A joint venture, often referred to as JV, is the result of two or more businesses or commercial parties creating a shared corporate entity. In addition, joint ventures can be characterized by involved parties sharing more than just ownership, but also sharing in both risks and returns.
Why Choose a Joint Venture?
Even though the regulations and laws regarding joint ventures in the UK are complex, many corporations still choose to create a joint venture for several reasons, some of which include the following:
● These companies wish to gain the ability to access new markets, especially emerging markets.
● A joint venture can increase efficiency in operations by reducing duplication and combining assets.
● High risk projects or risky investments can be shared amongst a larger pool with a joint venture.
● Joint ventures can enable access to certain skills and abilities.
Joint Ventures Within the UK
Within the United Kingdom, the regulations and laws concerning joint ventures are explicit and must be addressed in the formation and participation of any joint venture. For any company or businesses considering a joint venture, it is recommended to seek qualified legal counsel to ensure you are above board on the rules and regulations.
Corporate law in the UK does not consider a joint venture as a legal entity to be regulated. However, under the Partnership Act of 1890, multiple persons or entities carrying on business together are regulated under government authority.
Types of Joint Ventures in the UK
While any joint venture is a result of two entities executing business, whether its a project, arrangement, or intention, most joint ventures can be categorized under the following types.
● Any contractual agreement that remains unincorporated.
● An LP, or limited partnership, that is regulated by the Limited Partnerships Act, 1907.
● An LLP, or limited liability partnership, under Limited Liability Partnerships Act 2000.
● Corporations, or in other words, any limited liability company that was incorporated. The Companies Act 2006 applies to these types of JVs.
● Unlimited liability partnerships. These are regulated by the Partnership Act 1890.
● And as of April 2017, it can be a private fund limited partnerships, or PFLPs.
Laws Governing JVs in the UK
Since joint ventures are subject to UK company law, they are regulated by the following laws.
● Companies Act 2006
● Partnership Act 1890
● Limited Liability Partnership Act 2000
● Limited Partnership Act 1907
Choosing to Form a Joint Venture
The formation and registration of a joint venture alone has a series of forms, rules, and complex requirements. For any joint venture formed, it is recommended to seek legal counsel.
The first step to registration involves the Registrar of Companies, a part of Companies House. This step requires several documents, such as the proposed articles of association and model for governing the company.
At this stage, most also enter a formal joint venture agreement, which is intended to manage disputes among all stakeholders, but this is not an essential document for registering with the government. Another solution would be to include the terms and conditions from the joint venture agreement, and put it directly into the company’s articles of association instead.
Because there is no requirement for a public notary at this stage, most documents can be submitted in an online form when creating a joint venture.
Certain joint ventures, such as an LLP or an LLC, are required to register with the Companies House, but there are no other registration requirements, especially in terms of the local registries in the UK. However, many joint ventures find they are subject instead to merger control regimes from either the EU or the UK.
Market and Purpose of a Joint Venture
While a joint venture can be formed in any commercial sector, the regulations will change depending on the sector in which the joint venture is formed. There are specific regulations especially in the following four economic sectors: health care and treatment of disorders, financial services and consumer credit services, data protection, and gambling or gaming.
However, there are no restrictions on the purpose of a joint venture, aside from committing illegal activity.
Joint ventures are unique, and their complicated place within government regulations are variable depending on their type, what sector they belong to, and even the locations of the parties involved.