving business problems such as terms of cooperation, taxation considerations, and the sharing of intellectual property.
Shareholders’ Agreements
A Joint Venture arrangement is often supplemented by a shareholders’ agreement, assuming the participants entering the joint venture would become shareholders of this new entity.
Shareholders’ agreements stipulate the shareholders’ rights and obligations and set out how shareholders are to relate to one another and conduct the management of the company. A shareholders’ agreement may be entered into between some or all the shareholders of a company, or the shareholders and the company.
While shareholders in a new venture often start out with the best of intentions, over time, different shareholders may have differing views and may disagree over the direction and management of the company. This is why it is prudent to have a comprehensive shareholders’ agreement as a framework to set out agreed expectations and to guide conflict resolution and distribution of profits and funds. The absence of a clear shareholders’ agreement may result in shareholder conflict with a high probability of litigation.
Yuen Law takes the time to understand you as a shareholder, and your relations to other shareholders, as well as your goals, aspirations, and your unique value to the venture. We seek to protect your interests as a shareholder, and more importantly create or modify an agreement that would be the basis for a spirit of trust and productivity among shareholders.
Yuen Law has extensive experience in this area, and our firm was recognised by Chambers and Partners, IFLR1000, and Asialaw for our work with Startups and Emerging Companies, Private Equity, and Mergers & Acquisitions.
For assistance on matters regarding joint ventures and shareholder agreements, do contact us to make an appointment.
