A Simple Guide to Joint Venture Agreement

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A Simple Guide to Joint Venture Agreement

Joint venture agreement (JVA) is a sub-class of business agreement by virtue of which two companies come together to start an enterprise. It may be formed by two individuals who are motivated to accomplish a certain task and when the task is accomplishable through partnership. In the former case, since both the companies put in almost equal amount of their resources to develop the business, they deserve adequate shares in the holding and the profits incurred in the business process. And in the latter case, the individuals may be assessed and rewarded subsequently on the parts of the task they have individually committed.

However, such an endeavor is dictated by law and confirmed through documents. The entire process of recording the partnership and enshrining the patents in the correct place, with due recognition from the authorities for legalization of the business attempts, is convoluted and requires to be overseen by people who are significantly experienced in these jobs.

The US law related to Joint Venture Agreement – JVA puts forth certain guidelines on the basis of which the agreement must be developed. The most important element of this agreement is cooperation whereby the companies have to understand and cooperate with each other at every point. Thus success is determined not by any one but by the efforts made by both. The responsibilities, starting from the decision making to the implementation of ideas, are divided between the parties in a convenient manner so that both the companies are satisfied with the shares they have been assigned. The agreement documents this very vividly and secures the individual signatures to validate the provisions agreed upon by the co-venturers.

Thus the agreement papers highlight the following facets and try to achieve them with precision:

  • It lays down the purpose and feasibility of the project for which the venture would be undertaken to ensure if the venture would actually help or support in the development of the project.
  • The financial components of the project are given sufficient weight in this regard as the joint venture agreement has to codify the exact amount of investments and financial reserves demanded by the project.
  • It has to design the duties and responsibilities of the parties separately so that they do not enter into a row afterwards due to ambiguity in the definition of the elements(1).
  • It must be declared as to which company would enjoy how much of the total fruits attained from the project’s success.