Collaborative ventures allow organisations to pool their resources and expertise to work on a specific project or investment. These ventures may involve two or more companies, and are useful when your business may not have all the expertise, resources or funding necessary to complete a project.
There are two forms of collaborative ventures: incorporated ventures and unincorporated ventures. Incorporated ventures are where companies establish a legal entity to work together. In an unincorporated venture, parties collaborate without establishing that legal entity.
Key Documents for Incorporated Ventures
A shareholders’ agreement is important to your collaborative venture. This agreement will outline topics including the object of the venture, capitalisation and funding, the makeup of the board, and details the transferring of shares.
Another important document is the articles of association, “the written rules about running the company agreed by the shareholders or guarantors, directors and the company secretary,” as defined by gov.uk. In the case of collaborative ventures, this document may detail how collaborating companies share intellectual property rights and marketing strategies.
Seven Legal Tips for Successful Partnerships:
- Decide on a structure. In a contractual agreement where a new limited company is not formed, there is greater flexibility. Parties can quickly set up or dismantle the agreement as desired. However, as there is no newly formed company, the venture cannot enter into contracts in its own name. This has the potential to make operations more complicated, so try to have a clear structure from the get-go.
- Handle intellectual property rights. In any incorporated or unincorporated venture, you’ll need to establish how each party’s intellectual property rights may be used.
- Seek help from outside. A corporate solicitor can help you negotiate with another party, identify any risks, and draft your agreement. The dissolution of Sony Ericsson, where Sony and Ericsson disagreed on product and strategy, shows that even the most high-profile of partnerships can go wrong without a clearly established agreement.
- Know who’s responsible. Ensure all parties are agreed on how your profits and losses will be handled. Each organisation needs to know how profits will be distributed, and who will be responsible for any potential losses.
- Plan for the future. Your collaborative venture may be a long-term one, so the agreement should address how you will navigate any changes in your industry, and detail how you may modify the agreement over time.
- Prepare for the worst. Planning for the future should include foreseeing the worst-case scenario. It’s important that parties agree in advance on how to resolve disputes, whether through mediation or arbitration.
- Prepare for the best. Ideally, your collaborative venture will continue to grow over its lifetime. This means that more cash investment may be required. Your agreement should clearly define where this investment comes from (whether an additional contribution from one or more parties, or a loan) and whether any events will automatically necessitate further investment.
Conclusion
A successful collaborative venture requires a shared understanding from those involved, and also the flexibility to make changes when necessary.
